Mid-lease increases to be reversed in cases of misrepresentation

Letter issued by CompassRock

Letter issued by CompassRock

View full CompassRock letter

By Sabina Mollot

In news that is sure to be welcome to tenants who were recently on the receiving end of mid-lease increases, those who were led to believe by a leasing agent that they wouldn’t be getting mid-lease hikes will not have to pay their new, higher rents.

On Friday, management slipped notices under tenants’ doors, signed by the property’s general counsel, Fred Knapp, conceding that, “It has come to CompassRock’s attention that, in a limited number of cases,” tenants who signed leases pending the Roberts v. Tishman Speyer settlement “claimed that they were told by leasing agents that the increase set to go into effect on July 1, 2013 (the “July 1 Increase”) would not be applicable to them during the term of their lease.”

CompassRock said if tenants were in that situation then they should fill out an affidavit, which was attached to Knapp’s letter, with details of statements made to them, including emails or other documentation if available, and their rents would stay the same. The deadline for tenants to file their paperwork is June 30. Otherwise, they’ll have to pay their new, inflated rent starting July 1.

The notice came after Attorney General Eric Schneiderman conducted an investigation into allegations of tenants being misled by leasing agents. The matter was brought to the A.G. by Council Member Dan Garodnick after he said he’d heard complaints from numerous tenants. As of this week, Garodnick said there were a total of 39 tenants who said they were told, inaccurately, they wouldn’t be getting a mid-lease increase.

As for tenants who have no written proof of agreements that there would be no mid-lease hike, but have said they were told it wouldn’t happen, the rent rollbacks would apply to them as well.

“It is our understanding that verbal assurances will be treated the same way as written evidence, but there does need to be some sort of description” of statements, said Matt Mittenthal, press secretary for the attorney general.

Or, as the notice from CompassRock went on to suggest, tenants could also avoid paying the new rents simply by moving out.

“As you know, “ wrote Knapp, “you also have the right to terminate your lease and vacate your apartment. This notice does not affect that right in any way.”

The letter concluded by saying nothing “should be construed as an admission of wrongdoing or liability” against CompassRock or CWCapital.

Garodnick, who said around 1,100 tenants got mid-lease increases (around 1,300 got rent adjustment notices), added, “We appreciate this strong step taken by the attorney general. There clearly was an issue here that affected many people and any misrepresentations will now not be able to stand.”

Schneiderman, meanwhile, said ST/PCV residents “have been through battle after battle to preserve the character and affordability of their community. That’s why I was so concerned to learn that some tenants had been misled by leasing agents into signing leases that would result in skyrocketing rents. I am pleased that the owners cooperated with our office’s investigation and have entered into an agreement that ensures tenants are treated fairly: No one who was promised a steady rent will be socked with a mid-lease increase.”

Schneiderman added that the agreement means CW can’t impose any additional mid-lease rent hikes and, he noted, he’d be watching the special servicer to make sure of this.
“My office will keep a close watch in the coming weeks to ensure that all aspects of the agreement are honored,” Schneiderman said.

Even before Roberts was settled, attorneys were already warning tenants that CW could issue rent hikes, even mid-lease, as a result of language the special servicer had inserted into new leases. Rent hikes have reportedly been as high as over $2,000, although most are in the hundreds.

In response to the investigation and the agreement, CW said in an official statement that management had only known about 10 incidents of misrepresentations regarding the increases.

“Despite an exhaustive effort to solicit complaints from residents that leasing agents had represented mid-term rent adjustments would not occur, we have received only 10 complaints from affected residents,” CWCapital said on Tuesday.

“While it is clear that, legally, any such representation would have been superseded by the class action settlement in which residents received a $173 million benefit, we volunteered to make official our practice of deferring rent increases to the end of a lease term for any resident that has a factual basis for their confusion. Additionally, we agreed to make official our intention not to issue additional mid-term rent increases. We appreciate the Attorney General’s assistance in balancing our legal rights with a desire to accommodate any resident that was confused about the content of their lease due to purported misstatements by employees of the managing agent.”

This article has been updated to include quotes from CW Capital and Attorney General Schneiderman.

5 thoughts on “Mid-lease increases to be reversed in cases of misrepresentation

  1. Great work by Dan Garodnick!

    I never heard any lawyer warning tenants about a mid-lease rent hike before Roberts was settled. Where did that come from?

  2. Is this for real? I am thoroughly confused. We were definitely told to disregard any rider and that our rent was secure…but all we have to do is state that in an affidavit and we’re reprieved?

  3. Pingback: Stuy Town owners reach deal to halt mid-lease rent hikes – insiderater.com

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