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“Sham” Co-op on Upper East Side Slapped With $190,000 Fine

Upper East Side, Manhattan

Sham Co-op

The "sham" co-op (center) at 417 East 60th Street (image via Google Maps).

Aug. 29, 2018

The New York State Attorney General has busted a “sham” co-op on the Upper East Side for operating as a traditional rental building and illegally depriving tenants of the protection of the state's rent-stabilization laws, Patch.com reports

The state's top prosecutors reached a settlement with 417 E. 60 Owners Corp. that will require the landlord to abandon its co-op plan for the 25-unit walk-up and pay $190,000, the attorney general's office announced. The six-figure settlement will be paid to the city Department of Finance for use by the city Department of Housing Preservation and Development to fund housing for low-income New Yorkers. 

Up until 1984, the six-story residential building at 417 E. 60th Street, facing the Queensborough Bridge between First and York Avenues, operated as a rent-stabilized apartment building. In 1984, the building was converted to a co-op and ownership was transferred to an entity called the 417 E 60 Owners Corp. 

In 2015, one person acquired the entirety of the building's shares and began operating the building as a for-profit rental building, state prosecutors said. The listing service Zillow describes the building as “a wholly-owned cooperative functioning as a free-market rental building.” The apartments were sublet by tenants who were not protected by the state's rent-stabilization laws, and the building owner did not live at the property, violating the state's Business Corporation Law, prosecutors said. StreetEasy currently lists a 1-bedroom rental apartment for $4,650 a month, and a 2-bedroom for $5,150. 

"Sham cooperatives acting as rental properties diminish opportunities for homeownership and fail to provide rent stabilized protections for New York tenants," Attorney General Barbara Underwood said in a statement. "At a time when affordable housing is so scarce, my office will continue working to preserve critical protections for tenants and ensure more housing is made available to New Yorkers."

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