Commissioner Been

Department of Housing Preservation and Development
100 Gold Street

New York, New York 10008

March 12, 2014

Commissioner Been:

Our names are Nancy Sher and Jeff Goodman, we are tenants at 125 Court Street, Brooklyn, New York,
(unit 718 and 7K3), a HPD approved 421a, 80/20 building built by Two Trees Development in 2005. A
group of tenants have brought suit against Two Trees for fraud. On December 13, 2013 Judge Graham of

the New York Supreme Court denied Two Tress?s motion to dismiss the charge. This charge targets Two
Trees? fraudulent representation of the rent stabilized status of the apartments as designated by the

building?s 421a status.

In addition, this group of tenants is seeking legal redress to the numerous Two Trees violations of the

42 1a rules including:

0 Misrepresentation of the rents approved in the HPD Initial Schedule of Rents, fraudulently
depicted in tenant leases as well as to DHCR as the legal rent. These fraudulent HPD ?legal rents?
are increased with each renewal lease and in some cases exceed $18,000 ($11,000 in excess of the
approved HPD rents). Two Trees uses these deceptive ?legal rents? to justify rent increases of
$2,000., a clear disregard of the Rent Guideline Board?s approved increases for stabilized leases, a
legal requirement of all 421a rental units. Two Trees represents these illegal increases by

fraudulently depicting them as a preferential rent

0 Fraudulent misrepresentation, in their initial DHCR registration, of the status of the building as
being permanently exempt due to ?high rent vacancy?. The initial rents are depicted as
preferential due to building ?improvement.?

I Ignores lease requirements to include certain notifications and riders as well as the time
requirements to provide tenants with renewal leases. In one recent lease renewal 2014) a 421a
Apartment Lease Rider was included that states that the owner has applied or intends to apply for
4213 benefits suggesting that the building is not currently a 421a building.

Several tenants are currently on rent strike due to the appalling condition of their apartments that

include:

0 Extensive mold, veri?ed by a professional mold company, 5 Boro Mold Specialists, that remain

unaddressed, even though minors are in residence. These extensive areas are covered by

commercial grade plastic in an attempt to reduce the documented airborne mold and prevent

. . .
further contamination of the apartment 3 envrrons.

0 Large portions of ?ooring have buckled and split apart creating dangerous slip and fall conditions.

In some areas the ?ooring has risen as much as 12 inches.

0 These conditions are currently in their second and third cycle of repair due to water mtrusron,
suggesting that either Two Trees? management lacks the capacity or intention to repair and/ or that

the core defects in the construction of the building are, in essence, beyond repair.

There are many other concerns about Two Trees? misrepresentations in their HPD 421a application of
crucial information that are elements in calculations to determine the rents represented in the
Initial Schedule of Rents as well as their pervasive lack of adherence to the rules governing 421a. Included

in our concerns are the following:

0 Trees Trees? harassment and intimidation of Affordable Living Tenants utilizing deceit and
falsified presentation of documentation to attempt to evict them.

0 Gross misrepresentation of their Annual Income From Other Non'Housing Sources on their HPD
421a application. For example, Two Trees estimated their annual income for an approved 700
space parking garage at $72,000. This projected income suggests a parking charge of
$9.00 per space. In the same application, Two Trees projects the rental income for the building?s
15,907 square feet of commercial space as $22,000 or $1.38 per square foot. The tenants of the
commercial space include: Santander Bank, Lens Crafter Optique, Super Runners Shop, Yogurt (Sr
Smoothies, and a vacant space formerly occupied by Park Nail and Spa.

0 Gross misrepresentations of Operation and Management As Pursuant To The Annual Schedule of
Reasonable Costs

0 Lack of a signed HPD Final Certificate of Eligibility in either of the 2 FOIL requests and
confirmed by a letter written by Robert M. Pollack on June 14, 2011 to Two Trees wherein he

states that Two Trees? Final Application for Certificate of Eligibility is incomplete and proceeds to
list numerous issues.

A myriad of questions regarding the process and monitoring of Two Trees

compliance to the 421a
statute as well as the financing of the project include:

0 How.  Two Trees qualify to collect tax abatement Without submitting a signed Final Certificate
of Eligibility to the Department of Finance, a required stipulation?

0 Two Trees collected 3 years of construction tax abatements

when the buildin wa full 
by August 2005, as represented in their 2005 Bond Issue. OCCUpled

onstruction was started in January

2004. Did Two Trees essentially add an additional 2 years of tax benefits to their 25 year
abatement?

Cr Why did Two Trees return to the Bond Market in 12/ 05 for an additional $11.800,000. after
receiving $92,700.000, bringing the total outside financing to when the building
was complete and fully occupied in August 2005? According to the Bond Issue of 12/05:

?since August 2005 the month that full occupancy was achieved for the Project,
approximately 99% of the apartments have been occupied?

?The operating income from the Project has been sufficient to pay the operating expenses
of the Project and the debt service on the bonds issued to finance the Project.?

