Rector Square owners threatened with litigation

TRD New York /
May.May 15, 2009 12:45 PM

Tensions have reached a fever pitch at the Rector Square, the foreclosed Battery Park City condominium, as the court-appointed receiver and Related Companies threaten to sue a majority of the building’s unit owners who are refusing to pay more than $300,000 in retroactive common charges and PILOT payments.   

Related, the building’s new managing agent, warned in a letter obtained by The Real Deal that the receiver, Manhattan-based trust attorney Michael Miller, would be forced to file suit against more than 40 delinquent unit owners if they failed to pay thousands of dollars in newly assessed charges.

“While you certainly have legitimate gripes about the past management of the building, without regular and full payment of the common charges with which you have been assessed, the building cannot and will not be able to continue to operate,” wrote Bill Brake, regional manager at Related Management, which replaced Cooper Square Realty as the building’s managing agent.

After receiving invoices demanding common charges dating back to January, unit owners said they will not hand over the money until the receiver and Related give them a full accounting of the building’s budget and the renovation of the common areas. Owners are each being charged more than $5,000 for four months of common charges, dating back to January, and they allege they are not being consulted on key decisions related to the building operation.   

“This is not about not wanting to pay; this is about — we are very, very tired of being treated [like] we are third-class citizens after having purchased here,” Maria Rapetskaya, one of the leaders of the unit owners at Rector Square, told The Real Deal.

In February, Anglo Irish Bank filed to foreclose after developer Yair Levy defaulted on a $165 million mortgage loan at the building, at 225 Rector Place. Levy incurred millions of dollars in unpaid mechanic’s liens and PILOT payments to the Battery Park City Authority and is being investigated by New York Attorney General Andrew Cuomo amid allegations that rent and other funds were misappropriated. PILOT payments are payments in lieu of taxes, which go to Battery Park, which owns a ground lease under Rector Square and other area properties.

Attorneys for Levy told the court that the developer was “broke,” according to court documents filed in the foreclosure case, and thus could not pay common charges for more than 180 unsold units. Anglo Irish Bank agreed to hand over $2 million to cover the shortfall at the building, which has an estimated $5 million annual operating budget.

Mark Held, attorney for more than 45 unit owners, questions whether the unit owners can be fairly assessed common charges if the sponsor is insolvent.  

“The sponsor has to be financially viable to issue common charges,” Held said. “If [Levy] is not financially viable he cannot issue common charges.”   

Miller, the building’s receiver, said that owners have been issued a detailed executive summary of the building’s expenses and were warned from the get-go that common charges would be assessed starting at the beginning of the year.

“This is an ill-advised attempt to get an abatement,” Miller said.

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