Tenants Of 11 Harlem Buildings Can Sue Over Alleged Rent Fraud: Judge

HARLEM, NY — Hundreds of tenants across 11 Harlem buildings can collectively sue their landlords over claims that they illegally jacked up stabilized rents, a judge ruled last month, setting the state for what could be a historic class-action lawsuit.

The Aug. 15 ruling by Manhattan Supreme Court Justice Sabrina Kraus, first reported by City Limits this week, comes nearly six years after the tenants first filed their suit against a group of LLCs controlled by the companies Big City Realty and Magnolia Holdings.

Their effort to sue the landlords as a group was dismissed in 2018 but revived on appeal in 2019, leading to the new ruling, in which Kraus said the tenants alleged a "methodical attempt to illegally inflate rents and evade the requirements of rent-stabilization."

Most of the suit centers on allegations that the landlords raised rents on legally-stabilized units, based on claims that they had improved them. (State law allows landlords to raise stabilized rents to help cover repair costs.)

In fact, many of those supposed renovations never happened, according to the suit. One of the plaintiffs, Liam Cudmore, had the rent of his apartment jacked up from $975 to $2,030 between 2009 and 2010 — an increase that would have required more than $32,000 in repairs to be legally allowed, the suit says.

"There is no evidence that [repairs] in that amount were implemented in Plaintiff Cudmore’s apartment, and in fact, an inspection of that apartment suggests to the contrary," attorneys wrote.

In other cases, the landlords never registered the stabilized apartments with the state and took city tax breaks even as they charged market-rate rents, the suit alleges.

The landlord groups and their attorneys have not commented publicly on the new ruling, but have argued in court that the tenants' claims were too distinct from one another to form a legal class.

Kraus disagreed, saying the tenants were all suffering from the same alleged harm: the landlords' "failure to follow the strictures of the rental regulation."

In her ruling, Kraus ordered the landlords to give the tenants' attorneys full rent rolls for each of the 11 buildings, plus information about previous tenants dating back to 2012 — which could ultimately lead to nearly 2,000 current or former tenants being added to the case, a lawyer told City Limits.

A class-action case brought by tenants could be a "nightmare" for landlords, a landlord attorney told The Real Deal in 2019, arguing that it could lead to longer and more expensive cases.

The Harlem lawsuit was sparked by an investigation by the nonprofit Housing Rights Initiative, which said it uncovered widespread violations of the city's rent stabilization laws.

"The potential impact of this ruling on the lives of tenants cannot be overstated," Aaron Carr, the group's founder and executive director, told City Limits.

This appears to be the first time a New York judge has certified a class-action suit brought by tenants alleging fraud in individual improvement, the state law that covers repair costs in stabilized units, according to City Limits.

If the tenants ultimately win or settle the lawsuit, their monthly rents would likely be reverted back to their legally-stabilized levels, while tenants whose apartments were deregulated would get new, stabilized leases, City Limits reported.

Tenants who moved out due to rising rents could get money for their wrongful expenses, the publication reported.