Lawsuit: Big landlord owes back rent after taking tax break

New York’s highest court ruled in June that 421g benefit mandates rent-stabilized leases

TRD New York /
Dec.December 18, 2019 09:22 AM
Rockpoint Group co-founders Keith Gelb and Bill Walton (Credit: iStock, Rockpoint, CityRealty)

Rockpoint Group co-founders Keith Gelb and Bill Walton (Credit: iStock, Rockpoint, CityRealty)

A lawsuit alleges that the owner of 63 Wall Street charged market-rate rents for hundreds of units despite receiving tax benefits that — according to a recent court ruling — required it to offer rent-regulated leases.

Rockpoint Group, the owner of 63 and 67 Wall Street in the Financial District, under the 421g program, got a break on property taxes for 14 years. All of the units should have been covered under rent stabilization, according to the lawsuit, but tax bills show that as of June, only one was.

The two buildings have 795 apartments, according to public data.

A Boston-based private equity firm, Rockpoint Group has been one of New York’s most active investors in recent years. It received a $430 million acquisition loan in January from Brookfield Asset Management and Wells Fargo for a $600 million purchase of the One Dag Hammarskjöld Plaza. The firm also owns Starrett City with the Brooksville Company, which the two closed on in 2018 for $905 million.

Rockpoint Group did not return a request for comment.

The lawsuit contends that the owners carried out a “fraudulent scheme to evade the rent stabilization laws.” It is the latest in a string of similar lawsuits filed after New York’s highest court ruled six months ago that because the landlord at 50 Murray Street received the 421g break, its tenants are legally owed rent-stabilized leases and possibly back rent. (The 50 Murray Street landlord, Clipper Equity, is also bankrolling a constitutional challenge to the state’s new rent law.)

“It’s only as of June that the Court of Appeals reversed the decision and said you can’t luxury-deregulate these units,” said landlord attorney Blaine Schwadel, who supervises the regulatory law group of law firm Rosenberg and Estis. “To say the landlords had done anything wrong before June is crazy.”

The tenants’ lawyer did not portray it that way.

“With each passing day, as tenants become more aware of the chicanery, we’re uncovering additional irregularities and violations of the law,” said Lucas Ferrara, the attorney who is representing the plaintiffs. He claimed that larger institutional landlords had not previously been held accountable.

The recent cases are just “the tip of the iceberg,” according to Ferrara.

“New York legislators just pulled the rug out from under them,” he said. “It’s judgment day.”

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