Why Newman Ferrara Has Been Suing 421-a Buildings

First comes the complaint — barely more than a dozen pages.

Then Newman Ferrara comes for the rent.

Sometimes it’s $1,000 a month, sometimes more. It depends on how much of a discount the building owner offered to tenants to get them in — multiplied by the number of tenants, because these are class action suits.

Roger Sachar, the Newman Ferrara partner who signs most of the claims, is the tenant chaser steering a new run-up in class-action lawsuits at properties built through the state’s 421a property-tax break. Since August, the law firm has filed class-action lawsuits against at least 12 landlords alleging rent overcharges following concessions at these buildings.

On Wednesday, former Gov. Eliot Spitzer became Sachar’s latest target for allegedly overcharging tenants who received rent concessions at 420 Kent Avenue, an 857-unit building in Williamsburg. Aaron Carr, executive director of the watchdog group Housing Rights Initiative, estimated tenants could be owed as much as $30 million.

In the last three months, Newman Ferrara has filed actions against heavy-hitters like Douglas Eisenberg’s A&E Real Estate, Josh Gotlib’s Black Spruce Management and Blackstone.

New York City landlords are frequently sued and intensely regulated, and to an extent, Sachar and Newman Ferrara are just one more thorn in their side.

But Sachar seems to have a bigger goal. HRI identified more than 1,500 421a buildings “out of compliance with the rent stabilization laws,” Carr said in 2023. Thanks to some recent rulings favorable to tenants, more on that list might become targets for Sachar.

Damages from these cases, many of which have yet to be realized, and the subsequent resetting of rents could have “significant, if not catastrophic effects” on the buildings, according to real estate attorney Nativ Winiarsky.

Sachar on the scene

The firm’s class-action practice took off shortly after Sachar, an attorney in New York who had also practiced in St. Louis, joined the firm’s securities litigation practice in 2016.

Sachar, who sports dark-framed glasses and short, jet-black hair, quickly found a niche representing tenants in class-action lawsuits. Before then, the firm was just as likely to be working for the landlords on the other side. (In 2008, the firm successfully defended the Trump Organization against a lawsuit over an allegedly leaky roof filed by a commercial tenant at 40 Wall Street.)

Sachar’s playbook has earned him plenty of enemies in the landlord and legal community.

In a filing last month, Sachar pointed out that the defendant, a landlord tied to Atlas Capital, was represented by Belkin Burden Goldman, a law firm he claimed has been on the wrong side of a series of recent court decisions related to rent concessions. “We can only presume that BBG disclosed such losses to their clients, so that those landlords could mitigate damages,” he wrote, seeming to needle his common foe.

In August, he refiled an amended complaint against Douglas Eisenberg’s A&E Real Estate, his latest swipe at the landlord. Newman Ferrara first submitted the complaint in 2016, as one of the first major tenant class-action cases with Sachar on board.

A&E’s response directly called out Sachar.

“Roger Sachar has been unsuccessfully suing A&E-managed buildings for 10 years and has gotten absolutely nowhere with them,” a spokesperson for A&E previously told The Real Deal in a statement. “He is an opportunist who seeks to profit off his clients while blanketing owners of rent-stabilized properties with lawsuits backed by absurd claims.”

Sachar declined to comment.

Stacking up suits

Sachar has appeared to ramp up his efforts recently. A series of rulings has put rent concessions, in particular, in his crosshairs, leading to at least a dozen lawsuits against 421-a buildings in the past three months.

In August, a class-action lawsuit took aim at Josh Gotlib’s Black Spruce Management, alleging the firm overcharged tenants on over $20 million worth of lease renewals for rent-stabilized units at a 761-unit Murray Hill development. Other lawsuits followed, including action against a Blackstone rental building in Seaport, an AvalonBay multi-family development in Downtown Brooklyn and a Douglaston Development rental project in Williamsburg.

All it takes is a unit or two in a building relying on 421a exemptions that offered rent concessions in the last six years, and the landlord could soon be staring down millions of dollars in alleged damages. The suits usually point to advertised rents on StreetEasy — for example, a home at 21 West End Avenue listed for $2,692, with a note underneath that the tenant would receive two months free from the gross rent of $3,230, in one complaint.

Many of the buildings involved in the lawsuits don’t fit the stereotypical picture of rent stabilization. At 21 West End Avenue, a two-bedroom with views of the Hudson River, an in-unit washer/dryer and amenities like a yoga studio, indoor pool and sauna is on the market for over $9,000 a month.

Suits over rent concessions first picked up steam after the passage of the Housing Stability and Tenant Protection Act in 2019, which expressly prohibited owners from hiking rents on tenants previously paying “preferential rents,” or rents below the maximum that could be charged for that unit. Preferential rents can often date back to decades-old agreements between landlords and tenants.

At the same time, the state’s Division of Housing and Community Renewal removed a distinction between preferential rents and rent concessions, leaving that definition up to the courts — and Sachar.

Landlords commonly use rent concessions to fill up buildings during slow leasing periods or to compensate for construction or other nuisances. During the height of the Covid pandemic in 2020 and 2021, they were particularly common as many New Yorkers fled the city.

Sachar has been filing suits over rent concessions for years, but many of his earlier efforts first struggled in court, as judges dismissed the cases or denied class certifications. Now, Sachar is reviving old cases — and filing new ones at a rapid pace. They are undergirded by new case law, much of which stems from Sachar’s other lawsuits.

Sachar’s most significant win came from a March appeals court decision in a class-action lawsuit his client brought against a Long Island City landlord known as “Grey,” which established a new precedent for evaluating concessions. In another post-Grey case (also argued by Sachar), a state judge summed up the decision: “Grey makes it clear that if it is a post-HSTPA concession, it’s a preferential rent.”

Sachar’s recent complaints filed following that decision have read more like a victory lap.

“The law is clear that rent concessions cannot be used to circumvent HSTPA’s preferential rent bar,” he wrote, citing Grey, in a recent lawsuit claiming AvalonBay overcharged Downtown Brooklyn tenants by at least $40 million.

More to come

A broader coalition is responding to the recent wins with a search to find affected classes and populate class-action lawsuits.

Just a month before Newman Ferrara filed a lawsuit against the owner of 1 North Fourth Place in Williamsburg, Assembly member Emily Gallagher emailed residents urging them to contact Housing Rights Initiative to see if they had a claim. HRI has been the main source of cases for Newman Ferrara, sources said.

“Over the past year, the Appellate Division, First Department, has issued three unanimous decisions addressing rent concessions and their relationship to New York’s rent stabilization laws,” Carr, HRI’s executive director, said in a statement, referring to a pro se case filed by a tenant at Rockrose’s Linc LIC at 43-10 Crescent Avenue and two other related cases. “These rulings have reinforced an important principle: landlords cannot use rent concessions that function as preferential rents to circumvent the rent stabilization laws and impose unlawful rent increases on tenants, all while collecting hundreds of millions of dollars in taxpayer-funded benefits.”

Each case still depends on the circumstances of the concessions and the specific agreements laid out between the landlord and tenant, according to Winiarsky, the real estate attorney.

“It’s difficult to give definitive answers because it’s going to depend on so many factors,” he said.

As cases pile up and move through the courts, attorneys have already started advising landlord clients to do away with rent concessions entirely — seeking to avoid legal challenges before they can begin.

But some landlords are still pushing the boundaries. At Linc LIC, which is currently being sued by the pro se tenant, a new set of rental units hit the market offering fractional month concessions and a year of free internet.

It’s unclear how the courts will view these concessions, but Newman Ferrara is likely to find out.