Petition, politicians ask hedge fund waive $250K fee for evictees

At last Thursday’s rally, an activist wearing a mask of Madison Realty’s Joshua Zegen was given a gift bag and a “Predators’ Clearinghouse Sweepstakes” award for $250,000, in hopes that Madison would waive the legal fees that the evicted Smith-Stone family is obligated to pay under their former lease. Photo by Sydney Pereira

BY SYDNEY PEREIRA | After Madison Realty Capital evicted an East Village family, the company was readying to use a clause in the family’s former lease to make them pay Madison Realty $250,000 in legal fees. But last Thursday, just before dozens of activists rallied, word got out that the company is now considering waiving the fees.

Despite the news — and since there is still no official written word on the possibility — activists marched from the Shake Shack in Madison Square Park to outside the Flatiron District home of Joshua Zegen, the managing principal of Madison Realty.

“This story is not, unfortunately, unique,” Assemblymember Harvey Epstein told the rally.

“This issue will not go away,” he said. “How many families are going to have to struggle? How many families are going to have to suffer? Just like this family, it is our job [to come] together to say, ‘No more.’ ”

The Smith-Stone family was locked in legal battles with their landlord for three years over whether their apartment was rent-stabilized. In late 2016, a judge ruled the unit was “decontrolled” when the Smith-Stones first moved in and the rent was raised from $1836.20 to more than $2,000 — past the threshold that existed at that time to remove the unit from the rent-stabilization program. Earlier this summer, the family was evicted.

Activists say the $250,000 in legal fees demanded by Madison Realty from the lengthy court challenge would likely send the family into bankruptcy. Craig Smith and Elise Stone had lived in the building, 233 E. Fifth St., since 2003, raising a family while founding the nonprofit Phoenix Theatre Ensemble.

At last Thursday’s rally, activists presented Zegen with a “Predators’ Clearinghouse Sweepstakes” award for $250,000, in hopes he would waive the fees. In street theater evocative of the family’s involvement in the Village’s drama community, an activist in a mask with Zegen’s face accepted the check.

They also tried to deliver a gift bag to Zegen with a mock check of $250,000, a DVD about philanthropist Julius Rosenwald and an Abraham Lincoln quote: “You must remember that some things legally right are not morally right.”

But the doormen at 10 Madison Square West blocked the delivery attempt.

Madison Realty declined to comment.

“We wanted to win this for us and for New York City tenants. But after three stressful years of litigation, the courts missed an opportunity to protect tenants and advance affordable housing,” Craig Smith, the family’s father, said in a written statement. “At the very least, they could have turned a seriously flawed statute back to the legislature and tell them to ‘fix it.’ Instead, the justices in Albany gifted the New York City real estate lobby, turning our home over to a multibillion-dollar hedge fund that now wants us to pay their legal bills.”

Smith said his family misses the community — their church, grocer, school, merchants, friends and artists.

“We raised our kids here — a family, an unusual East Village commodity these days,” Smith said.

The Smith-Stone family’s downstairs neighbor for 15 years, Jim Markowich, echoed concerns about the larger struggle by tenants citywide.

“They were fighting not just for themselves,” Markowich said. They were fighting because their case could have helped other deregulated apartments to be restored to the program, he said.

“They fought that battle courageously, even though they didn’t have money,” he said. Recent legislation passed in the City Council and a package of legislation passed in the Assembly is intended to combat landlords trying to push out rent-regulated tenants, a practice often seen in “hot neighborhoods” like the East Village and Lower East Side.

“This story is about greed and corruption,” Assemblymember Epstein told the activists. “This story is about how Albany has failed our city.”

Landlords, financed by loans, appear to be buying up buildings based on how much they anticipate they could profit if all the units went market rate. State Senator Brad Hoylman and Epstein penned legislation in June directing the state Department of Financial Services to study the matter in hopes of revealing how financial institutions give out loans for commercial and residential buildings. The bill has not been passed by either the Assembly or Senate.

Hoylman told The Villager in June that the legislation is “urgently needed” and lawmakers “need the data on this issue in order to try to address the problem.”

Last Tuesday, Hoylman wrote to Zegen requesting Madison Realty waive the evicted East Village family’s legal fees.

The Smith-Stones are “longtime neighborhood artists for whom these fees will most certainly result in bankruptcy,” Hoylman wrote. “As a gesture of corporate citizenship and goodwill to the East Village neighborhood, I urge you to intervene and ensure that these fees will be waived by 233 E. 5th St., LLC to protect this highly regarded family from financial ruin.”

Councilmember Carlina Rivera spoke on the phone with Madison executives last Tuesday, urging the company waive the fees against the Smith-Stone family.

“I stand with my colleagues and neighbors in calling on Madison Realty Capital to revoke its petition for payment,” Rivera said in a written statement. “Families already feel powerless in fighting against big-moneyed real estate corporations. They shouldn’t be intimidated with potential six-figure fines for pursuing fair legal action to protect their homes.”

A group called Tenants Taking Control, or T.T.C., created a petition earlier this month for neighbors to sign, requesting in a letter to Zegen that Madison Realty pay its own legal fees.

The Smith-Stones began their fight to stay in their apartment with former landlord Raphael Toledano. In early 2017, Madison Realty foreclosed on Toledano on more than a dozen properties.

At the time, a source familiar with New York real estate told The Villager the foreclosure was no surprise since Madison Realty operates on a “loan-to-own” business model.

A fellow former Toledano tenant at a Chelsea building that is no longer owned by Madison Realty recalled 10 days without heat and hot water this past spring because there was nobody to pay the bills. Alison Frauenglass, who was born in her W. 16th home, added that her building superintendent wasn’t paid for six months.

“I think one of the scariest things when you’re a tenant in a rent-regulated building that’s been bought by somebody is the anxiety of the unknown,” said Frauenglass, decked out in a floor-length, sparkling dress for the mock sweepstakes activists performed. But organizing with other former Toledano tenants — like they did last Thursday — makes that anxiety fade, she said.

This article has been updated to clarify that a former Toledano building in Chelsea is no longer owned by Madison Realty. 

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