Attorney General Cuomo Sues NYC Developer For Illegally Raiding Condominium's Reserve Fund
Lawsuit Seeks $7.4 Million in Restitution and to Bar Developer from Future Sales
NEW YORK, NY (June 9, 2010) - Attorney General Andrew M. Cuomo today filed a lawsuit charging the developers of the Rector Square Condominium in Battery Park City with defrauding purchasers out of approximately $7.4 million by raiding a reserve fund meant to ensure the health and safety of residents and instead using the money for personal and unrelated business purposes.
The Attorney General’s investigation revealed that while developers YL Rector Street, LLC and its principal, Yair Levy, had promised tenants and owners that the reserve fund would be set aside for making repairs, improvements and replacements necessary for their health and safety, they instead depleted the fund leaving residents with a mere $70. A review of the Condominium’s financial records uncovered that Levy misused millions of dollars of the residents’ money for personal and general business expenses, including making credit card payments and writing checks to himself and relatives.
“It is unconscionable that the developer pocketed a fund established to protect residents,” said Attorney General Cuomo. “Today’s lawsuit sends a clear message to property developers that deception and fraud will not be tolerated. Purchasers and tenants are entitled to full and honest disclosure and must be able to rely on all representations made to them.”
The lawsuit, filed in New York State Supreme Court in Manhattan, alleges that YL Rector Street, LLC and Levy violated New York’s Martin Act for fraudulent conduct in connection with the sale of real estate securities and Executive Law 63(12) for persistent fraud and illegality in the conduct of a business. The suit seeks restitution, damages and penalties from Levy and YL Rector Street LLC, and also seeks to bar Levy from offering real estate securities for sale in New York State in the future.
The Rector Square Condominium conversion plan was filed with the Attorney General in May 2007, and the developers undertook renovations in 2007 and 2008. Under New York City law and the Attorney General’s regulations for condominium conversions, the developers were required to create a reserve fund of approximately $7.4 million for Rector Square residents to address health and safety issues that may arise in the future. Although the developers represented they would comply with this law, they instead raided the reserve fund for personal and unrelated business purposes.
The case is being handled by Assistant Attorney General Jeffrey Rendin and Assistant Attorney General Lewis Polishook under the supervision of Deputy Attorney General for Economic Justice Michael Berlin and Executive Deputy Attorney General for Economic Justice Maria Vullo.