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Post date: January 13 2015

A.G. Schneiderman Announces Court Order Barring Developers From Clearing Tenants From Upper West Side Apartment Building

Court Orders Newcastle Realty Services To Halt Plan To Convert Rent Stabilized Residential Rentals To Luxury Condominiums Pending Fraud Investigation; Refrain From Removing Tenants From Units; Produce Evidence

Schneiderman: Real Estate Developers Must Respect Tenant Rights When Converting Occupied Rental Buildings To Condominiums

NEW YORK - Attorney General Eric T. Schneiderman today announced a court order that bars Newcastle Realty Services, LLC, 101 West 78th Street LLC and Margaret Streicker Porres from moving forward with plans to convert an occupied residential rental building at 101 West 78th Street into condominiums, pending a fraud investigation. The Attorney General is investigating allegations of fraud in the offering of condominium units at the Upper West Side property, including allegations that the developers submitted a fraudulent offering plan to the Attorney General’s Office, distributed the false plan to tenants at the building, made false filings with the City’s Department of Buildings, and wrongfully entered into buyout agreements with tenants to induce them to vacate their apartments during the conversion process. 

“Developers who purchase occupied buildings with an eye to converting them to condominium or cooperative ownership cannot run roughshod over New Yorkers who rent their apartments,” Attorney General Schneiderman said. “In attempting to clear the building of tenants to make a conversion easier and more lucrative, these developers violated the law and stripped tenants of their rights.”

"Attorney General Schneiderman is to be congratulated for standing up for tenants at 101 West 78th Street," Manhattan Borough President Gale A. Brewer said. "Unscrupulous developers like these are pressuring existing tenants in conversions all over the city, and this should be a warning to them."

New York State Senator José M. Serrano said, "More and more, tenants in New York City find themselves in jeopardy of losing their homes while being pushed out of their community. I applaud Attorney General Eric Schneiderman for standing up for tenants in our community by ensuring that any conversion that may affect tenants be done in a transparent way."

"With the number of rental buildings being converted to co-ops and condos increasing exponentially in my district on the west side and across the city, vigilance is required to ensure that existing residents, including rent-regulated tenants, are not stripped of their rights in the process," Assemblymember Linda B. Rosenthal said (D/WF-Manhattan). "I am pleased that Attorney General Schneiderman uncovered this fraud in my district; working together, we will continue to take decisive action to protect tenants and to deter future bad behavior."

“The UWS has lost over 12,000 units of affordable housing since 2010 through conversions just like this one. We need to be vigilant to protect our affordable housing stock," said Council Member Helen Rosenthal (D-Manhattan). “I thank Attorney General Schneiderman for fighting for affordable housing, defending the rights of tenants, and holding wrongdoers accountable for their actions."

The developers were ordered to halt their plans to combine units at the West 78th Street building and to cease any attempts to remove the remaining tenants from their homes. The order also requires the developers to produce documents relating to the scheme to the Attorney General and requires Streicker Porres to testify under oath. The respondents are all temporarily restrained from participating in the offer and sale of securities in New York while the investigation is pending.

The Martin Act, New York’s blue sky law, protects both apartment purchasers and tenants in buildings that are converted to coops or condominiums. Tenants get an exclusive right to buy their units and, in most cases, cannot be evicted purely because the building is being converted. To make sure that tenants have full information about their decision whether to continue to rent or to purchase, the law requires that developers disclose to tenants the proposed conversion plan, prior to its being accepted by the Attorney General.

101 West 78th Street is a landmarked 44-unit building in the heart of the Upper West Side. It has been home to residential renters, including rent-stabilized and rent-controlled tenants, for more than a century. Streicker Porres and Newcastle bought the building in late 2012, through their affiliate, 101 West 78th Street LLC. At the time of purchase, it was almost fully occupied.

In June 2013, the developers submitted an offering plan to convert the building to condominiums, which represented that they would offer 43 units for sale “as is.” However, the Attorney General has uncovered Department of Buildings filings the developers made before the offering plan was submitted to the Attorney General that show that they actually intended to combine units in the building and offer 24 much larger apartments. The developers seemingly attempted to conceal their illegal scheme by submitting a false offering plan to the Attorney General and distributing that plan to tenants, all with an intent to strip tenants of their rights and never give them the offer to purchase their apartments that is required by law. In addition, for more than a year, the developers have been clearing out tenants by means of buyouts that are prohibited. The Attorney General will also investigate whether tenants were forced out by acts of harassment.

The investigation is being conducted by Assistant Attorney General Elissa Rossi, Deputy Chief Andrew H. Meier, and Bureau Chief Erica F. Buckley, all of the Real Estate Finance Bureau, as well as Executive Deputy Attorney General for Economic Justice Karla G. Sanchez.

A copy of the court order can be viewed here.

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