The Real Deal New York

King & Grove settles rent dispute with Hotel Chelsea tenants

By David Jones | September 27, 2013 06:40PM

UPDATED, 3:24p.m., Oct. 1: Tenants at the Hotel Chelsea have reached a deal with their landlord, an entity called Chelsea Dynasty that was recently taken over by King & Grove, ending two years of litigation over whether the property could be partially converted into a hotel.

The settlement, which covers the 38 members of the Chelsea Tenant Association, calls for a 4.7-month rent abatement, a 20 percent reduction in monthly rent until renovations are complete, exemption from rent increases tied to capital improvements, and the payment of about $100,000 in legal fees, according to attorney Samuel Himmelstein, who represented the group.

The tenants will also be put up in the King & Grove New York at 29 East 29th Street for about a month, in two groups, while the owners finish work that requires the apartments to be vacant. After that, they will be able to continue living at the Hotel Chelsea.

The agreement does not cover nearly 40 tenants who are not part of the association.

The deal comes one month after King & Grove, led by CEO Ed Scheetz, bought out their main financial backers, the Chetrit Group and David Bistricer, who battled tenants for years over renovations at the historic property at 222 West 23rd Street.

The 160-unit landmark building served as the home of some of the country’s most famous musicians and writers, ranging from singer Bob Dylan to writer Charles Bukowski. However, in 2011, the Chetrit Group and Bistricer bought the property with the intention of creating a boutique hotel.

The rent-stabilized tenants and developer Joseph Chetrit had an antagonistic relationship that ultimately led to litigation. The Chelsea Tenants Association sued in 2011, claiming Chetrit failed to fix problems at the hotel in order to drive them out.

Six months ago, work stopped at the property after a construction accident forced water, heat and gas offline. A partial stop work order is still in place, according to city Department of Buildings records.

The tenant deal does not affect the DOB order, but the developers plan to resume renovations in October and finish by early 2014, Himmelstein said.

A spokesperson for King & Grove said the partial stop work order only applies to the roof, and has been lifted for the rest of the building. Pappas confirmed that contractors have already begun renovating the rest of the property.

When Scheetz took over, he promised to repair the relationship with residents.

“This settlement reflects the goal of King & Grove Hotels to implement significant improvements in the way the property is managed during restoration,” Scheetz said in a statement. “When we became involved, our priority was to enter a dialogue with the residents, to enhance it and to make immediate and continuing improvements in living conditions during the hotel’s restoration.”

Zoe Pappas, head of the Chelsea Tenants’ Association, said in a statement that landlord-tenant relations had “dramatically improved” since Scheetz took over ownership of the property on Aug. 27, paving the way for a settlement.

“The agreement enables the owners to perform necessary renovations at the hotel while protecting the rights of Tenants Association members by insulating them from major capital improvement rent increases,” Pappas said.