The Real Deal New York

Kushner Companies hit with second rent stabilization suit in Brooklyn

18 Sidney Place, a former Brooklyn Law School dorm, should not have free-market rents, tenants claim
By Will Parker | November 14, 2017 12:30PM

Laurent Morali and 18 Sidney Place

UPDATED, Nov. 14, 1:53 p.m.: In July, Kushner Companies reportedly put two Brooklyn Heights rental buildings on the market, hoping to get nearly three times what the company paid three years prior.

The properties at 18 Sidney Place and 144 Willow Street were once dormitories for Brooklyn Law School, but re-entered the free market as rental apartments after Kushner’s purchase in February 2014 for a combined $7.6 million. That same year, Kushner paid $14.3 million for another former law school property, 89 Hicks Street, and charged market-rate rents.

But a tenant’s rights organization believes Kushner’s swift repositioning of the former dorms into market-rate apartments violates rent stabilization laws. In August, law firm Newman Ferrara filed suit on behalf of tenants at 89 Hicks Street and on Tuesday, it filed a separate complaint alleging the same rent stabilization violations occurred at 18 Sidney Place.

According to court filings, 18 Sidney Place was a rent-stabilized rental building prior to its adaptation by Brooklyn Law School for student housing in 1991. The academic use of the property allowed the school temporary release from rent stabilization, but if the buildings returned to the market as rental apartments, they were required to be brought back under stabilization laws, the suit claims. When Kushner bought the building in 2014, the company did not do this, the suit claims. As a result, current tenants may be paying hundreds of dollars more a month than they might have if Kushner had reset rents in accordance to the guidelines provided by the state’s Division of Homes and Community Renewal, the plaintiffs contend.

Chris Taylor, a spokesperson for Kushner Companies, said in a statement that the allegations were “without merit” and that the company had followed all applicable rent regulations.

Six tenants at 18 Sidney Place are named in the suit, and they all allege that they received illegal free-market leases. Their rent should have been determined, they allege, based on what the rent charged in 1991 was, plus annual Rent Guidelines Board increases, a single vacancy increase and a single longevity increase.

There are three actively listed apartments at 18 Sidney Place on StreetEasy, including a $2,600 a month studio and a $3,800 a month one-bedroom unit.

The lawsuit was filed following an investigation by the nonprofit group Housing Rights Initiative. The group says that of 18 Sidney Place’s 19 apartments, only two of them were registered as rent-stabilized with the state. HRI has partnered with law firm Newman Ferrara on a series of other suits against prominent New York landlords over the last year.

Many of those suits have focused on the rent-stabilization requirements of the J-51 tax abatement, a building owner incentive that does not allow apartments to be deregulated after the legal rent crosses the “luxury” threshold, currently $2,700.

The allegations against Kushner regarding the institutional use of rent-stabilized properties appears to be a less common source of rent litigation.

HRI’s founder, Aaron Carr, released a statement Tuesday calling on Gov. Andrew Cuomo to investigate Kushner’s entire New York City building portfolio, which includes well over 1,000 residential units, for possible abuses of the rent laws. “The government has all the data; they know what Kushner has been registering; they know what they have been doing,” Carr said. “The feds are investigating Kushner Companies, Maryland is investigating Kushner Companies, and a tiny non-profit with the budget of a nickel is investigating Kushner Companies. But, where is Cuomo?” Carr also called the company a “rapacious predator.”

“The only predatory conduct here is that of Aaron Carr,” Taylor wrote in a statement, “who seems bent on attacking responsible owners in the press for the sake of sensational headlines.”

The plaintiffs are seeking monetary damages with interest, the suit says.