Lawsuit alleges Two Trees overcharged stabilized tenants at a Fort Greene tower with a 421-a tax break. Two Trees calls it 'without merit'

A new class-action lawsuit accuses Two Trees, one of Brooklyn's best-known developers, of illegally raising rents on rent-stabilized apartments at 300 Ashland Place in Fort Greene, Gothamist reported. The 379-unit building gets the 421-a property tax break. In exchange, its apartments must follow state rent stabilization rules, even the high-priced ones.

The suit was filed Friday by the law firm Newman Ferrara with the Housing Rights Initiative, a tenant advocacy group. It claims Two Trees offered tenants a discounted "preferential rent," for example by advertising two months free. Then at renewal, the suit says, the company applied the yearly increase to the higher "legal rent" instead. In one example from the complaint, an apartment with a $3,990 legal rent was effectively offered at $3,325. Applying the renewal increase to $3,990 could amount to a hike of about 20%, the lawsuit says. The Rent Guidelines Board has not approved an increase above 3.25% since 2021.

The suit claims the practice raised rents by more than $30 million over five years. Those are allegations, and no court has ruled on them.

Two Trees managing director David Lombino called the lawsuit "entirely without merit" and said the company will "vigorously defend against these claims," according to Gothamist. He said litigation like this raises the cost of building and running housing. A real estate investor quoted by Gothamist called such overcharge claims "foot faults."

Why it matters to residents: concessions like free months are common in new buildings. Tenants who sign a stabilized lease at a discount may not know the landlord can still list a higher legal rent. The 421-a break saves owners millions in property taxes over decades.

What our records add

Hudson says the state isn't enforcing. Council Member Crystal Hudson, who represents Fort Greene, told Gothamist she helped notify tenants of the advocacy group's investigation by sending mailers. She criticized the state housing agency, the Division of Homes and Community Renewal, for leaving enforcement of the tax break's rules to a nonprofit and a private law firm. The agency declined to comment on the litigation. Rent stabilization and 421-a are set by state law, so the Council's own tools are limited mostly to notices, data and city housing programs.

Two related Council bills have had no hearing.

• Int. 475, from Sandra Ung with two sponsors, would require the city's housing department to send all 421-a notices by certified mail, with a pamphlet in the city's 10 designated languages, according to its summary. It has waited since Jan. 29.
• Int. 600, from Hudson with six sponsors, would require the housing department to study rent-stabilized housing periodically and create a program encouraging owners to keep apartments stabilized longer. It has waited since Feb. 12.

Members have questioned 421-a buildings before. At a March 24 Housing and Buildings budget hearing, Council Member Gale A. Brewer cited an analysis of buildings opened since 2016 that found high housing code violation rates. She noted every building in it had received 421-a. She asked the housing department what corners were being cut. An official answered that these are generally private buildings not financed by the department (3:55:42).

Signs that tell tenants they're stabilized. At a Sept. 9 Housing and Buildings hearing, Council Member Sandy Nurse asked the housing department for enforcement numbers on a requirement that buildings with stabilized apartments post signs saying so. She said tenant organizers had found the signs helped tenants realize they were being illegally overcharged. The department said it would follow up with numbers of inspections and violations.

Two Trees' newest project got its own tax break in Albany. In May, state lawmakers extended the expired 421-a program to cover Two Trees' 1,200-unit River Ring project on the Williamsburg waterfront, even though it won't be finished by the 2031 deadline, Gothamist reported. That was a state budget decision, not a Council vote.

What's next

The case will proceed in court. Tenants who think they've been overcharged can file a complaint with the state's Division of Homes and Community Renewal. Neither Council bill is on a published committee agenda.