Raphael Toledano, a notorious East Village landlord, has been banned from New York real estate after violating an agreement with the state attorney general’s office to end illegal business practices and tenant harassment.
Attorney General Letitia James won an order from the New York Supreme Court that prevents Toledano from participating in the industry for the next five years, after which Toledano can petition the court for readmittance. A press release from James indicates that the landlord will have to sell whatever is left of his New York holdings; Madison Realty Capital took ownership of his East Village portfolio last spring.
The ban stems from a 2019 investigation by James that found Toledano harassed tenants in his East Village buildings, using coercive buyouts and illegal construction practices. Among other findings, the probe found Toledano didn’t provide rent-stabilized tenants with utilities and repairs.
Toledano that year reached a $3 million settlement with the office, which required that an independent monitor supervise his real estate business and banned the owner from contacting tenants directly. He was required to hire an independent management company to oversee his properties.
But James said in a release that Toledano violated the settlement agreement in a number of ways. In addition to not disclosing real estate activities to the monitor or getting approval for deals, he also diverted funds from a reserve account, failed to make penalty payments and didn’t maintain his properties in a lawful manner.
Referring to the five-year ban, Toledano’s lawyer, Benjamin Brafman, a prominent criminal defense attorney, said, “Mr. Toledano fully intends to honor the agreement.”
James filed a motion to enforce the penalties set out by the agreement in December 2020. In addition to the ban, Toledano is required to pay the attorney general’s office $500,000 to cover past-due penalties.
The landlord emerged in the mid 2010s as an unexpected major player in the city’s multifamily market. He debuted in 2015 with a 28-building purchase from the Tabak family for $140M, and in 2016 valued his portfolio, which largely consisted of East Village walk-ups, at $500 million.
However, with the wunderkind reputation came a slew of legal troubles, for which Toledano in 2016 paid $1 million to settle.
Despite the controversy, he maintained a defiant sense of confidence, telling The Real Deal in 2016 he was “worth a fuckload of money, bro.”
“Tenants are not pawns to be abused and discarded in big real estate’s illegal, money-making schemes,” Sandra Meyer, a former tenant of Toledano’s, said in a statement. “At least one bad-acting chess piece has been removed from the board in New York.”
Madison Realty Capital, Toledano’s lender, last year acquired his 15-building East Village portfolio for about $153 million as part of a liquidation plan. A subsidiary of Toledano’s Brookhill Capital owed Madison about $140 million.
“New York tenants can breathe more easily knowing that Rafi Toledano is no longer in the real estate business,” James said in her release. “Through his deceptive and illegal actions, Toledano caused incredible pain and suffering to hundreds of vulnerable families, who are still feeling the effects of his harassment today. Every New Yorker deserves to live in a safe, decent home free of abuse and fear.”
Much of the incentive to force out rent-stabilized tenants was removed when the state reformed the rent law in 2019. Previously, landlords could raise rents on stabilized apartments by 20 percent if they became vacant, and convert them to market-rate if the legal rent of a vacant apartment exceeded a certain amount.
Some investors, possibly including Toledano, bought rent-stabilized buildings at prices that would leave them unable to pay their mortgages if they failed to deregulate enough apartments.