Manhattan condo developer faces foreclosure on taxes, maintenance

Source : Business Times - 19 Feb 2009

A downtown Manhattan condominium developer is facing foreclosure for failing to maintain the property and pay contractors.

Anglo Irish Bank Corp plc said Yair Levy and his company, YL Rector Street LLC, are in default on US$165 million in loans because they didn’t pay property taxes or contractors and failed to ‘complete the work needed to make the project safe and habitable’, according to a lawsuit filed in New York State Supreme Court.

About 75 per cent of the units at 225 Rector Place remain unsold, according to the complaint. Developers moved into the financial district during the five-year property boom, buying up office buildings and converting them into upscale condominiums. Demand for such properties has dwindled as financial firms fire employees in the second year of the US recession.

The Rector Place building has no heat in the lobby or in the hallways, and promised amenities such as a gym and a concierge had not been provided, said Pam Flakowitz, a resident who paid US$565,000 for a 600-square-foot apartment there.

On Feb 13, the building’s management company told residents that there was only enough money in a common fund to keep the heat and water on for another week, Ms Flakowitz said.

‘Their explanation was they have no reserve accounts, there’s no capital account and he hasn’t paid common charges since day one,’ she said of Mr Levy.

Anglo Irish said in the lawsuit that Mr Levy also failed to contribute to a building escrow fund, among other expenses. Mr Levy, who turned the rental building into condominiums, has sold 72 of the 304 units in the building, according to the suit. His company still controls the condominium board and he is responsible for paying maintenance fees on behalf of the unsold units, the suit said.

Mr Levy did not return a call for comment at his Manhattan development office.

In its request for foreclosure, Anglo Irish is also asking the court to appoint a receiver over the property.

‘We are extremely concerned that the property be maintained in a safe and habitable condition while we resolve the issues that are before the court,’ said Chris Sullivan, a partner at Herrick, Feinstein LLP, which filed the suit on behalf of Anglo Irish.