The Real Deal New York

Firm to pay restitution to tenants in 42 rent-regulated buildings

Residents claimed Colonial Management failed to maintain properties, engaged in harassment
By David Jones | September 10, 2014 02:50PM

New York state Attorney General Eric Schneiderman announced today that his office has reached a settlement with Colonial Management over the company’s maintenance of 42 rent-regulated buildings in New York City – and its treatment of tenants at those properties.

Under the terms of the deal, Colonial, led by David Kramer, agreed to pay $225,000 in rent credits and restitution and to complete repairs for about 1,700 tenants in rent-regulated buildings in Brooklyn, the Bronx and Manhattan. Those tenants claim they were subject to harassment when they tried to organize against the buildings’ landlords.

The settlement follows an April agreement with the buildings’ owners — a partnership of private equity firms including Westbrook Partners and Normandy Real Estate Partners — to provide almost $1 million in rent credits, a one-year deadline to complete repairs, and called for the termination of Colonial as the management firm.

The AG’s investigations followed extensive complaints filed in November 2013 by tenants alleging they were being harassed by the landlords after they tried to organize against the owners. Residents also claimed that Colonial took down notices they posted and retaliated against tenants who participated in organizing tenants associations.

The investigation found that Colonial failed to maintain the buildings. Two of the buildings were listed on the city’s Alternative Enforcement Program, which includes the worst maintained properties in the city.

“This agreement shows that we will leave no stone unturned in holding property owners accountable and in securing full and meaningful relief for tenants who have endured harassment and neglect,” Schneiderman said in a statement.

Today’s agreement calls for a one-time credit of $600 for tenants who live in seven of the 42 buildings that Colonial owns, which amounts to $140,000. In addition, tenants in all 42 buildings managed by Colonial will get a total of $50,000 in restitution.

The agreement calls for Colonial Management to be dissolved, with a new company brought in to manage the seven buildings. Repairs and outstanding code-violations must be repaired within a year as well, according to the AG.

“Colonial Management and the new owners of the seven buildings are pleased that they were able to come to this agreement with the Attorney General’s office that continues the relief that was afforded to tenants in the AG’s previous agreement with the owners of the Three Borough Pool and resolves any outstanding issues with the seven buildings that were left over from prior ownership,” said Y. David Scharf, attorney for Colonial, in a statement. 

He added that Colonial Management fully cooperated with the AG, and neither admits nor denies the AG’s findings in the current investigation. According to the statement from the AG, Kramer purchased seven of the buildings in the original 42.

Ed Josephson, director of legal services at South Brooklyn Legal Services, claimed the owners bought a number of highly leveraged properties and then attempted to push out residents to bring in higher paying tenants. His organization represented a number of clients in Colonial buildings in the Bronx, but was not personally involved in the settlement talks with the AG.

“There’s a lot of hedge fund money looking for quick profits,” he said. “Either they succeed and displace tenants or they can’t get the rents up and go into foreclosure.”

Officials at Colonial were not immediately available for comment. An attorney for Colonial was not immediately available for comment.