Lower Manhattan tenants sue for refunds over landlord tax break abuse

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Tim and Bruce’s living room in their Hanover Square apartment. (Photo: Jason Scott Jones/THE CITY)

BY JOSEFA VELASQUEZ AND RACHEL HOLLIDAY SMITH, THE CITY | This story was first published on Oct. 4 by The City. A Financial District couple who discovered their apartment should have been rent regulated in exchange for a landlord tax break filed a class-action lawsuit Friday seeking rent reductions and refunds.

Bruce Hackney and Tim Smith’s lawsuit alleges the landlord of 10 Hanover Square engaged in a “fraudulent scheme to deregulate apartments in the building” — and demands more than a decade’s worth of past rent payments they say surpassed legal limits.

“We’re not not talking about a Netflix overcharge that is 27 cents. We’re talking about people’s homes. You have something that is very serious,” said Roger Sachar, one of the attorneys on the case.

“You’re talking about significant overcharges, a result of a 15-year violation of the rent regulations,” Sachar added.

Representatives for UDR, the owner of 10 Hanover Square, did not respond to requests for comment.

The couple, who have lived in their apartment for 12 years, are among the thousands of downtown renters in buildings receiving so-called 421-g benefits who should have had stabilized leases and may be owed years of back rent.

The owners of their 493-unit building, once home to investment firm Goldman Sachs, are among landlords at dozens of lower Manhattan properties who are benefiting from the 14-year tax break, created in the 1990s to encourage conversions of office buildings into residences.

10 Hanover Square. (Photo: Jason Scott Jones/THE CITY)

‘Surprised, Shocked and Saddened’

The lawsuit follows a June decision by the state’s highest court confirming that landlords receiving the 421-g tax break must place their apartments under rent regulation — even those where rents were high enough to normally qualify for deregulation as luxury units.

Hackney and Smith were being charged more than $4,000 a month in rent. They told THE CITY in August they were surprised to learn from the state agency that oversees rent regulated apartments that they were entitled to a stabilized lease and a reduction in their rent.

UDR presented a rent-stabilized lease, which the couple is disputing.

Tim Smith, left, and Bruce Hackney, right, were recently offered a rent-stabilized lease. (Photo: Jason Scott Jones/THE CITY)

Hundreds Could Join Suit

The lawsuit alleges that Hackney, Smith and other building residents are paying much more than they should be. The couple is asking the court to appoint an independent entity to reform all the building’s leases to comply with state rent laws.

“I’m surprised, shocked and saddened that the majority of the tenants who currently live or used to live in 10 Hanover Square as well as many of the other 421-g buildings are unaware of their rights and what they are entitled to,” Hackney said.

More than 500 current and former tenants of 10 Hanover Square could potentially join the suit against UDR, according to the complaint.

“Could this landlord be any more shameless?” asked Lucas Ferrara, another of the attorneys for Hackney and Smith.

“It secured generous tax breaks on condition that it treat units as regulated, yet opted to completely disregard the governing requisites,” he added. “Rather than comply with the law, this landlord, in our view, engaged in a calculated scheme to defraud its tenants.”