A class-action lawsuit filed on Wednesday accused a real estate company run by former Gov. Eliot Spitzer of overcharging tenants at a waterfront apartment building in Brooklyn.
Spitzer Enterprises, the lawsuit contends, violated state law when it applied increases to the full rent of rent-stabilized apartments rather than to the discounted figure, known as a preferential rent, given to tenants when they first signed leases at the 857-unit building, 420 Kent Avenue, in Williamsburg.
Aaron Carr, the founder and executive director of the Housing Rights Initiative, a nonprofit that used public data to investigate 420 Kent and reached out to tenants, said that they could be owed $30 million, based on an analysis of increases between 2020 and today.
“When a tenant in a taxpayer-subsidized building is defrauded, every taxpayer gets defrauded,” he said.
Mr. Spitzer said in an interview on Wednesday that the complaints had come out of “left field” and that his company would “litigate the case hard.”
“We’ll have to see how this plays out,” he said.
New York City landlords regularly offer discounts on luxury apartments to entice prospective tenants, and Spitzer Enterprises was no different: It offered between one and four months free on new leases of its many rent-stabilized units. A studio that might rent for $3,025 per month, for example, averaged out to a preferential rent of $2,269 per month on a 16-month lease with four months free.
Because the homes were rent-stabilized, the rent could go up only by an amount approved by a special panel, known as the Rent Guidelines Board. At no point in the past decade, for example, has the panel allowed rents on one-year leases to rise by more than 3.25 percent.
But when tenants went to renew their leases, the lawsuit contends, they encountered numbers far higher than they expected: Spitzer Enterprises had applied the increases to the full, higher number, not the preferential rent.
The lawsuit is one of the latest examples of a series of rent disputes between landlords and renters after New York State passed a sweeping set of pro-tenant laws in 2019. Those laws said that while a tenant occupied an apartment, the landlord must apply rent increases to the preferential rent, not the full rent.
Mr. Spitzer noted in the interview that before those laws were passed, landlords used to routinely offer concessions and then apply increases to the full rent.
His firm is just one of several developers and landlords being sued over similar practices.
The lawsuit also shows how rent stabilization is changing in New York City. While overall, rent-stabilized apartments tend to be cheaper than those renting at market rates, many newer homes are rent-stabilized under a lucrative property tax break known as 421-a, or similar programs, and those apartments tend to be more expensive.
For example, the nearly 15,000 rent-stabilized units added by the city in 2024 — a vast majority of which were created under 421-a — had a median rent of more than $3,100, according to the Rent Guidelines Board. Spitzer Enterprises used the same program to build 420 Kent.
The lawsuit comes as Mayor Zohran Mamdani’s rent freeze went into effect, applying to leases beginning on or after Oct. 1. A lawsuit challenging the freeze is pending.
Mr. Spitzer served as New York’s attorney general from 1999 to 2006, before he became governor in 2007. His term was brief, however, ending with his resignation in 2008 amid a prostitution scandal. He ran unsuccessfully for New York City comptroller in 2013, before taking over the family real estate business founded by his father, Bernard Spitzer.
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