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Court backs tenants in J-51 class action against landlord

Judge rules Urban American illegally deregulated units in Astoria building

November 2nd, 2021

Erin Hudson

25-21 31st Avenue, (L-R) Philip Eisenberg and Joshua Eisenberg, Urban American executive Vice Presidents, and Housing Rights Initiative’s Aaron Carr (REBNY, LinkedIn, Google Maps)

UPDATED Nov. 2, 2021, 10:08 a.m.: A judge has determined that Urban American should not have deregulated apartments in Astoria while receiving tax breaks under New York’s J-51 program.

The landlord had removed the units from rent stabilization between 2010 and 2015 after a landmark ruling that deemed deregulation illegal in buildings getting J-51 and required landlord to recalculate rents. Urban American had defended its conduct by pointing to a “state of confusion” after the 2009 court ruling.

The judge responded in her Friday decision that “ignorance of the law is no defense, and willful ignorance remains willful conduct sufficient to find fraud.”

Tenants at the 101-unit building at 25-21 31st Avenue sued the landlord in 2018. Queens County Supreme Court Judge Pam Jackman Brown ruled that Urban American had more than a decade to re-register 43 units.

If the ruling stands on appeal, a referee would calculate the rent overpayment that Urban American owes tenants. The calculation will be based on a formula that defines the legal rent as the lowest rent charged for a stabilized unit with the same number of rooms in the building four years prior to the lawsuit’s filing. That so-called default formula will be used because of the finding of fraud on the landlord’s part.

In addition to overpaid rent, Urban American is also on the hook for legal fees for tenants, who were represented by Lucas Ferrara and Roger Sachar at Newman Ferrara.

“For an owner of some 15,000 units to profess ignorance of the rent laws was a laughable defense,” Ferrara said in an email.

Urban American was not immediately available for comment, but the landlord is likely to appeal. It was represented by the law firm of Adam Leitman Bailey, who declined to comment.

Urban American is an owner-operator that invests in multifamily, workforce housing. The company’s founder and CEO is Philip Eisenberg, whose son Joshua Eisenberg is executive vice president. The Astoria rental is part of a 1,400-unit portfolio that Urban American recapitalized in a $275 million deal last year.

The lawsuit came after Housing Rights Initiative, a watchdog group led by Aaron Carr, investigated rental histories in the building. HRI investigations have laid the foundation for a spate of lawsuits accusing landlords and developers receiving tax benefits from programs including J-51 and 421a of violating their rules and ultimately overcharging tenants. At least 40 HRI investigations have led to J-51 class-action lawsuits, though most are still pending, according to Carr.

“This is a massive victory for our watchdog group,” he said, adding that New York’s Division of Housing & Community Renewal, the state agency that oversees rent stabilization programs, should audit its data and catch violators or abolish the tax breaks.

“Hopefully Gov. Hochul will push her agency to do what Cuomo never had the spine to do, which is enforce rent stabilization laws,” he said.

Industry leaders have said ending the abatement programs would increase rents.


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