Landlords pushing their luck with shaky stories of woe

[David Goldsmith]

"The attorneys pointed to 450 rentals, representing 17 percent of Croman’s real estate portfolio, that are sitting vacant, the bulk of which are “free market and commercial.”

"Croman has purchased more than a dozen properties since his release from prison."

Steve Croman Gets Deadline Extension For Tenant Payments

Landlord Steve Croman has until 2023 to pay off the final $2 million of $8 million in restitution owed to tenants.

therealdeal.com

Croman gets until 2023 to pay final $2M in tenant restitution​

Landlord’s attorneys say Covid has led to vacant units​

New York
Mar. 19, 2021 10:30 AM
By Kathryn Brenzel
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Landlord Steve Croman has bought himself extra time to pay off the remaining $2 million he owes tenants, thanks to hundreds of vacancies across his rental portfolio.
Croman agreed in 2017 to pay tenants $8 million to settle allegations that he harassed them out of their rent-regulated apartments. The deadline for paying the final $2 million installment of the settlement was Dec. 31, 2020.

In a Dec. 11 email, Croman’s attorneys said he couldn’t make the payment in a “timely manner,” due to the pandemic and its resulting economic downturn. The attorneys pointed to 450 rentals, representing 17 percent of Croman’s real estate portfolio, that are sitting vacant, the bulk of which are “free market and commercial.”

As a result, New York County Supreme Court Judge Shlomo Hagler set up a new schedule for Croman, allowing him to make 27 monthly payments of just over $74,000 between January 2021 and March 2023.
But some are unhappy about the extension. Cynthia Chaffee, a founder of the Stop Croman Coalition who lives in one of the landlord’s buildings on East 18th Street, said she didn’t understand why the judge granted Croman’s request. She questioned what proof he was required to provide to demonstrate that he was financially hurting, noting that Croman has purchased more than a dozen properties since his release from prison.

“How can he claim that he doesn’t have the money to pay the restitution?” she asked. “Are they just taking him on his word?”
Assembly member Linda Rosenthal said the vacancies and resulting financial hardship are likely Croman’s own doing. The landlord has previously been accused of using illegal tactics to drive out tenants, then flipping the units, using a now-defunct provision of the state’s rent law that allowed the deregulation of vacant apartments.

“I call this the orphan defense,” she said. “It’s like someone killed their parents, and are on trial and then say, ‘Have pity, I’m an orphan.’”
She added, “We know that he has held units off the market for years.”
Rosenthal said the state needs to investigate if Croman intentionally kept units vacant, a practice called warehousing that landlords warned would result from the 2019 changes to the rent law. New York doesn’t prohibit landlords from keeping apartments vacant, though Rosenthal has introduced legislation that would fine owners who keep rent-regulated apartments empty.

An attorney for Croman’s company, which recently rebranded as Centennial Properties NY, said that the reason for the change in the payment schedule was provided to the state Attorney General’s office and the court.
“The company remains focused on diligently implementing the settlement agreement in line with its focus on using best practices to provide quality housing for its residents,” the attorney said. He would not provide further details on the vacant rentals.

A representative from the Attorney General’s office declined to comment.
Earlier this month, Rosenthal wrote a letter calling on the state’s housing regulator to audit Croman’s portfolio to see if the units were vacant before the pandemic. A representative for the Division of Homes and Community Renewal said the agency was reviewing the letter but could not confirm or comment on any pending audits.

“New York State has zero tolerance for landlords who harass, intimidate or unlawfully overcharge tenants,” an agency spokesperson said in a statement, which noted that HCR’s Tenant Protection Unit had made the criminal case referral that led to Croman’s conviction.
Croman was convicted in 2017 on mortgage and tax fraud charges and served eight months of a one-year prison sentence. He subsequently settled harassment allegations in a civil case by agreeing to pay tenants $8 million, and temporarily turned over management of more than 100 buildings to New York City Management, a private company selected by the state.

He has since faced several other lawsuits. Most recently, tenants of 159 Stanton Street have alleged that more than half of the building has been empty for more than five years and that the property is plagued by a rodent and roach infestation, the Village Sun reported.
Under Croman’s consent decree with the court, the landlord could request to take back control of up to 20 buildings on the one- and three-year anniversary of the agreement. He is slated to resume management of all of his properties in 2023.

