Adam Leitman Bailey P.C. Wins Co-op’s Right to Retain Multimillion Dollar Security Deposit Post-HSTPA
In one of the first tests of the 2019 Rent Law’s provisions restricting security deposits and prepaid rent, Adam Leitman Bailey, P.C. won for an extreme upscale cooperative in Manhattan, the right to keep the multimillion-dollar, multi-year prepaid maintenance it had negotiated from a foreign national with an unsavory international reputation. Arguing that the prepaid maintenance was not subject to the 2019 law, Adam Leitman Bailey, P.C. preserved the cooperative’s ability to secure itself against its shareholder’s possible defaults. This was a particularly important victory for the cooperative as the shareholder did ultimately file bankruptcy while owing considerable maintenance to the cooperative, but the cooperative was left unharmed because of the now protected large prepaid maintenance deposit.
Bringing an action in State Supreme Court to declare entitlement to return of the bulk of the prepaid rent, the shareholder argued that the 2019 law made it illegal to retain as security prepaid rent in excess of one month’s maintenance.
Adam Leitman Bailey, P.C., however, argued that the shareholder’s reliance on the 2019 law was misplaced, that the action was based on an incorrect reading of the law, and that the law only forbade asking for such prepaid maintenance, not keeping it. The court then ruled in the cooperative’s favor, dismissing the lawsuit. Soon after this victory, the shareholder declared bankruptcy in a high profile case, making the client realize that if we had lost the case, the money would never have been seen again.
The co-op was represented by Adam Leitman Bailey, P.C. attorneys Adam Leitman Bailey, Carolyn Z. Rualo, Dov Treiman, and Jeffrey R. Metz.