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Free rent not entirely free, Knotel’s landlord alleges in lawsuit

Northwind Group sued the flex-office firm for $900K

Knotel’s Amol Sarva and Northwind’s Ran Eliasaf with 40 Wooster Street (Google Maps)
Knotel’s Amol Sarva and Northwind’s Ran Eliasaf with 40 Wooster Street (Google Maps)

A Soho office landlord is suing Knotel over nearly $900,000 in unpaid rent, including six months of free rent that was part of its initial lease agreement.

Northwind Group, a Manhattan real estate private equity firm, wrote in a lawsuit filed in New York State Supreme Court that the flex-office company stopped paying rent on its office space at 40 Wooster Street in March.

The landlord withdrew Knotel’s $206,250 security deposit in May, but Northwind claims it’s owed $485,810 as of October. Northwind also alleges that by failing to make the required rent payments, the tenant “has forfeited its right to the free rent period amount” of $412,500, per the lawsuit.

Northwind is asking for a judgment of $898,310 against Knotel.

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Offering several months of free rent is a common strategy by landlords to attract tenants, but Northwind asserts that tenants can lose that benefit if they don’t hold up their end of the bargain.

Ran Eliasaf, Northwind’s managing partner, did not return a request for comment.

“Knotel is always evaluating and adjusting our portfolio to best meet the needs of our customers, through Covid-19 and beyond, and we have reached positive resolutions with many owners,” Knotel spokesperson Mousa Ackallm said in a statement. “We take our landlord relationships very seriously, and will continue to actively engage with them to achieve good outcomes during these challenging times.”

Established in 2015, Knotel has grown rapidly since, but the pandemic lockdown has posed an existential threat to the flex-office sector. Northwind is not the first landlord to sue Knotel for nonpayment.

Northwind acquired the six-story, 14,125-square-foot Soho building in April 2014 for $16.35 million, according to public records. Knotel has occupied the second through sixth floors since March 2018.

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