“Not one building should be back to him until every penny of the restitution is paid,” Chaffee said. “The tenants feel that he has gotten off with a slap on the wrist.”

 

[David Goldsmith]

Less than 5% of the vacant units in NYC are capped substantially below market.

Apartments Sit Vacant After New York Rent Law Overhaul

In an unintended consequence of New York’s 2019 rent-stabilization law, landlords are leaving cheap units off the market.

therealdeal.com

Why affordable housing sits empty​

Unintended consequence of 2019 rent law leaves countless units vacant​

I thought landlords were bluffing when they said the new rent law would force them to leave some apartments vacant.
I was wrong.

Yes, there have been articles and TV news segments about units sitting empty after the law capped rent increases that landlords once imposed to pay for renovations.
It still seemed unlikely to me, however, until I ran into a guy I knew from pickup basketball and struck up a conversation. It turns out he’s a landlord.
Two decades ago he inherited a modest rental portfolio. In growing the business, he said, his best decision was to avoid rent-stabilized buildings. Still, he has a few regulated apartments, including one where he pays more than twice as much in co-op dues as he collects in rent. He loses about $1,300 on that unit every month — more if the tenant stiffs him.

“She pays her rent sporadically,” he said in a phone interview. “You have to sue her every two or three years.”
She has received a few “one-shot” grants from the city to catch up on her bills. “I thought one shot means one shot,” he said, “but I guess it means several shots.”
The tenant knows the system well. When she dies, her son might claim succession rights to the lease, just as she once did.
“That will be the third generation,” the landlord said. “It’s conceivable that they will have the apartment in their family for 100 years, operating at a loss.”
Somehow my friend described the situation without a hint of bitterness. Perhaps acquiescence keeps frustration at bay.

Another tenant leases the entire parlor floor of a brownstone in Prospect Heights. It’s an old apartment and not in great condition, but it has 12-foot ceilings and original plaster molding. “It’s beautiful,” the owner said.
But he believes it’s empty most of the time.
“I’m absolutely convinced that he’s not living there,” he said. “He’s living in Bensonhurst with his girlfriend.”
Until two years ago, landlords occasionally went to court to prove a rent-stabilized tenant’s primary residence was elsewhere — a violation that could yield an eviction and a 20 percent rent increase.
But the 2019 overhaul of the law got rid of the vacancy bonus, which incentivized landlords to push tenants out. So the parlor floor with the 12-foot ceilings sits nearly unused, renting for less than the city pays to board homeless people in small hotel rooms.

“Why should I kick him out?” my friend asks. “If I kick him out, I’m not going to get more rent. You have no incentive to get rid of people who aren’t there.”
Hiring a private detective and lawyer to bring a case would cost thousands of dollars. And he would probably lose anyway.
“The tenant has to be really over the line, like his fourth or fifth violation of the lease, to where [Housing Court is] going to consider throwing him out,” he said.
If this sounds like a lousy affordable housing program, hold on. It gets worse. Another unit in his portfolio is empty and will remain so indefinitely.

The apartment had been occupied by a single gentleman for 40 or 50 years. “Good guy,” the landlord recalled. “He used to come to my office and drink tea.”

He was paying $512 a month, plus a voucher worth $140 or so. When he died two years ago, the owner brought in a contractor to fix up the place.
But just as work began, Albany limited to $15,000 what landlords can recover from rent increases for repairs and upgrades.
The unit needs a gut renovation: new floors, electrical, kitchen, bathroom, windows and more. “We weren’t going to put another $40,000 or $50,000 into it to charge $650 a month,” the owner said. “I just don’t know what to do with it.”
Why not do a patch job — the bare minimum to bring it up to code?
“When you get a tenant in, that tenant has every right to ask you for repairs, and you have no right not to make them,” the landlord said. “Are you going to make enough money after all those repairs to justify the $600 rent?”

