NYC Tenants File Illegal Rent Inflation Class Action Lawsuit

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Dozens of current and former tenants in apartment buildings owned by A&E Real Estate Holdings filed a proposed class action lawsuit against the landlord on Tuesday claiming it “blatantly” violated rent inflation regulation laws.

Filed in state Supreme Court in Manhattan, the proposed class action lawsuit accuses A&E Real Estate Holdings of engaging in a scheme to evade New York City’s rent inflation regulations.

The company, who holds over 100 buildings with assets valued over $2 billion, fraudulently raised rents by artificially inflating the amount of money spent on improvements to the apartments, the lawsuit alleges.

“The scheme represents defendants’ blatant attempt to circumvent New York City’s rent regulation process, at the expense of tenants residing in buildings in the A&E portfolio,” the tenants state. “Left unchecked, this conduct will force countless tenants from their homes, and continue the demise of affordable rental housing in New York City.”

The rent inflation class action, filed by 68 current and former tenants, personally names company founders Douglas Eisenberg and John Arrillaga Jr. and is purportedly one of the largest tenant lawsuits ever filed in New York City, housing-rights advocates say.

According to the tenants, their buildings are protected by a little-known city tax abatement that gives landlords a break on property taxes in exchange for stabilizing rents.

As such, landlords are entitled to a rent increase of 1/60^th (or 1/40^th where the building contains 35 apartments or less) of the cost of Individual Apartment Improvements (IAIs). IAIs are items such as new doors, counters, and cabinets that improve, rather than repair, the apartment.

One of the named plaintiffs, John Stafford, lived in one of A&E’s apartment buildings in Manhattan. He says between 2011 and 2013, the legal regulated rent on his apartment increased by 354 percent, which would have required over $123,000 in IAIs to be justifiable.

In fact, Stafford and the other plaintiffs contend there is no evidence that IAIs in this substantial amount took place, and that an inspection of their apartments suggests to the contrary.

The tenants are bringing the lawsuit to “end the illegal and fraudulent practices employed by Defendants over the course of their ownership and operation of over 100 apartment buildings in the City of New York.”

They are seeking certification of claims for damages for a Class of current and former tenants of A&E Portfolio buildings who, between Oct. 18, 2012 and the present date, resided in rent-stabilized or unlawfully-deregulated apartments, and who paid rent in excess of the legal limit based on misrepresentations by the defendants, or any predecessor in interest, concerning legal regulated rents and improvements.

Additionally, the plaintiffs propose a subclass consisting of all current tenants of A&E buildings, who currently reside in a rent-stabilized apartment or unlawfully-deregulated apartment. The subclass seeks certification of claims for declaratory and injunctive relief.

In related news, A&E was accused by the New York Attorney General’s Office earlier this year of making illegal payouts to rent-stabilized tenants at an Upper West Side condo conversion. The firm agreed to pay $540,000 to settle these allegations.

Stafford and the other plaintiffs are represented by Lucas A. Ferrara, Jarred I. Kassenoff, Jeffrey M. Norton and Roger A. Sachar Jr. of Newman Ferrara LLP.

The NYC Rent Inflation Class Action Lawsuit is John Stafford et al. v. A&E Real Estate Holdings LLC, et al., Case No. 655500/2016, in the Supreme Court of the State of New York, County of New York.