October 5, 2022

Legal Updates from NYC’s Real Estate Landscape: Rent Stabilization Infringement & Gender Diversity | PropertyShark

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Legal Updates from NYC’s Real Estate Landscape: Rent Stabilization Infringement & Gender Diversity

Jacqueline Weiss

NYC-based boutique law firm  Pardalis & Nohavicka  brings the latest legal updates from the world of real estate. Pardalis & Nohavicka handles an eclectic array of matters, representing individuals and business owners in civil litigation, criminal cases and business transactions, currently litigating and representing clients throughout the United States and around the world. 

Real Estate Brokers & Gender Diversity

On Aug. 17, 2022, Governor Kathy Hochul signed Senate Bill S-536A into law, which amended a 1927 real estate bill that referred to real estate agents and brokers as salesmen. Women are especially hopeful that the new bill will create more gender diversity and equity in the real estate profession: The new bill replaces the older Article 12A of Real Property law, which referred to all real estate people as salesmen, a male-centric term.

The purpose of the legislation was to create a gender-neutral bill that will acknowledge the women who work in the real estate profession (equating to 64% of the industry workforce). The new law makes New York consistent with the rest of the Northeast by not referring to brokers and real estate salespersons exclusively in the male gender. Specifically, the new law:

  • Changes the word “salesman” to “salesperson” in 85 places in the original assembly bill
  • Replaces the use of the word “his” to “their” and “himself” to “their selves”

During the bill signing, Senator Anna Kaplan remarked, “Jobs have no gender. But, unfortunately, many of our state laws still use gendered language when discussing professions that have no genders.”

Assembly Member Danny O’Connell added, “People of all professions deserve to be valued, but gendered language in our real property law fails to adequately recognize the contributions of women and non-binary New Yorkers. We want our workplace to reflect the diversity of New York.”

According to Bill S-56-A, A-8077A, a salesperson is defined as someone who works under the supervision of a licensed broker assisting in the sale, purchase or leasing of real estate in the state of New York. A salesperson must receive 77 hours of mandatory, approved real estate courses, including six hours in housing and discrimination continuing legal education credits.           

State AG Settles Rent Stabilization Law Infringement Case

In other recent developments, the New York State Attorney General’s Office just settled an ongoing case with 29 property management firms. Brian Lee’s recent New York Law Journal article addressed the status of the settlement and its litigation ramifications as follows:

In May 2019, a lawsuit was filed against New Castle employee David Drumweller, alleging that New Castle and its employees were violating New York City rent-stabilization laws by inflating renovation costs to increase the cost of rents in rent-stabilized apartments. The property owners — including New Castle, High Castle and other LLCs — were accused of negligence in failing to exercise proper oversight of New York City landlords and of their employees in the oversight of low-income apartments.

The litigation and Attorney General’s probe lasted for more than three years. The lawsuit was filed against many property management owners with the primary defendant named as Ink Group LLC. At the time, the property management owners controlled more than 32 apartment buildings in northern Brooklyn and Manhattan — all of which were intended to be designated as rent-stabilized.

Specifically, apartment owners were accused of forcing tenants out of their buildings by letting their buildings fall into disrepair and then forcing them out. Employees of the property management firms would then get $5,000 kickbacks for forcing tenants to leave their apartments through harassment or by allowing their buildings deteriorate to the point that they were no longer livable. 

Furthermore, Ink and other property management owners were alleged to have willfully hired contractors to perform cosmetic updates or renovations to the building. As a result, the owners were only supposed to increase rents by a small portion of the cost of improvements so that the apartments’ rent-stabilized status would remain intact. However, the owners increased rents substantially — in violation of each unit’s Individual Apartment Improvement System.

Additionally, the owners also attempted to deregulate the status of the apartments in other ways:

  1. Ink property owners and others submitted phony rental invoices or rent rolls to tenants and to their banks.
  2. Ink, New Castle and others submitted phony rental agreements with false tenants, including associates, family members and friends.
  3. Property owners inflated renovation costs by submitting phony loan documents to banks to obtain refinancing for the rental units.
  4. Property management offered bonuses to contractors and employees who kicked out tenants, including $5,000 payments to every employee for every tenant who relocated to another apartment building.

New York State Attorney General Letitia James’ investigation found that 29 property management LLC owners had made a concerted effort to deregulate the apartments by increasing their rents so that the apartments’ classification could be converted from “regulated” to “market status.” This then allowed the owners to substantially increase their rents.

James’ settlement provided that the 29 owners involved in the settlement would be responsible for a total of $4 million payable by all entities involved in the lawsuit. This includes paying $1.75 million to the NYC Affordable Housing Fund. It also provides restitution to all affected tenants of the rental scheme in the sum of $400,000. The settlement also mandated that the property owners refund tenants for overcharges in rent, as well as offer rent-stabilized leases and reset rents.

Moreover, other conditions of the settlement also required the owners to provide each tenant with a $2,500 payment for costs associated with being left with an uninhabitable or deteriorating apartment, along with other conditions of restitution. Ink Property LLC and other owners were also required to retain an outside, independent auditor at their own expense to properly retain rent-stabilization practices.

Need to speak with our real estate attorneys? Email us at contact@pnlawyers.com or call 212-213-8511 today. 

Read the article on PropertyShark here and check out our other PropertyShark feature pieces here.

Taso Pardalis

Taso Pardalis is a founding partner of the Law Offices of Pardalis & Nohavicka, a leading full- service NYC law firm with offices in Manhattan, Queens and WeWork. Taso may be a well-known attorney with many cases making headlines in major media outlets, but at heart, he is a true entrepreneur that believes in supporting the small business community. His areas of concentration are: Intellectual Property, Trademarks, Corporate, Business Law and Real Estate Law.

Jacqueline Weiss

Jacqueline Weiss, a graduate of Union College, received her Juris Doctor from Albany Law School and is admitted to practice in the States of New York and New Jersey.  She has completed NYS Basic Mediation Training for Community Mediation and interned with Justice Pineda-Kirwan in the NYS Supreme Court of Queens County and is now a full time attorney at Pardalis & Nohavicka. Ms. Weiss has experience in healthcare and the defense of professional liability claims involving physicians, hospitals and nursing homes.

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