But you’re getting nothing now, I said. Wouldn’t you rather have a tenant?
“You run a great risk of putting someone in there who’s difficult enough that the apartment loses money,” he said. “They’re never going to leave and they could call every month on an apartment that’s not in good condition and force repairs.”
One of his tenants, a hoarder, complains about bedbugs. The exterminator bills come to about $6,000 a year.
To avoid such situations, landlords look for a certain kind of tenant.
“A rich tenant who works for Goldman Sachs and lives in London, and you’re reasonably confident that he’s going to return [there],” my friend explained. “So I won’t be stuck with someone who’s grandfathered in.”

The new rent law got rid of income limits. Even Bill Gates qualifies for a rent-stabilized unit now. Not that he would want one, but landlords typically prefer tenants with means. (Discrimination is common against apartment applicants bearing rent vouchers.)
Incidentally, my friend considers himself liberal. He knows how important affordable housing is. “If you’re poor and you hit the lottery with a rent-stabilized apartment, it can do wonders for you,” he said.
He understands tenants’ stress. Once he left a message on the answering machine of a tenant who cleaned houses for a living. It was a benign matter, but his message omitted why he wanted her to call him back. Weeks later he learned that she had barely slept since, fearing he wanted her out.

“I completely upended her life by making a phone call,” the landlord said. “Any little event that happens to people can render them homeless.”
More than 51,000 people live in city shelters. Perhaps twice as many are doubled-up. But my friend’s empty apartment will remain unused.
Some landlords believe lawmakers really thought $15,000 was enough to fix up an apartment in New York City (“No apartment in New York can be renovated for so little,” one small-landlord advocate tweeted.) Or maybe legislators were more concerned about keeping rents low than about units sitting vacant and deteriorating.
My friend, who halted renovations on one Brooklyn building the very day that the rent law passed, said he recently saw one of his contractors’ workers collecting cans.

No one knows how many decrepit apartments are sitting vacant, but one reader tweeted at me that she knows a dozen owners of such units. Landlord groups say dormant dwellings run into the thousands, if not tens of thousands.
“The advice we’ve gotten from everybody is keep them vacant,” my friend said, “and wait for the law to change.”

 

[David Goldsmith]

Landlords Turn Down Federal Relief Dollars

Property owners have taken issue with requirements to disclose financial information, as well as limits on evicting tenants.

therealdeal.com

Landlords shun federal rent relief over program requirements​

Aid roll-out varies state-by-state​

The federal government wants to give landlords and tenants $50 billion to help keep renters in their homes — but some of those property owners are turning down the funding that they’re eligible for.
Some landlords have taken issue with the requirements to receive federal rent relief, including disclosing financial information, as well as limits on evicting tenants if they choose to do so, the Wall Street Journal reported.

In Boston, a tenant attorney said that a fifth of his cases involve a landlord who has refused the funds. A Houston nonprofit tasked with distributing the funds said that in 5,600 cases, landlords shunned the relief. In Los Angeles, nearly half of the tenants who received rent relief had landlords who declined to participate in the program.

While federal requirements stipulate the money should be used to pay rent for low-income tenants, individual states have broad discretion over how the programs are implemented. Those differences can be dramatic: In Broward County, Florida, the rent relief will only make up for 60 percent of back rent if what’s unpaid exceeds a month’s rent.

Some landlords, faced with keeping a non-paying tenant and accepting a discounted rent versus finding a new tenant who may be in a better position to pay, are choosing the latter. The ban on federal evictions, which expires at the end of March, does not mandate that landlords renew current leases.
“If you have someone who wasn’t upholding their end of the contract…you’re asking the housing provider to sign up for essentially another year of this person being in this unit unable to pay,” Amanda Gill, government affairs director for the Florida Apartment Association, an industry trade group, told the publication.

“You’re really putting them in a really difficult position, because they have ongoing obligations,” Gill said.

 

[David Goldsmith]

Raphael Toledano Banned from New York Real Estate for 5 Years

Raphael Toledano, a notorious East Village landlord, violated an agreement with the New York Attorney General’s office.

therealdeal.com

Raphael Toledano banned from NY real estate for 5 years​

Notorious East Village landlord found by AG to have harassed tenants​

Raphael Toledano, a notorious East Village landlord, has been banned from New York real estate after violating an agreement with the state attorney general’s office to end illegal business practices and tenant harassment.
Attorney General Letitia James won an order from the New York Supreme Court that prevents Toledano from participating in the industry for the next five years, after which Toledano can petition the court for readmittance. A press release from James indicates that the landlord will have to sell whatever is left of his New York holdings; Madison Realty Capital took ownership of his East Village portfolio last spring.

