By Laurie Villanueva
When developers start to change historical buildings, we often focus solely on the masterminds behind the reimagination of the old into the new. But in the case of the $1.1 billion Manhattan House condominium conversion, one of the most expensive conversions in New York City history, Adam Leitman Bailey, P.C. ushered the building’s occupants into a brighter future through extensive years-long litigation in all stages of the conversion.
Prolific developer Jeremiah W. O’Connor knew a condominium conversion of Manhattan House was worth a hefty investment.
Since its construction in 1951, the 21-story building occupying an entire city block and designated as a New York City landmark with almost 600 total units, has housed many notable New Yorkers, including former New York Governor Hugh Carey, the “King of Swing” jazz clarinetist Benny Goodman, and the actress and Princess of Monaco Grace Kelly. At the time that Kalikow, partnering with the late investor Jeremiah O’Connor, began the development project, even Brooklyn Dodgers legend Jackie Robinson’s family still lived in the building.
O’Connor had lofty ambitions for their conversion. Soon after the construction was completed and amid the mid-2000s financial crisis, they were listing condo sales at the average asking price of $1,775 per square foot.
But the rent regulated tenants, most of whom were middle-class renters who had lived there for decades, were afraid of being left behind. The costly conversion had the potential to completely upend the lives of the 600+ tenants occupying the building, and in many cases, the developers wanted them gone. They needed Adam Leitman Bailey, P.C., a scrappy firm that could match the ambitions of the prolific developers, to ensure the rights of both the free-market tenants and the rent-regulated tenants were not encroached upon, and that their quality of living was upheld through their building quite literally being torn apart.
To the developers attempting to bring a traditionally working-class building community into a new, luxury-minded market, the over 500 rent-regulated tenants represented Adam Leitman Bailey, P.C. were often seen as an inconvenience.
But, for the rent-regulated tenants in Manhattan House, the building was more than just somewhere to put their heads at night: it was the place they had called home for decades. By the time Manhattan House sold to O’Connor in 2005, most of the regulated tenants were more than 50 years old and long-time veterans of the building. They were immediately targeted by the developers, who were eager to deregulate the over 500 rent-stabilized units and maximize their profit.
The developers’ legal team attempted to drive rent-regulated tenants out of Manhattan House by weaponizing Major Capital Improvement (MCI) applications to justify rent increases and deny the tenants basic services. Their efforts to “improve” these apartments were at one point so egregious that they replaced boilers that were in perfect working condition.
In a letter to the developers on December 17, 2012, the rent-regulated tenants claimed that the new owners were aggressively attempting to raise the rents on stabilized units above the “luxury decontrol” threshold of $2,000/month, a move that would increase condominium sales while making current stabilized tenants ineligible for rent-regulation.
The developers continued their MCI application efforts, switching out many of the units’ in-shape windows for new panes that severely worsened living conditions by failing to block out almost any extreme temperatures. Further, the tenants called the owner’s denial of basic services systematic, as tenants faced pressure to leave the building after dealing with hot water failures, flooding, mold, bed bug infestations, heating outages, and sludge-filled water, all of which was exacerbated by heavy construction for the conversion straining the building.
One tenant, who had lived there for 25 years, came home to three feet of floodwater in her unit and was wrongfully charged $8,000 in water fees. Another woman who had lived in Manhattan House for 50 years was forced out of her unit and into a hotel while developers made “mandatory” window replacements. Longtime tenants were not only disrupted by constant construction and repairs within their units, but also lost access to critical building amenities as perpetual construction shut down the laundry rooms and elevators, and left hallways in disrepair.
Adam Leitman Bailey, P.C. refused to allow this gross assault on the rent regulated and free market tenants. The firm documented and challenged the strategic negligence, and fought false claims in Major Capital Improvement (MCI) applications, including identifying an engineering report that revealed the original boilers were in good condition and would last another 5-7 more years. The faulty application claimed the boilers were 25 years old, despite cast iron boilers having a useful life of 35 years, and defied the Useful Life Schedule in the Rent Stabilization Code.
Adam Leitman Bailey gave each tenant complaint its full attention, working tirelessly to address each of the issues as they arose. When a clause was added to the condominium bylaws allowing the landlords to evict any rent-regulated tenant who smoked in their unit or common area, Adam Leitman Bailey, P.C. defended tenants' rights and argued that such a rule was designed to simply always keep the tenants on their toes, not in the sincere interest of safety.
