Two Trees sued over $30 million in alleged illegal rent hikes

A class-action lawsuit filed Friday accuses Two Trees, a multibillion-dollar real estate firm, of illegally raising rents at a Fort Greene building by more than $30 million over the past five years. The complaint, brought by the law firm Newman Ferrara and the nonprofit Housing Rights Initiative, targets leasing practices at 300 Ashland Place, a 379-unit complex that opened in 2016.

The developers won a rare concession in this year's state budget when lawmakers extended the expired 421a tax break program to cover exactly one project: Two Trees' latest waterfront development in Williamsburg. In exchange for this property tax relief, landlords must keep apartments rent-stabilized and adhere to city limits on rent increases. The lawsuit alleges that Two Trees violated these rules by applying annual rent increases to the full legal rent of units rather than the lower preferential rent that tenants originally agreed to pay.

The complaint cites a 20th-floor apartment as an example of the tactic. According to a listing in the complaint, the unit's legal rent was $3,990, but the company advertised it with two months free, effectively lowering the monthly cost to $3,325. When the lease came up for renewal, Two Trees applied the increase to the $3,990 figure. Aaron Carr, executive director of the Housing Rights Initiative, said this method could result in a 20% hike, far exceeding the 3.25% maximum approved by the city's Rent Guidelines Board since 2021.

"When landlords pocket taxpayer subsidies while legally overcharging tenants, they are cheating the public twice," Carr said. "Once through the rent they steal, and again through the tax dollars they collect." He noted that property owners often use such concessions to attract tenants before eliminating them at renewal, relying on the housing shortage to make moving difficult.

David Lombino, a managing director at Two Trees, said the company is reviewing the lawsuit and declined to comment further. The firm owns and manages more than 4,000 apartments in a portfolio valued at $4 billion. It is currently constructing River Ring, a 1,200-unit project on the Williamsburg waterfront that received the 421a extension in May despite not meeting the 2031 construction deadline.

Councilmember Crystal Hudson, who represents the district including Fort Greene, said she helped notify tenants of the investigation by sending mailers. She criticized the state's Division of Homes and Community Renewal for leaving enforcement to a nonprofit and a private law firm rather than enforcing the rules itself. Charni Sochet, a spokesperson for the agency, declined to comment on the ongoing litigation but stated the agency remains committed to protecting rent-regulated tenants.

Seth Glasser, a partner at Marcus Millichap, compared the alleged overcharges to tennis foot faults, arguing the penalty is disproportionate to the infraction. He said the organization and its attorneys have honed in on a technicality to squeeze landlords.