The Arc at 30-02 39th Ave. in Long Island City. Photo via Google Maps.
Feb. 25, 2025 By Ethan Marshall
Multiple tenants of an apartment building at 30-02 39th Ave. in Long Island City have submitted a class action lawsuit against their landlord, 30-02 Associates LLC, accusing them of illegal rent overcharges.
The lawsuit was filed against the landlord of this 428-unit building, known as the Arc, following an investigation by the Housing Rights Initiative, a non-profit watchdog that investigates real estate fraud, connects tenants to legal services and promotes their rights to fair and affordable housing.
Based on the investigation’s findings, tenants of the Arc have been getting overcharged in rent since it was built in 2017. The Housing Rights Initiative estimates that the tenants are owed more than $20 million in rent refunds and millions more in rent reductions. The nonprofit found that in 2021 alone, the landlord received over $3 million in tax credits.
The Arc participates in the 421-a program, meaning the landlord is required to register the units with the New York State Division of Housing and Community Renewal (DHCR). These apartments were supposed to be treated as rent-stabilized. However, the tenants allege that the landlord has willfully not met the requirements of the 421-a program and rent stabilization laws.
While the 421-a program states that all rent increases have to be derived from the initial cost of rent paid by the tenants, the tenants allege that the landlord registered initial rents at much higher prices than what they were paying. They also accuse the landlord of wrongfully registering a lower rent. These preferential rents were representative of the actual rents that initial tenants were actually charged.
The Housing Rights Initiative concluded that 30-02 Associates LLC used early occupancy concessions to inflate the cost of rent. Initial occupants were referred to as “licensees,” allowing them to occupy their apartments before the purported start date of the lease.
One such example involved a tenant who paid $3,925 for a two-year lease but received one month free, resulting in an average rent of $3,768. However, the landlord registered the initial rent as $3,925, with all future rent increases taken from that amount.
Consequently, this shows that while temporary rent concessions were given to initial tenants, the landlord did not reflect these concessions in Arc’s initial registrations with the DHCR, allowing 30-02 Associates LLC to make rent increases higher than what is permitted. All future rent increases that were permitted stemmed from the illegal registration, meaning an accurate rent has never been set for the tenants.
According to the rent stabilization law RSC § 2521.2, preferential rent is supposed to be triggered by an agreement being made by the owner for a payment that is less than the legally regulated rent of a unit. The Housing Stability and Tenant Protection Act of 2019 (HSTPA) grants landlords the ability to increase the preferential rent by an amount permitted by the Rent Guidelines Board during renewal. Tenants in rent-stabilized units are required to be given lease options for one or two years.
Tenants accuse the landlord of manipulating the terms of the leases and the payment amounts, allowing them to get around the protections provided by the HSTPA. For example, one of the tenants was offered an 18-month lease with a Legal Regulated Rent of $4,948.13. However, as a result of the landlord manipulating the manner in which payments were allocated, this tenant ended up paying much less on an average monthly basis.
This lease also had concessions for five of the 18 months, making the preferential rent $3,573.65. But when it came time to renew the unit, the landlord refused to renew the preferential rent concession, violating RSC § 2522.5, which prevents landlords from changing the terms and conditions of a rent-stabilized tenancy during its renewal. The landlord wound up increasing the rent by more than 45%, to $5,195.54, failing to follow the Rent Guidelines Board’s permitted 5% increase.
The class action lawsuit alleges the rent concessions provided by the landlords were just preferential rents by another name, with “free rent” being provided for a certain period rather than monthly discounts. While the tenants were initially charged lower than the legal registered rent, camouflaging the preferential rent as a concession enabled the landlord to violate governing law by making excessive rent increases on renewals. The landlord then allegedly further used concessions on subsequent tenancies, avoiding setting preferential rents and allowing themself to make higher rent increases, which was in violation of the amount permitted by the Rent Guidelines Board.
The tenants are being represented in this case by real estate attorney Roger Sachar of the firm Newman Ferrara LLP. According to Sachar, it is becoming increasingly common for landlords to violate rent regulations. They have received many calls from tenants of buildings operated by the Lightstone Group, which operates 30-02 39th Ave., claiming their landlords have done this as well.
“The landlord’s cheating and taking tax benefits that require it to provide tenants with the benefit of rent stabilization, and they just decided that it’s wonderful that they get tax benefits, but they never register the apartments properly,” Sachar said. “The landlord has to fix the problem and refund the overcharge.”
Sachar, along with Newman Ferrara LLP partner and New York Law School Adjunct Professor Lucas Ferrara, feel a lack of state and local government enforcement has led to more landlords attempting to skirt rent regulations.
“The government operates basically like the IRS. They accept submissions at face value,” Ferrara said. “It’s only when these submissions are audited or challenged that the government possibly wakes up and takes action. I think the DHCR (Department of Housing and Community Renewal), the state agency that oversees that regulation, is understaffed. They just don’t have the resources to address this irregularity.”
Even when government action is taken against these landlords, Ferrara feels they get away with a slap on the wrist, as the monetary fines do not dissuade them from doing this. He believes punishments for this should be more severe, even floating the idea of jail time under certain circumstances.
“[The landlords] cry poverty to the regulators, but they feast on taxpayer gold,” Ferrara said.
“We trust the courts to recognize that right is on the tenants’ side here and the landlord is blatantly cheating,” Sachar said. “So far, we’ve had significant success in the courts recognizing that, and we anticipate that continuing.”
Following the filing of the lawsuit, 30-02 Associates LLC criticized the legitimacy of the allegations.
“This is another in a series of lawsuits filed by this law firm against dozens of landlords throughout New York City on this same issue. We believe we have acted legally and appropriately and this lawsuit is without merit,” 30-02 Associates LLC said in a statement.
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