When slews of MCIs attempted to spike or raise the tenants’ rent, the firm defeated the applications and secured a month off of rent and a rent reduction. The litigation team also negotiated additional protections for the tenants, convincing the building owners to allow pets and negotiated a construction schedule that did not interfere with the tenant’s peaceful living. The firm also ensured all repairs in the building were completed within 30 days, and that its legal fees were paid in full. Adam Leitman Bailey, P.C. prevailed on behalf of rent-stabilized tenants, defending and protecting their rights within Manhattan House.
In the case of Manhattan House’s market-rate tenants, many found themselves in a uniquely vulnerable position during the conversion, as they lacked the statutory protections their rent-regulated counterparts enjoyed. The developers knew this, and in most cases offered lease renewals doubling or even tripling the tenants’ rent to stay in their units.
One tenant, who was initially paying $4,500 per month in one year, was offered a new lease for $6,700 per month in 4 years later with no option to renew their current lease. The landlords added insult to injury by refusing to negotiate fair lease terms, instead moving rapidly to evict any tenant who did not accept their new offer.
The developers had little regard for the longtime tenants’ circumstances in their aggressive conversion. One tenant, who was suffering from Parkinson’s disease, faced eviction despite the special circumstances of his advanced age and deteriorating health. Another tenant, a 98-year-old man, was hospitalized several times following his exposure to construction dust and poor air quality. This was a direct result of his proximity to the ongoing repairs and renovations in the building, and the developers still sought to raise his rent or kick him out. Ignoring all personal circumstances and tenant histories in the building, the owners continued to offer market-rate tenant renewals with exorbitant rent increases.
Adam Leitman Bailey, P.C. faced an uphill legal battle once the tenants’ leases expired, but remained unwavering in its commitment to defend the free-market tenants, strategically extending legal proceedings to protect their rights and give them critical time to secure new housing and opportunities.
Beginning in June after the free-market lease expirations, the new landlords initiated holdover eviction proceedings against dozens of longtime Manhattan House market-rate tenants.
When many other firms would have stopped litigating at this loss and started strategizing their exit, Adam Leitman Bailey, P.C. knew the tenants did not have their proper day in court. The team devised a novel legal argument, drafting papers that proved the landlord’s counsel and the judge, collectively, did not properly address their argument of systematic retaliatory eviction claims in the first lower court case and appeal. A second judge sided with the tenants, and Adam Leitman Bailey, P.C. was able to renew the case for litigation, and buy the tenants precious time to seek better living arrangements.
Defending these tenants required a high-level legal strategy, and Adam Leitman Bailey P.C. began filing subpoenas to pursue retaliatory eviction claims. The firm filed subpoenas for the production of documents to MH Residential 1, LLC, investigating emails from employees and directors of Manhattan House to attempt to prove a pattern of bias against the market-rate tenants. The new owners attempted to dodge this subpoena, but the court ruled in favor of Adam Leitman Bailey, P.C., demanding that they produce the aforementioned documents. This led to our victory in an Appellate case to expand discovery, a huge win for the tenants and Adam Leitman Bailey, P.C.. This helped to build a detailed record of the tenant mistreatment and landlord misconduct occurring within the conversion at Manhattan House.
Adam Leitman Bailey, P.C. attorneys were determined to demonstrate the retaliatory nature of these evictions, highlighting how many of the recent evictions followed tenants’ involvement in tenant organizations or came right after they filed a complaint about poor conditions. The Developer-landlord took these eviction cases to court but the tenants’ faced a setback when the judge limited the scope of evidence acceptable to the record at trial. This limitation allowed witnesses to testify only about events between the building’s acquisition and the start of actions against them, excluding evidence of patterns like asbestos dust and retributive conduct.
The firm responded by filing a motion to reargue the decision limiting subpoena testimony, and submitted an order to show cause to stay the trial pending both that motion and our appeal to the Appellate Term. Further, we used valuation data, commissioned by our firm, to prove that rent trends in Manhattan compared unfavorably to the tenant group. This data found that the adjustments the tenant group faced led them to overpay beyond the neighborhood’s standard rent increases. The evidence also showed that certain long-term famous tenants received favorable rents compared to the general population. The judges and the Firm both knew that the maximum time the free-market tenants could receive if the tenant’s won their retaliatory evictions claims equaled to an additional one-year term. The free-market tenants litigation lasted 7 years without rent increases and while the tenants’ remained in possession.
After nearly 7 years of litigation, the landlord finally came to the table for settlement negotiations by the end of the non-jury trial. This opened the door for a number of market-rate tenants to purchase their units, freed the tenants from owning any back pay to the Developer-landlord and was the beginning of the end of a tiring and frustrating legal process for these tenants. Overall, the Developer did an excellent job making sure that the all tenants lived peacefully despite the construction ongoing turning Manhattan House into a state of the art, luxury building with new amenities that commanded top of the market prices.
