The Most Important Real Estate Lawsuits of 2023

Legal battles aim to settle personal scores and, sometimes, answer pivotal questions for an entire industry.

Here are some of the most-read stories of 2023 involving ongoing and new litigation; it is a semi-data driven ranking, based on the lawsuit stories that drew the most attention from readers or that have larger implications for the industry.

Many of these stories do both – perhaps because readers know which stories matter:

Copycats

It is not every day that a court decision in Missouri sends shockwaves throughout the industry nationwide. The landmark decision in Sitzer/Burnett raised questions about the future of National Association of Realtors’ influence and exclusive listings, and even its very existence.

In October, an eight-member jury ordered NAR, Keller Williams and HomeServices of America to pay $1.78 billion in damages in a class-action lawsuit brought by more than 500,000 Missouri homeowners. The jury found that the brokerages colluded to inflate commissions, based on NAR rules that require the sellers to offer a commission to buy-side brokers in exchange for access to local Multiple Listing Service systems.

The ruling triggered several copycat lawsuits, including one against the Real Estate Board of New York. That complaint focused on a similar rule in the trade group’s Universal Co-Brokerage Agreement.

REBNY amended its UCBA in October to require sellers to pay buyers’ agents directly.

End of the road

Landlord groups made it to the highest court in the land, only to be rejected.

One month after the passage of the 2019 Housing Stability Tenant Protection Act, New York landlord groups filed a lawsuit challenging the state’s rent stabilization system. The groups, the Rent Stabilization Association and the Community Housing Improvement Program, planned to fail upward, with the intent of bringing the case to the U.S. Supreme Court.

Their case was repeatedly rejected. In February, a panel of Second Circuit judges upheld a lower court’s dismissal of their case, finding that the state has “broad authority to regulate land use without running afoul of the Fifth Amendment.”

Three months later, CHIP and RSA filed a petition with the Supreme Court. They argued that the state’s rent law, which regulates more than 1 million apartments throughout New York City, violated the Fifth Amendment’s takings clause (which protects private property from being taken for public use, without just compensation) and the 14th Amendment’s due process clause.

In October, the high court declined to hear the case, leaving the groups little recourse but to try to convince lawmakers that landlords need a reprieve. Landlords who filed two other lawsuits, each taking a narrower approach in challenging the rent law, are still awaiting a court decision on whether their cases will be picked up.

Flatiron drama

The saga of one of the city’s most iconic buildings, the Flatiron Building, started with a lawsuit. It also ended with one.

The building’s majority owners, Sorgente Group, GFP Real Estate and ABS Real Estate Partners, sued minority partner Nathan Silverstein to force an auction of the building in 2021. The parties couldn’t agree on the Flatiron’s future, and Silverstein even suggested physically dividing the uniquely shaped building into five different properties.

An auction was held in March, with Jacob Garlick winning with a $190 million bid. Garlick, whom virtually no one had heard of previously, momentarily became the most interesting man in New York City real estate, but he failed to deliver a $19 million deposit required to finalize the deal.

At a second auction, the majority owners won with a bid of $161 million. They subsequently sued Garlick, alleging that his bid at the first auction was “fraudulent” and that he never had the money to close on the deal.

In October, the Brodsky Organization bought a stake in the building and announced plans to convert the property into condos. The full plans for the building have not yet been revealed.

Trump’s not-so civil trial

You may have heard that former President Donald Trump was on trial in Manhattan.

A civil lawsuit brought by state Attorney General Letitia James accused Trump, his sons and his company of inflating his wealth by as much as $3.6 billion.

In September, the judge ruled that Trump violated state fraud law and ordered that the Trump Organization’s businesses be canceled, which would mean the company’s properties, including Trump Tower and 40 Wall Street, would be transferred to an independent receiver. A state appellate court has paused that order while Trump appeals it.

Testimony ended in the case in mid-December, and Justice Arthur Engoron is expected to deliver a verdict next month. James is seeking at least $250 million in fines.

