Ag Settles Case Of Fraudulent Co-op Conversion
Attorney General Spitzer today announced a settlement which requires that a Brooklyn rental building which was fraudulently converted to a cooperative, be restored to rental status and once again be subject to rent regulation.
"By taking this action, we are ensuring that badly needed rent regulated housing will be protected from landlords seeking to evade rent regulation," said Spitzer.
The sponsor of the conversion, 2424 Kings Associates, and its principals, Sally Frishberg, Helen Gamss and Avi Kassuto, have entered into a consent judgment with the Attorney General's Real Estate Financing Bureau. The building, located at 2424 Kings Highway, has 33 residential units.
"My office will investigate and take action to insure that the cooperative conversion process is not abused for the sole purpose of taking apartments out of the rent regulatory system," said Spitzer. "We will be vigilant in monitoring conversions to assure that they conform with all legal requirements and are fair to tenants whose homes are directly affected."
Apartments which become vacant in cooperative buildings are no longer subject to New York rent stabilization laws. As a result of the fraudulent conversion, new rental tenants were not given renewal leases, and the sponsor was able to charge market rental rates as apartments in the building became vacant.
In an amendment submitted to the Attorney General's office in June 1989, the sponsor falsely stated that it had obtained qualified purchasers for the required 15% of the units necessary to convert a rental building to cooperative status in a non-eviction plan. In fact, one of the purchasers listed was the daughter of a principal of the sponsor who did not qualify as a bona fide purchaser.
The consent judgment permanently bars the sponsor and its principals from the offer and sale of real estate securities in New York, directs that the building revert to rent stabilization status, requires defendants to pay full restitution for any excessive rents charged, pay restitution to any bona fide purchasers in the full amount of their purchase price plus interest and imposes costs of $25,000 to be paid to the State for its investigation.
This case was handled by Assistant Attorney General Kenneth E. Demario under the direction of Bureau Chief Geneith Turnbull and Chief of Enforcement Gary Connor of Spitzer's Real Estate Financing Bureau.