IAIs were inflated at hundreds of NY apts. suit says

Attorney General Letitia James

By Sabina Mollot

A property manager is being accused of lying about the costs of hundreds of apartment renovations in order to have the rents reach the threshold where they could be converted to market rate.

The property manager, David Drumheller and his company, JBD Realty Services, were both named as defendants in a lawsuit that was filed by Attorney General Letitia James last Thursday.

The suit accuses Drumheller of fraud and repeatedly violating the Rent Stabilization Law for the individual apartment improvement (IAI) scheme, which was allegedly perpetrated at hundreds of apartments in Manhattan and Brooklyn. At that time, he was working for Newcastle Realty Services, a firm that manages roughly 2,500 units in the city. He also, along with an unnamed associate, allegedly collected $1.2 million in kickbacks from contractors who did renovation work at Newcastle-managed apartments. Some contractors were said to have paid the pair directly, while others paid for their expenses such as country club dues, Porsche payments and home improvement projects. Most of the contractors made most of their money from the Newcastle jobs, including a landscape design firm that had no apartment renovation experience when hired by Newcastle.

According to the attorney general, the scheme went on for years between 2012-2016, with Drumheller manipulating the IAI system that allows property owners to charge permanent rent increases to tenants based on the cost of the renovations that were done in their apartments. An owner can charge 1/60th of the cost in buildings with over 35 units, and 1/40th of the cost in buildings with 35 or fewer units. The goal was to get the rents to reach the threshold where they could be deregulated.

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