Predatory-equity landlord Raphael Toledano will have to pay $3 million to East Village tenants injured by his violation of tenant-protection laws, under a consent order announced by New York Attorney General Letitia James on June 19.
The announcement said Toledano agreed to the order to avoid litigation on charges that since 2014, he “repeatedly used fraud, harassment, and other illegal conduct as part of a scheme to defraud tenants of their legal rights and to unlawfully remove affordable apartments from state tenant protection laws.” The state will appoint an independent monitor to supervise his real-estate business, which Toledano will pay for. He will also be barred from direct contact with tenants, and will have to hire an independent property manager for buildings he owns.
The Attorney General’s office is working on how to set up a fund to pay the tenants damages. The federal bankruptcy court overseeing Toledano’s collapsed business will hear tenants’ evidence for their claims of injuries on Aug. 6.
According to the state’s complaint, Toledano’s business model involved buying up buildings with significant numbers of rent-stabilized tenants with the intent of driving them out, so he could renovate the vacant apartments and charge higher rents. Afte r he bought 444 East 13th St. in the East Village in 2015, he had private investigators pose as members of law enforcement to question the mostly Mexican tenants about their immigration status, falsely accusing them of illegal activities while aggressively offering buyouts. In this and other buildings, he filed baseless eviction cases against tenants; failed to provide cooking gas, heat, and hot water; and did construction work that often resulted in health hazards such as rat infestation, floors collapsing, and lead dust.
Toledano’s bankruptcy case involves 15 of the 19 buildings he bought with a $127 million loan from the Madison Realty Capital private-equity firm. Unable to raise rents fast enough to make the payments, he declared bankruptcy in March 2017. In April 2017, federal bankruptcy Judge Robert D. Drain gave Madison the right to manage 15 of those buildings. Its Silverstone Property Group subsidiary is now the property manager.
If Toledano violates the terms of the agreement, James will seek to bar him permanently from participating in the real-estate industry.