Brooklyn developer overcharged tenants by more than $1M at new 421a building: lawsuit

Housing Rights Initiative is accusing a Brooklyn landlord of overcharging rent-stabilized tenants at a newly constructed 421a building in Clinton Hill by more than $1 million.

The tenant-advocacy group, led by Aaron Carr, organized tenants at 74 Grand Avenue to file a class action-seeking lawsuit against developer Jacob Neiss, which was delivered in Brooklyn Supreme Court Wednesday.

HRI, which over the past two-and-a-half years has organized more than 50 lawsuits against landlords alleging abuses of the state’s J-51 tax program, said this is the first step in a “421a crusade.”

“This class action is just the tip of a very dirty iceberg,” said Carr, HRI’s executive director. “The 421a tax program is riddled with fraud.”

According to the lawsuit, Neiss was required under 421a to register all 62 apartments at 74 Grand Avenue with the state’s Department of Housing and Community renewal when the building opened, and to set the initial rents in conjunction with the city’s Department of Housing Preservation and Development.

Neiss was also required to inform tenants that their apartments were subject to rent stabilization laws.

But the developer failed to set the initial rents with HPD or register the units at first, and it was only on subsequent lease renewals that Neiss did register the apartments, the suit claims. Even then, the new rents were allegedly designed to cover up previous overcharges.

Neiss did not return calls asking for comment.

The Brooklyn-based developer conceived 74 Grand Avenue as a condominium building with an initial sellout of $41.98 million, according to filings with the state Attorney General’s office. But Niess withdrew the condominium offering plan in late 2015 and decided to rent the apartments out.

HRI believes his property is one of 194 buildings that received notices from regulators in 2015 that warned developers who had ditched their condo plans that they were required to register their apartments as rent-stabilized.

The Wall Street Journal first reported the lawsuit.

The legal action, which was signed by 11 tenants, seeks to have the court invalidate any improper leases that tenants signed, and looks to recoup illegal rent increases that HRI estimates could be as much as $1 million.

Carr’s group, which has worked on dozens of lawsuits, had its first two class action filings certified in October.

And while Carr pledged more action against landlords who abuse 421a, he pointed the finger at Gov. Andrew Cuomo for what he says is a lack of will to root out fraud.

“Since our founding, we’ve been calling on Governor Cuomo to investigate the pervasive problem of tax benefit fraud,” Carr said. “But having taken more real estate contributions than any governor in the history of New York State, it appears that he has his hands tied.”