Toshi Chan bids to get Smart Apartments judgment reversed

Latest twist in long legal battle over extended-stay firm

TRD New York /
May.May 07, 2014 01:10 PM

Lawyers for Robert ‘Toshi’ Chan filed plans to appeal an April court decision that granted a judgment against his controversial extended-stay firm, Smart Apartments, over unpaid rent at its former headquarters at 274 Madison Avenue.

Lawyers for Chan, in court filings, argued that he was only liable for back rent and could not be held liable for any unpaid rent that he owed during the lease.

“The matter on appeal is regarding the limited guarantee (better known as a ‘Good Guy Guarantee’) that was contained in the commercial lease at issue,” said attorney Jonathan Nelson, chair of the litigation department at Dorf & Nelson, which is representing Smart Apartments and Chan. “It is our contention that the lower court’s decision disregarded the clear limitations of liability contained in the Good Guy Guarantee, and in this regard, must be reversed on appeal.”

Chan was sued in May 2013 by the landlord, an entity controlled by Abramson Bros., alleging the company exited its lease in January 2013, after the city sued Chan’s company to shut down its illegal business of renting apartments for transient guests.

By February 2013, the city obtained a restraining order that effectively shut down Smart Apartments, which court records show operated in more than 50 buildings across the city. Toshi continued to operate the Flatiron Hotel under a long-term lease agreement.

According to the suit, Chan owed more than $8,777 per month for the 274 Madison space under a rental agreement that expired in 2016, and called for the rent to gradually increase each year until it reached almost $9,600 per month. According to the original complaint, Chan guaranteed payment of future rent, plus damages if he left the space early.

The suit also claims that Smart Apartments notified the landlord of the plans to leave the space via email, instead of a certified letter and also surrendered the keys to the building superintendent and not the owners.

“It’s obvious to me that there would be no merit of their appeal,” said attorney David Rosenbaum, who represented the landlord in the case. “The judge had it right that the tenant violated the lease and that the guarantor is obligated on the guarantee.”

The appeal of the $402,000 judgment comes two months after Chan won a court case against DelShah, a Manhattan-based turnaround firm that acquired the debt at the Flatiron Hotel and was trying to take control of the property from the owners.

Chan has been in discussions on a deal to acquire the hotel. No agreement has yet been reached.

In November 2013, Chan settled his suit with the city of New York for $1 million.

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