With new rent law, Brooklyn landlord sues to escape contract for rent-stabilized buildings
Complaint claims deal was based on old rent laws
A Brooklyn landlord is trying to back out of a contract to buy two Bronx apartment buildings, arguing that the “cataclysmic” changes to New York’s rent law make the deal impossible to complete.
An entity tied to J. Wasser & Company and Martin Templer filed a lawsuit seeking to cancel its contract to buy 465 East 167th Street and 1178 Washington Avenue, which collectively have 38 rent-stabilized units. The complaint, filed in state Supreme Court on Monday, claims that the reforms approved by the state Legislature last month had an “utter and complete deleterious effect on the laws.” J. Wasser had agreed to purchase the properties for $6.6 million from LLCs tied to Casablanca Management, based on the previous rent law, the complaint states. Neither the buyer or seller anticipated the “unforeseeable possibility of such massive, sweeping and cataclysmic changes,” according to the lawsuit. Under the new law, the price tag allegedly no longer made sense.
“When Defendants marketed the Properties for the sale price of over $6.6 million, it was understood by Plaintiff, Defendants, and all others involved in the transaction, including but not limited to brokers, banks, and attorneys, that the purpose of consummating the transaction at $6.6 million depended upon Plaintiff’s ability to avail itself of the then-existing rent stabilization and other landlord tenant laws that had been in existence for almost a century,” the lawsuit states.
Representatives for Casablanca were not immediately available to comment. Attorneys for J. Wasser, Oved & Oved’s Edward Wipper, Darren Oved and Glen Lenihan, declined to comment.
Templer was banking on the ability to raise rents in the properties’ regulated apartments through a few different mechanisms that were either eliminated or dramatically changed through the Housing Stability and Tenant Protection Act of 2019, according to the lawsuit. The new law did away with vacancy bonuses and vacancy decontrol, which respectively allowed for up to 20 percent rent hikes when a tenant left an apartment and for a unit to be deregulated once rent hit $2,775. The measure also capped rent increases secured through the Major Capital Improvements and Individual Apartment Improvements program and made such rent bumps temporary. The lawsuit also separately accuses Casablanca of misrepresenting the rent roll at 1178 Washington Avenue, by omitting a tenant living illegally in one of the apartments and overstating the rent rates in at least seven apartments.
In the lead up to and following the passage of the TPA, landlords warned that changes to the rent law would have a chilling effect on multifamily transactions and potentially result in the decline of the city’s housing stock. This action appears to be one of the first lawsuits initiated by a landlord to walk away from a deal specifically due to the new rent law.