AG Bans Predatory Landlord from NY Real Estate Business

A landlord has been banned from New York real estate after violating an agreement with the state attorney general’s office to end illegal business practices and tenant harassment. The New York Supreme Court issued an order barring the landlord, Raphael Toledano, from engaging in any New York real estate business activity for at least five years, at which point he can petition the court for reentrance.

One level deeper: A 2019 investigation by the attorney general’s office found Toledano had harassed tenants in his East Village buildings, using coercive buyouts and illegal construction practices. Among other findings, the probe found that he didn’t provide rent-stabilized tenants with utilities and repairs. In addition, he also engaged in deceptive business practices in his real estate transactions, including repeatedly and persistently misrepresenting himself as a lawyer and advertising apartments with three or four bedrooms, when legally the apartment could have one or two bedrooms only.

Under the terms of the 2019 Consent Order (stipulation and judgment), the landlord’s real estate business was ordered to be supervised by an independent monitor to ensure that Toledano stopped engaging in fraud and tenant harassment. Additionally, he was not allowed to have any direct contact with tenants, was required to hire an independent management company for his properties, and was ordered to pay damages and penalties. The June 2019 agreement stipulated that he could be subject to penalties for violating the agreement, including a ban against participating in the real estate business, and a further suspended judgment of $7 million.             

While continuing to monitor the landlord, the attorney general found that he was violating the terms of the agreement, including:

• Failing to disclose his real estate business activities to the independent monitor, or to get the monitor’s approval for further deals;
• Diverting funds from a reserve account established by the agreement;
• Failing to make penalty payments (other than initial payments totaling $520,000); and
• Failing to maintain his properties in a manner that complied with applicable laws and protected tenants’ rights, health, and safety.

The landlord will be required to pay OAG an additional $500,000 from the sales of his current properties to cover past-due penalties.

One takeaway: During his ownership of 22 buildings, Toledano harassed and intimidated tenants with in-person visits and phone calls to urge them to accept buyouts. Much of the incentive to force out rent-stabilized tenants was removed when the state reformed the rent law in 2019. Previously, landlords could raise rents on stabilized apartments by 20 percent if they became vacant, and convert them to market-rate if the legal rent of a vacant apartment exceeded a certain amount. Prior to the enactment of the Housing Stability and Tenant Protection Act, some investors bought rent-stabilized buildings at prices that would leave them unable to pay their mortgages if they failed to deregulate enough apartments.