The ban stems from a 2019 investigation by James that found Toledano harassed tenants in his East Village buildings, using coercive buyouts and illegal construction practices. Among other findings, the probe found Toledano didn’t provide rent-stabilized tenants with utilities and repairs.
Toledano that year reached a $3 million settlement with the office, which required that an independent monitor supervise his real estate business and banned the owner from contacting tenants directly. He was required to hire an independent management company to oversee his properties.

But James said in a release that Toledano violated the settlement agreement in a number of ways. In addition to not disclosing real estate activities to the monitor or getting approval for deals, he also diverted funds from a reserve account, failed to make penalty payments and didn’t maintain his properties in a lawful manner.
Referring to the five-year ban, Toledano’s lawyer, Benjamin Brafman, a prominent criminal defense attorney, said, “Mr. Toledano fully intends to honor the agreement.”

James filed a motion to enforce the penalties set out by the agreement in December 2020. In addition to the ban, Toledano is required to pay the attorney general’s office $500,000 to cover past-due penalties.

The landlord emerged in the mid 2010s as an unexpected major player in the city’s multifamily market. He debuted in 2015 with a 28-building purchase from the Tabak family for $140M, and in 2016 valued his portfolio, which largely consisted of East Village walk-ups, at $500 million.

However, with the wunderkind reputation came a slew of legal troubles, for which Toledano in 2016 paid $1 million to settle.

Despite the controversy, he maintained a defiant sense of confidence, telling The Real Deal in 2016 he was “worth a fuckload of money, bro.”
“Tenants are not pawns to be abused and discarded in big real estate’s illegal, money-making schemes,” Sandra Meyer, a former tenant of Toledano’s, said in a statement. “At least one bad-acting chess piece has been removed from the board in New York.”

Madison Realty Capital, Toledano’s lender, last year acquired his 15-building East Village portfolio for about $153 million as part of a liquidation plan. A subsidiary of Toledano’s Brookhill Capital owed Madison about $140 million.
“New York tenants can breathe more easily knowing that Rafi Toledano is no longer in the real estate business,” James said in her release. “Through his deceptive and illegal actions, Toledano caused incredible pain and suffering to hundreds of vulnerable families, who are still feeling the effects of his harassment today. Every New Yorker deserves to live in a safe, decent home free of abuse and fear.”

Much of the incentive to force out rent-stabilized tenants was removed when the state reformed the rent law in 2019. Previously, landlords could raise rents on stabilized apartments by 20 percent if they became vacant, and convert them to market-rate if the legal rent of a vacant apartment exceeded a certain amount.
Some investors, possibly including Toledano, bought rent-stabilized buildings at prices that would leave them unable to pay their mortgages if they failed to deregulate enough apartments.

 

[David Goldsmith]

Steve Croman’s Bankruptcy Plan Had “No Chance,” Judge Rules

A federal judge ruled the landlord’s bankruptcy filing on a four-building portfolio was in “bad faith.”

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Judge calls Croman’s bankruptcy a ploy​

Landlord had “no realistic chance” of paying debt to Maverick
Steve Croman tried to stave off foreclosure on Kips Bay apartment buildings last year by filing for Chapter 11 bankruptcy.
But it was a ploy, a federal judge ruled.

Last month, the court tossed the case, writing that Croman had filed in “bad faith” to delay foreclosure and block Maverick Real Estate Partners from recovering the debt.
“The debtor has no reasonable probability of emerging from the bankruptcy proceeding,” Judge James Garrity Jr. determined.

The dispute dates back to August 2021 when Maverick, which specializes in distressed debt, picked up a $25 million loan covering the formerly incarcerated landlord’s four-building, 85-unit portfolio at 208-214 East 25th Street.
Maverick later sued to foreclose, alleging that Croman had defaulted twice on the loan. The filing demanded immediate repayment of the $22.7 million balance, plus the interest accruing at the default rate of 24 percent.
In May 2022, a state court appointed a receiver to collect rent and oversee security deposits at the Kips Bay properties. But Croman continued to demand rent from tenants and sign new leases “as if he had the authority to do so,” receiver Hayley Greenberg said in an affidavit.
In June, Greenberg asked the court to hold Croman in contempt.
The move pushed the landlord to cough up about $330,000 over the next several months but he did not specify what the money was for, to the receiver’s dismay.