WeBroke

WeWork, once valued at $47 billion, admitted in August that there was “substantial doubt” that it could continue to exist for another year.

The company told landlords a month later that it would try to rework “nearly all” of its office leases. An analysis by TRD of Trepp data found that landlords in New York that count WeWork among its top five tenants owe about $2.6 billion in CMBS debt, of which about half is due within 12 months and nearly 80 percent of which is either watchlisted, delinquent or in default.

Some landlords fought back: DivcoWest sued WeWork for $30 million in unpaid rent, alleging that the co-working company walked away from its office at 311 West 43rd Street without notice.

WeWork’s attempts to renegotiate leases and abandon others proved insufficient for the firm to stay afloat. In November, the co-working company filed for Chapter 11 bankruptcy.

What’s he worth?

A decades-long feud came to a close this year, but not before it inspired more lawsuits.

In August, SL Green Realty and its partners took over Ben Ashkenazy’s stake in 625 Madison Avenue after foreclosing on a $195 million mezzanine loan. Ashkenazy had used the financing to purchase the ground under the office tower for $400 million in 2013.

SL Green controlled the building through a long-term lease, and bought a stake in the mezzanine debt in 2019. The real estate investment trust and its partners moved to foreclose on the loan after Ashkenazy secured a rent hike for SL Green’s ground lease, raising the annual rent to $20.25 million from $4.5 million.

Before the auction, SL Green and its partners filed a complaint against Ashkenazy demanding records that show that he maintained a net worth of $195 million and liquid assets of $5 million, which were requirements of the loan agreement.

Ashkenazy was also locked in a legal battle with the Gindi family this year.

A tangled web

Former HFZ Capital Executive Nir Meir is involved in countless legal fights. One that garnered the most attention from TRD readers this year was between him and his estranged wife, Ranee Bartolacci.

In court filings, Bartolacci alleged that Meir and his attorneys kept her in the dark about a $13 million judgment against her and the fact that a judge had found her in contempt of court for moving money from restrained accounts.

That judgment sprung from claims filed by Israeli businessman Yoav Harlap, who provided financing for HFZ’s failed project at 1135 Lexington Avenue. In 2021, a judge ruled that Harlap could go after Meir and his wife for the $18.5 million he was owed.

Through his attorney, Meir has rejected the notion that Bartolacci was unaware of the legal issues.

Fortis woes in FiDi, Cobble Hill

Fortis Property Group is facing foreclosure at its troubled and unfinished tower at 161 Maiden Lane, a luxury condo project that is perhaps best known for its slight lean.

Meanwhile, the developer is also fighting with the State University of New York over the unfinished remaking of the former Long Island College Hospital campus in Cobble Hill. SUNY has accused Fortis of failing to close on the second part of a $240 million deal for the site, where the developer planned to build six residential buildings and eight townhouses.

SUNY is seeking $8 million for failing to close on the deal. Fortis alleges that SUNY is, in fact, to blame for the botched deal.

Real-life “Succession”

All is not well in the house of Goldman.

When Sol Goldman died in 1987, he left control of his real estate empire, which according to Forbes includes more than 400 properties, to his four children. In November, his daughter Amy Goldman Fowler and three of his grandchildren hit his youngest daughter Jane Goldman with a lawsuit, accusing her of trying to squeeze other family members out of their fair share of the estate.

Jane Goldman has denied the allegations.

The first of many?

Landlords went to court to force Airbnb to comply with Local Law 18. The restrictions under the law went live in September, requiring hosts to register their listings with the city and allowing property owners to put their buildings on a list indicating that Airbnb and other short-term rentals are prohibited.

In October, Canvas Property Group and Milstein Properties filed the first set of lawsuits against Airbnb since the new rules went into effect. The landlords accuse Airbnb of posting listings in their buildings, despite the fact that their properties at 207 Columbus Avenue and 30 West 63rd Street are on the banned buildings list.