0 Why is the audited review of the final costs for 125 Court Street unnotarized?

0 Why does 125 Court Street appear to be one of the most expensive, if not the most expensive
development, in portfolio, as depicted in their 2006 Annual Report. Based on a ratio
of loan amount to number of units, 125 Court is extraordinary for its high ratio. This ratio does
not include the additional $11,800, 000.generated by the 12/05 bond issue which would only
increase the outsized ratio. This high ratio is striking because at that time 125 Court was built, it
was purported to be the largest non union construction in the history of New York City,
suggesting a notable cost savings?

0 Did provide 100% financing contrary to their guidelines? Other than the Bond Issues



what are the other sources of financing? The total amount of Bond Issue financing is $104,500
million. An un?notarized audit of the final construction budget puts the final costs at
$107,551,261. These amounts imply 97% financing by 

0 Did Two Tress comply with Schedule of Reasonable Construction Costs?

0 Were Bond investors misled by illegal, misleading, irregular, and/ or fraudulent statements of
material fact?

0 ls 125 Court Street in compliance with the requirements for Low Income Tax Credits or HUD
guidelines?

Given the nature of our questions, we think a forensic financial examination is justified.
Questions regarding Two Trees? treatment of tenants as well their accountability to the taxpayer include:

0 How many tenants at 125 Court Street have been illegally evicted or forced to move because of
Two Trees? disregard for the law? It is virtually impossible for a tenant, through due diligence, to
understand the truth regarding the actual legal rent of their unit short of studying the complex

421a law and obtaining FOIL documents. Two Trees has infected every avenue of public inquiry

with fraud.

0 How many tenants are currently being grossly overcharged for rent as well as other Two Trees

?generated charges.7

0 Were New York City taxpayers defrauded by Two Trees and their misrepresentations on their
421a HPD application, their receipt of tax abatements by the Department of Finance though they
lacked the HPD Final Certificate of Eligibility, their lack of compliance to the rules of 421a and
the number of tenants who have who have been defrauded, harassed, and victimized? Are
taxpayers? aware that their generous largess and subsequent reduction of tax revenues, that are the
funding basis of the 4213 program, are being used by Two Trees to harass and intimidate all

tenants including the Affordable Living Tenants?

0 ls it fair for a handful of tenants at 125 Court Street to incur the legal expense to force Two Trees
to comply with all aspects of the 421a law when city agencies should have a system in place to

monitor their own processes at every juncture as well as enforce them?

0 How does the city propose to reform the 421a program so that it is not exploited solely for the

benefit of developers?

Tenants on the eastern end of the building recently received a letter from Two Trees Management
informing them that their windows are to be bricked up due to construction in the adjoining lot, though
they made no mention of any rent adjustments for the loss of natural light. Most of the apartments will
have a room with no Window. ls this legal? Did Two Trees receive money for Wait rights?? Are HPD,
and investors aware and/ or concerned about the obvious diminution in the property value of
125 Court Street? Since the building?s design will drastically change since its initial approval, What impact
will it have on the tax abatement schedule? How did the Department of Buildings approve plans for a
building with lot line windows and then issue a permanent Certificate of Occupancy for a building with
lot line bedrooms that are now going to be bricked up, a clear violation of the building code.

These represent a sampling of our concerns and questions. We believe they suggest a pattern of deceit
and fraud in other Two Trees properties that warrant a full scale investigation. These claims are not
frivolous, rather are substantiated by documents and extensive research. Documentation is available
upon request. Any number of the aforementioned claims would qualify as a default event according to
the Regulatory Agreement for 125 Court Street accompanied by appropriate consequences, but thus far
appear to be empty words on a page. The interests of the Bond Holders and of the taxpayers as well as the

rights of the tenants are endangered by the lack of the enforcement stipulated in the agreement and
articulated in the State law N.Y. RPT. 421A.

We feel these allegations are sctlous enough to possibly disqualify Two Trees trorn ever being a candidate
for taxpayer subsidies in the future and provide the grounds to reevaluate their current fitness tn continue
tn receive these benefits,

In addition to the fraud charge currently in Supreme Court. we are evaluating the most responsive
avenues available to have a full investigation as well as a legal and public hearing regarding the process by
which Two Trees 'obtained 421a benefits (or 125 Court Street as well as the federal benefits, the
financing, and their continuing non compliance with the law. HPD, unfortunately, has been
unresponsive to date, Given that you are new to the agency we, as tenants, citizens, and voters,
believe that you would be interested in meeting and discussing our concerns. We would welcome the

opportunity, Nancy Sher can be reached ar_ and Jeff Goodman can be reached at-

. 0- we look forward to heating From you.

Sincerely, Sincerely,
Nancy Sher Jettrey Goodman

Cc: William De Blasio, Mayor New YorkCity
Alica Glen, Deputy Mayor for Housing and Economic Development, New York City
Carl Weisbord, Commissioner City Planning, New York City
Stephen Levin, City Council Member. New York City
Antonio Reynoso, NYC Council District 24, New York City
David Greenfield, NYC Council District 44, New York City
Kenneth LT. Wright, NY State Chair Committee on Housing. N. Y, State
Melissa MarkrVivcrto. Speaker NYC Council, New York City
Brad Lander, NYC Council District 39, New York City
Thomas Di Napoli. NYS Comptroller, Albany, New York
Eric Schneidetman. NYS Attorney General, Albany, New York