Carnegie House Co-op Sues to Protect Residents from Drastic Ground Lease Rent Hikes, Potential Evictions

NEW YORK, NY (09/13/2024) (readMedia)-- This week, the Carnegie House Tenants Corporation, a ground lease co-op in Manhattan, filed a lawsuit (index no: 654745/2024) in New York State Supreme Court, New York County, against their landowners and the New York State Division of Homes and Community Renewal, in an attempt to prevent devastating rent hikes that could force the co-op into insolvency and result in the eviction of all residents. The co-op is seeking, among other relief, a final judgment as to the rights and other legal relations of the parties under New York's rent stabilization laws.

Carnegie House, a 21-story ground lease co-op home to 324 families, is facing a scheduled rent reset in March 2025. Despite years of residents' attempts to negotiate in good-faith, the landowners are demanding a ten-fold or greater increase in ground rent. This could result in an annual rent hike to $40 million or more, putting the co-op owners at risk of losing their homes and facing possible evictions amid the ongoing housing crisis. Such a dramatic increase would likely drive Carnegie House into insolvency and force its conversion to rental status. Understanding the consequences of deconversion is essential for Carnegie House's Board to make informed decisions in negotiations and to prevent the displacement of more than 300 families.

Click here to read the lawsuit in its entirety.

"The landowners continue to show us that they are not interested in finding a compromise that keeps residents in their homes; their goal is to force us out of our homes to maximize profit," said Richard Hirsch, president of the Carnegie House Board of Directors. "Rather than engaging in good-faith discussions, the landowners have pursued a strategy of gamesmanship - merely giving the appearance of negotiation while working to drive Carnegie House into insolvency. We have no choice but to take legal action to protect our residents and prevent the displacement of more than 300 families."

BACKGROUND:

More than 25,000 New Yorkers are co-op residents who own their apartments, but not the land that it sits upon. Instead, they lease the land from a third-party landowner. Many of these leases were written as far back as the 1950s and were signed by a now long-gone developer, changing hands over the years. Originally established to support middle-class homeownership, co-op buildings on leased property are the last unprotected class of 'tenants,' with virtually no protections or regulations governing how the owners of the land under their apartments are held accountable.

The lack of protections paves the way for greedy landowners to exploit their residents. As the ground lease for Carnegie House nears its term and faces a rent reset, the co-op owners are being threatened by ultra-wealthy landowners demanding ground rent increases of up to 1,000% – potentially forcing out residents who can't pay the increase or even evicting the entire building of residents so a new, much more lucrative building can be built.

There are approximately 100 other ground lease co-op buildings across New York City and Westchester. The majority of ground lease co-op apartments house families with a range of socioeconomic backgrounds, and are located in the outer boroughs, with Queens having the highest concentration. Earlier this year, a group of co-op owners launched a campaign to change state law in order to remedy the fundamental flaws in the residential ground lease system and to address the vast power imbalance between landowners and residents.

The Ground Lease Coop Coalition (GLCC), a non-partisan coalition of co-op owners advocating to save their homes, is working to pass S7825/A5031A in the upcoming legislative session. The legislation, sponsored by Assemblywoman Linda Rosenthal and State Senator Liz Krueger, aims to collectively regulate ultra-wealthy landowners in order to keep co-op residents of all socioeconomic backgrounds in their homes. Until this legislation is passed into law, co-op buildings like Carnegie House are left on their own to fight for the future of their homes.

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