A group of West Village tenants are suing the notorious landlord Steve Croman for allegedly illegally charging market-rate rents at a building that was required to remain rent-stabilized under a special New York City tax benefit program.

At least five residents at 560-566 Hudson Street, a 32-unit building, say they were not provided with rent-stabilized leases in a lawsuit filed Thursday morning.

Under J-51, residential property owners rehabbing or renovating their buildings can apply for tax breaks. But they must keep their units rent-stabilized while receiving the tax benefits.

The J-51 benefits for the building, which began in 2006, expired in June 2016. At the time, only 10 of the 32 units were listed as rent-stabilized, according to the complaint. During that time, Croman received a total of $145,000 in tax breaks.

The lawsuit did not provide rental histories of the tenants, but according to Streeteasy, a studio at 560 Hudson Street is listed at $5,595 a month.

Croman, who owns approximately 140 Manhattan buildings and has routinely appeared on “worst landlord” lists, recently served eight months in jail for multiple tax and mortgage fraud charges. His sentencing in 2017 was the result of a year-long investigation by former New York State attorney general, Eric T. Schneiderman.

Most recently, Croman came under the spotlight for his purchase of 567 Hudson Street, which is home to the White Horse Tavern, a historic bar known for its famed literary patrons. The sale stoked fears among local residents about both the fate of the bar and about the tenants who live above it. The building contains 17 apartments, many of which are said to be rent-regulated. In the past, Croman developed a reputation for harassing rent-regulated tenants to force them out, but under the new laws, rent-regulated units cannot be easily deregulated.

The tenants in the 560 Hudson Street case declined to comment, but in an email to Gothamist, their attorney Lucas Ferrara wrote, “It’s particularly telling that, despite his incarceration, Croman stubbornly refuses to make amends or to comply with the spirit or letter of the rent stabilization laws.”

He added: “It’s a disgrace, actually.”

Reached for comment, Sam Spokony, a spokesperson for Croman, issued a statement, saying, “While we do not comment on pending litigation, we remain committed to diligently implementing our settlement agreement with the state Attorney General in line with our focus on using best practices to provide quality housing for our residents.”

The case came about after the Village Independent Democrats, a local political club, began knocking on doors and interviewing tenants in buildings receiving J-51 tax benefits. The group has long lobbied for changes in the rent laws, which passed this June, and provide stronger protections for rent-stabilized tenants.

Tony Hoffmann, one of the members who did the canvassing, said he met personally with two tenants at the Hudson Street building.

“Both had no idea that they were supposed to be under rent stabilization,” he said. “They thanked us very much and we said we would follow up.”

The group then passed along the information to Housing Rights Initiative, a watchdog organization that helps tenants initiate class action lawsuits against landlords who violate J-51 rules.

In July, Housing Rights Initiative helped spearhead another J-51 lawsuit against Croman involving 100 tenants at an East Harlem building.

Aaron Carr, the group's founder, has sought to use the cases to argue that the state is not sufficiently doing its job of holding landlords accountable. The state enforcement agency, Housing and Community Renewal (HCR), however, has said that it was the work of their staff members that prompted the Attorney General’s investigation of Croman.

But in a statement, Carr said, "While it is true that HCR played a part in the civil and criminal case against Croman, what is also true is that Croman is still Croman and that our broken enforcement system is still broken."

Hoffman, who has lived in the West Village for 50 years, said that the affordable housing crisis is evident throughout the pricey neighborhood. Many younger members of his political club are forced to leave, he said, because they can’t afford the rents. According to Streeteasy, the median asking rent is $3,775, up 5 percent from a year ago.

Noting the proliferation of high-priced shops and markets in the neighborhood, he added: “Even if you pay 50 percent of your salary on rent, can you afford to live in a neighborhood like this?”

UPDATE: This story has been updated to include a statement from Croman's spokesperson.