Legal Aid, Milbank Bring Damages Suit Against Unscrupulous Landlord, City Of New York Over Illegal Subsidies

The Legal Aid Society and Milbank, Tweed, Hadley & McCloy LLP filed a class action lawsuit in New York County Supreme Court against Hewlett Associates, LP; Kaled Management Corporation; and the City of New York in a case that could impact over 100 families.

The lawsuit, filed on behalf of tenants residing at Trafalgar Apartments in Queens, seeks damages for overcharged rent as a result of their landlord’s decades-long flouting of New York’s rent stabilizations laws.

“Kaled Management Corporation has a long and brazen history of flaunting New York’s rent regulation laws to line their pockets,” said Amee Master, Supervising Attorney of the Queens Tenant Rights Coalition at The Legal Aid Society. “Their conduct is illegal and the City is complicit for doling out benefits paid for by taxpayers with zero oversight while low-income New Yorkers suffer from higher rents. We look forward to righting this 40 year injustice in a court of law very soon.”

As long ago as 1974 and continuing into 2017, the landlord of Trafalgar Apartments - Hewlett Associates, LP -acting on its own and through its management company - Kaled Management Corporation - has reaped the rewards of New York’s 421-a and J-51 tax benefit programs.

The 421-a program was established by the New York State Legislature in 1971 with the intent of spurring the construction of new affordable units by providing developers a tax exemption for building a multi-unit residential project on vacant land. The J-51 program provides owners with real property tax exemption and abatement benefits to offset the cost of residential major capital improvements.

The landlord has disregarded the legal obligations that come with the receipt of such tax benefits including:

  • failing to register the rents of the building;
  • neglecting to provide notice of the building’s rent-stabilized status and misleading tenants as to that status when asked;
  • overcharging the tenants of the rent-regulated units to the tune of hundreds of thousands of dollars.

The landlord’s malfeasance has been enabled by the City of New York, acting through its commissioners of the Department of Housing Preservation and Development and the Department of Finance. The City Defendants have long been aware of New York City/landlords’ non-compliance with the rent stabilization requirements that are a precondition to the receipt of tax benefits under the 421-a and J-51 programs. But landlords, including the landlord at issue in this case, have received at least $100 million in tax benefits while failing to meet basic rent stabilization requirements.

“By standing idly by in the face of such non-compliance, the City has effectively showered landlords with millions of dollars in tax benefits they do not deserve,” said Grant Mainland, litigation partner at Milbank. “This windfall is barred by New York’s Constitution and should be enjoined.”

"J-51 offenders are committing dual-theft from both the tenants and taxpayers of New York City. The J-51 program was pitched to the public as an affordable housing program. The program cost taxpayers approximately $250,000,000 in forgone tax revenue each year. However, without legislative reforms or increased enforcement, the J-51 program will continue to serve as a bad deal for tenants and taxpayers. We thank Legal Aid for their unparalleled dedication and commitment to assisting the families in this building," said Aaron Carr, Executive Director of Housing Rights Initiative.