“Seven months after the receiver order was entered, it is still unclear whether the debtor has turned over to the receiver all of the tenant security deposits,” his December affidavit reported.
Meanwhile, Croman had racked up more debt — failing to pay property taxes and stiffing Con Edison for $65,000 in electric bills. The landlord also held about $1.5 million in an escrow account that the court had ordered him to fork over.

​

His debts mounting, Croman sought bankruptcy protection in November and tapped FIA Capital Partners’ David Goldwasser as his chief restructuring officer.
That paused Maverick’s foreclosure suit, bogarting its attempt to collect. Within six weeks, Maverick asked the court to toss the suit.

When a business files for bankruptcy, it has three months to propose a reorganization plan to repay its debts. Two months after Croman’s filing, Maverick claimed he had yet to propose such a plan and even if he did, repayment was hopeless.
By Maverick’s count, Croman owed over $11.4 million on the loan and had been unable to refinance it for a year and a half. The firm alleged Croman had access to only about $1.7 million — the $900,000 in escrow after paying the back taxes and the $820,000 collected by the receiver.
Even if he managed to cobble together those funds, when the loan matured on April 10, he would owe the full balance of $33 million, Maverick claimed.
“In just a few weeks … the debtor will be in the exact same position it currently is in now: unable to pay its mortgage debt on a fully matured loan and facing foreclosure,” Maverick wrote.
By February, Goldwasser had resigned, according to Maverick’s second motion to dismiss, which a federal judge granted.

Croman, though, had another card to play. Last week, he appealed the court’s dismissal.
Croman’s lawyer did not respond to a request for comment, and Maverick’s declined to comment.

​

 

[David Goldsmith]

Croman Owes $35M on $23M Loan After Maverick Foreclosure

Steve Croman owes $35 million after Maverick Real Estate Partners foreclosed on buildings backing a $23 million loan and tacked on default interest.

therealdeal.com

Croman owes $35M on $23M loan after Maverick foreclosure​

Landlord calls lender a “bully in the schoolyard”

Three years, two defaults and one bankruptcy “ploy” later, lender Maverick Real Estate Partners finally nabbed a judgment in its foreclosure battle against notorious landlord Steve Croman.
Croman is on the hook for $35 million after defaulting on a $23 million loan backed by four multifamily properties, 208-214 East 25th Street in Kips Bay. a court-appointed referee determined Friday.

That extra $13 million owed largely stems from the 24 percent default interest rate Maverick tacked on when it acquired the loan from Croman’s original lender Miami-based BankUnited.
Croman’s loan will continue to accrue interest at $15,400 per day until the debt is satisfied, according to the court filing.

Maverick, a distressed debt player, earned its aggressive reputation by charging interest just shy of New York’s legal limit. Croman has previously called the firm a “the bully in the schoolyard.”
Neither Croman nor Maverick’s attorney responded to requests for comment.
The recent judgment winds down a three-year saga between the landlord and his lender.
The dispute kicked off in the summer of 2021 after Croman twice defaulted on the debt collateralized by the Kips Bay properties. Maverick scooped up the note, then sued to foreclose the next day.

​

Croman tried to delay the process by filing for Chapter 11 bankruptcy in December 2022. He claimed he had fallen “victim to predatory lending” when BankUnited accelerated his debt and sold the loan to Maverick after “modest” shortfalls arose.

Maverick, he alleged, then rejected his monthly interest payments — installments made at a non-default rate — to jack up his debt.
Last April, a judge tossed Croman’s bankruptcy case, ruling the suit was a ploy filed in “bad faith” as Croman had “no reasonable probability of emerging from the bankruptcy.”
In July 2023, a judge ruled Maverick could barrel ahead with its foreclosure. In response, Croman’s attorney, Terrence Oved, said the team intended to appeal and immediately followed through.
But three months later, Oved resigned, court filings show.
Croman’s loan is non-recourse, according to court documents, meaning Maverick can only recoup what the properties sell for at auction.

​