For Naftali Group, the conversion of an Upper West Side apartment building into condos has proved a tough row to hoe.
Last summer, some long-standing tenants refused to vacate 215 West 84th Street after the developer gave notice that it would not renew their leases.
Now a lone renter is blocking the project’s completion and costing Miki Naftali’s firm tens of millions in the process, the developer alleges in a lawsuit.
The company is suing Ahmet Ozsu, a penthouse unit tenant, for refusing to leave after his lease expired on the last day of 2021. Ozsu has lived in the building since 2007 and had been on a month-to-month lease since 2017, according to the complaint.
Naftali bought the building last June for about $70 million, planning to make it a condo, and informed Ozsu in September that it would not be renewing his lease. But Ozsu is still there, has not paid rent since September and owes over $10,000, the lawsuit charges.
The developer’s suit claims Ozsu is refusing to leave “for the sole purpose of delaying the project to cause financial harm” to Naftali. The developer said the delays have cost it $25 million in lost rent and profits.
But how can one tenant bring a condo conversion to its knees?
Steven Wagner, an attorney who specializes in condo conversions, said Naftali’s choice conversion plan likely gifted the tenant his trump card.
The Housing Stability and Tenant Protection Act of 2019 made conversions trickier. Before, an owner only had to get 15 percent of a building’s renters to agree to buy their units and he could evict the other tenants and sell theirs.
Now, developers must persuade 51 percent of a building’s renters to buy their units and can convert the market-rate units as their tenants’ leases expire. Tenants of rent-stabilized units can remain, giving them leverage to negotiate hefty buyouts.
But there is another option, one that Naftali appears to be pursuing.
“What I think is happening here is this might be the only person left in the building,” Wagner said. “And if he’s the only person left in the building, [Naftali] might want to do a conversion based on vacancy.”
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An owner who clears a building of renters can move forward with a non-occupancy conversion.
“If the building is empty, you’re not converting it from one form of residential occupancy to another,” Wagner said. “You’re creating a condominium.”
Neither Naftali Group nor the attorney bringing the suit, Erez Glambosky of Rivkin Radler, responded to a request for comment. Ozsu could not be reached.
The company’s push last year to clear tenants out of 215 West 84th Street points to the scenario Wagner suggests. Naftali had given tenants notice that their leases would expire, and lingering renters had seen dozens move out.
But so long as Ozsu is still living there, a non-occupancy conversion cannot proceed, Wagner said. The state’s Real Estate Finance Bureau database shows no record of an offering plan for 215 West 84th Street.
Naftali has not disclosed details of the project, but residents told The Real Deal they had heard rumors last July that the owner planned to build a high-rise. The property’s zoning would allow for 21 stories — 14 more than the existing building at 215 West 84th Street.
The developer could replace the building or add floors. While difficult, expansions have been done. Jeff Greene topped the six-story commercial building at 100 Vandam Street in Hudson Square with an 18-story condominium. Construction is just about complete, New York YIMBY reported last week.
Naftali appears to be starting work on the empty units. The city’s Department of Buildings on Friday approved a request to remove doors, plumbing and non-load-bearing walls from apartments on the third, fifth and sixth floors.