The Real Deal New York

Core Development claims its property managers fleeced firm of rent money

The suit is seeking at least $1M in damages over missing rent, fraudulent financial docs
By Meenal Vamburkar | March 13, 2019 07:00AM

Fation and Nick Spaho with 149 Dupont Street in Brooklyn (Credit: The Guberman Group, Google Maps, and Pixabay)

Landlords usually go after tenants for not paying the rent. But in a new lawsuit in New York, a prominent landlord alleges that its own property-management firm is bilking it of rent money.

Josh Guberman’s Core Development Group is suing Nick Spaho and Fation Spaho, and Core Management NY, the management company the two run, for allegedly not collecting or not remitting about $420,000 in rents and fees, not including approximately $600,000 in applicable penalties and interest.

“When confronted with the missing rents and fees, the Defendants promised and agreed to remit the missing funds to the Plaintiff but have failed to fully do so,” the complaint said.

According to the suit, filed in New York State Supreme Court, Nick and Fation Spaho were hired in 2009 to manage three rental properties — 149 Dupont Street, 235 North Henry Street and 235A North Henry Street in Brooklyn — and a handful of condominium buildings.

In 2014, the developer said it discovered the Spahos were hiding their failure to collect rents — and they fraudulently altered financial documents to Wells Fargo, claiming 100 percent rent collections and occupancy. That year, an IRS audit also revealed the Spahos hadn’t collected over $545,000 in rental income, the complaint states

The Spahos “promised and agreed to ‘cover’ and ‘make good’ on the missing funds ‘no matter how long it took,’” the complaint said. In early 2015, the Spahos formed Core Management NY LLC. They have repaid $131,525 of the missing funds, but haven’t made any additional repayments since fall 2016, according to the lawsuit.

Core Development and Core Management couldn’t immediately be reached for comment.

The developer is seeking damages of at least $1 million. Its condo properties include the Lux Condominium at 433 East 74th Street, the Legacy Condominium at 157 East 84th Street, the Union Square Condominiums at 5 East 13th Street and 10 East 14th Street, and the Russell Street Condominium at 169 and 171 Engert Avenue in Brooklyn.

Several lawsuits over monetary disputes have emerged over the last few months. In February, a former Compass agent claimed her former team conspired to cut her out of deals. And this week, Sotheby’s International Realty sued the owners of 520 Park Avenue for withholding a commission on the sale of a $31.5 million unit at the condo tower.