A
group of New York City tenants has sued the Kushner Companies, the
family real estate firm of Jared Kushner, President Trump’s son-in-law
and White House adviser, accusing the company of systematically
violating the state’s rent regulations.
Claims could grow to more than $1 million in rent overcharges in a single apartment building if the company is found liable.
The
lawsuit, filed in the New York State Supreme Court in Brooklyn on
Tuesday, was on behalf of nine tenants, but it concludes that more than
100 former and current tenants could have similar claims. The complaint
is seeking class-action status.
The
nonprofit group that researched the building, Housing Rights
Initiative, said it had found similar irregularities in more than 50
other Kushner Companies apartment buildings across New York City and is
studying potential future litigation related to those properties.
A Kushner Companies spokesman said the firm was reviewing the lawsuit.
The
complaint stems from the Kushner Companies’ 2014 purchase of a 48-unit
apartment building at 89 Hicks Street in Brooklyn Heights, one of the
city’s most affluent neighborhoods.
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The
building had previously been owned by the Watch Tower Bible and Tract
Society, then by Brooklyn Law School. Because those owners did not rent
the apartments to the public, units previously covered by the state’s
rent stabilization laws were temporarily exempt.
Under
New York State law, any building of six apartments or more built before
1974, or new buildings that have received certain types of property tax
breaks, must charge rents that conform with the state’s rent
stabilization laws. Landlords must register the rents annually and can
increase the rents only based on formulas set by the city and the state.
The
suit claims that Kushner Companies failed to provide rent-stabilized
leases to tenants as required, once it had purchased the building and
the temporary exemption ended. The company’s failure to offer such
leases was “willful and designed to remove the apartments” from the
protections of the rent laws, according to the complaint, filed by the
law firm Newman Ferrara in Manhattan.
The
building is in the heart of Brooklyn Heights, a short walk from the
historic Brooklyn Bridge and several amenities along the water,
including basketball courts, roller-skating rinks, jogging and biking
paths, and sweeping views of Lower Manhattan.
The
suit came after a monthlong investigation by Housing Rights Initiative,
which investigates rent fraud in rent-regulated buildings.
“I’ve
seen instances where the landlord registered the units’ rents at an
improper amount, but I’ve never seen a landlord just deregulate an
entire building,” said Aaron Carr, the group’s executive director. “I’ve
investigated hundreds of buildings, but never seen a scheme as
egregious and systematic as this one.”
Kushner
Companies has been registering a handful of units in the building as
rent-stabilized, which Mr. Carr said showed that the firm’s omissions
were unlikely to have been an accident, a pattern he said his group has
seen in other Kushner properties.
“Rent
overcharges or rent fraud is part of a systematic business model,” he
added. “When you see irregularities in a few buildings, that mostly
likely means there are irregularities in all of their buildings.”
In
preparation for his new White House role, Mr. Kushner began divesting a
small portion of his stake in the family real estate empire. But he has
retained ownership in the majority of the multibillion-dollar business,
which includes more than 20,000 apartments and nearly 14 million square
feet of office space around the country, mainly in New York and New
Jersey.
The
stake held by Mr. Kushner and his wife, Ivanka Trump, in the family
business and other investments is worth as much as $761 million to the
couple.
In
the case of a one-bedroom apartment in the Brooklyn building, Mr. Carr
said that Kushner Companies was charging the tenant about $2,500 a
month, when he estimated the legal rent should more properly have been
about $1,100 a month, based on the permissible increases since the last
time the unit’s rent was regulated.
As a result, he estimated that the tenant was overcharged by about $17,000 in a single year.
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