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Foul Play Alleged In Village Leases
By Josh Barbanel
The Wall Street Journal, October 25, 2010
William Cornwell, a retired advertising art director, hired a brokerage firm to a rent out a studio in his West Village townhouse. Then a broker at the firm made him a proposition he found he couldn't refuse: Why not rent it to me instead?
The result was that Mr. Cornwell, who is 74 years old, signed two handwritten leases on two studios in his Greek revival townhouse, with the agent and the agent's father, for below market rates, and for terms of up to 20 years.
William Cornwell is suing a broker and the broker's former employer.
Now Mr. Cornwell is in court battling the broker and his firm, Citi Habitats, charging the leases violated the obligation under state law that a broker represent a client's interests honestly, fairly and in good faith.
Under the agreements, Mr. Cornwell's agent, Amir Meiri, rented one second-floor apartment for $1,167 a month and the agent's father rented the other for $400 a month. Currently the least expensive rental apartment of any size in the West Village has an asking price of $1,950 a month, according to listings on Streeteasy.com.
"I am not a very good negotiator, and I am not very good with numbers," Mr. Cornwell says. "That was why I hired a broker to help rent the apartment.
Mr. Meiri said he was dismissed by Citi Habitats because of the lease deals, but said he did nothing wrong.
"They made a deal. It could have been a good deal. It could have been a bad deal but they made a deal," says Joseph A. Altman, who represents Mr. Meiri and his father, Herzel Meiri, a Long Island real-estate developer who drafted the leases.
Citi Habitats issued a statement saying that Mr. Meiri rented the two apartments "for Barry Mallin successfully argues case in New York's highest court on behalf of community housing advocates his own personal use and was acting on his own behalf," not on behalf of Citi Habitats. The firm confirmed that Mr. Meiri left after the leases were signed but declined to elaborate. "Citi Habitats conducts business with the highest levels of integrity and ethics, and we hold our agents to those same standards," the statement said.
The fight comes at a time that New York state is paying increasing attention to brokers who play multiple roles in transactions. A state law that takes effect in January requires brokers to provide written disclosure statements to customers in apartment buildings, co-ops and condos that define the broker's fiduciary obligations and outline potential conflicts of interests.
The lawsuit Mr. Cornwell filed in August is the second time he has brought the matter to a New York state court; he sued Mr. Meiri and his father to break the leases last year. In December, Justice O. Peter Sherwood called the leases "extremely favorable to the tenant" and said Mr. Cornwell "may have been dazzled by a show of cash." But he found no evidence of intimidation or coercion. A notice of appeal has been filed in that case.
The new suit seeks millions of dollars in damages from the agents and from Citi Habitats for failing to represent Mr. Cornwell's interests properly. The agent leased the apartments for terms ranging up to 20 years, which is highly unusual in a market in which most leases are for one- or two-year terms, according to court papers.
The longer terms make it impossible to sell the townhouse at its true value if he needs the money to live on, Mr. Cornwell claims in his suit. And under the lease terms they drafted, if he wants to sell anyway, the agent and the agent's father both have the right to match any offer on the property and buy it instead.
Mr. Cornwell's lawyer, Michael Schwartz, said: "It was a case of a 27-year-old working with his father, taking advantage of a 74-year-old man."
Mr. Cornwell and his partner, Thomas Doyle, moved into the red brick building on Horatio Street in 1961, at the time when it was still a gritty part of town.
Mr. Cornwell was initially a renter, paying less than $100 a month, and said he paid about $130,000 for the house in 1971. It now has working fireplaces, several rear terraces and five apartments, including Mr. