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In Unusual Move, East Village Landlord Attempts To Evict Tenants Through Bankruptcy Filing

HPD Commissioner Maria Torres-Springer at Wednesday’s tenant rally
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HPD Commissioner Maria Torres-Springer at Wednesday’s tenant rally Photo by Jonathan Patkowski

The anonymous owner of an East Village building associated with infamous landlord Raphael Toledano is trying to force out rent-striking tenants by seeking to terminate their leases in bankruptcy court.

The unusual eviction tactic has prompted Attorney General Letitia James and other state and city agencies to intervene in the case. During a protest rally on Wednesday, James announced that her office, along with the New York State Division of Housing and Community Renewal and New York City Department of Housing Preservation and Development, was filing a court motion to oppose a request by the owner of 444 East 13th Street to reject tenants’ leases.

“Bankruptcy Court should not be used as a tool to unjustly oust rent-stabilized New Yorkers from their homes,” James said in a statement. “In filing this motion, my office is working to ensure that the tenants are not displaced."

Michael Leonard, a senior staff attorney at the Urban Justice Center, said using bankruptcy court to push through evictions was rare. He said that typically, when a building is sold, the tenants get to stay and are able to exercise tenant protections, such as rent stabilization, under state law.

Instead, the building owner is asking for a bankruptcy court to terminate the tenants' leases, on the grounds that a proposed $8.2 million sale of the property can't go through while the rent-stabilized leases are in place.

“They are essentially trying to pull a fast one and circumvent tenants’ rights,” Leonard said of the landlord.

Wasim Lone, the director of housing services at Good Old Lower East Side, a grassroots group that has been assisting tenants at the building, called the landlord's filing “outrageous.”

“We see this as litigation harassment,” he added.

A group of eight tenants at the building have been withholding rent for months over a range of problems, including lack of heat, failure to make necessary repairs, and rodents. The building currently has 68 outstanding violations, according to HPD’s website. They include citations for lead-paint hazards, rat droppings, and defective floors.

The building, which has 16 rent-stabilized units and is registered under an LLC that filed for bankruptcy in 2017, has been on the radar of state and city officials because of its association with East Village landlord Raphael Toledano. The latter has a well-chronicled history of tenant harassment, including threats to have tenants deported and to drop dynamite on the building.

In 2016, Toledano was ordered to pay more than $1 million to settle a tenant harassment case where tenants secretly recorded conversations in which the landlord, building agents, and the property manager used claims of prostitution, a drug investigation, and skyrocketing rents to attempt to frighten them into leaving.

According to the state’s legal filing, the Attorney General’s office was made aware of the bankruptcy claim through its ongoing investigation of Toledano, who is referred to as the building’s “prior controlling member.”

Untangling the new ownership is difficult. Property registration documents that listed Toledano as the head officer of 444 East 13 LLC expired in 2017. No new paperwork has since been filed with the state.

Robert Sasloff, an attorney representing the LLC on the bankruptcy filing, did not immediately respond to a request for comment.

What is clear is that the owner is trying to unload the debt-ridden property, according to court documents. In December 2018, the LLC entered into a $8.2 million “stalking horse” contract with an individual named Alex Gonter. A stalking horse refers to an initial offer for a bankrupt company’s assets from a buyer selected by the owner, which sets a floor for future bids. The agreement, which could be challenged by creditors, will not be finalized until a bankruptcy judge signs off.

Court documents have also turned up an unexpected association between the landlord and a former Democratic power broker. In November 2018, the landlord hired Domenic Recchia, the former City Council finance chair who served as a top lieutenant to then Speaker Christine Quinn, to act as its “landlord/tenant consultant.” In 2014, Recchia unsuccessfully tried to unseat Representative Michael G. Grimm, the two-term Republican from Staten Island who was indicted for 20 counts of fraud. The Brooklyn native vastly out-fundraised his scandal-ridden opponent with $5 million in donations.

During the race, Recchia's losing poll numbers inspired a segment on Jon Stewart’s Daily Show called, “Wait, How the f@#k does that happen?”

Recchia did not immediately respond to a request for comment.

A hearing on the bankruptcy case is set to be held on March 19th.

UPDATE: An earlier version of this story misstated the timing of Jon Stewart's segment. It was during the campaign.

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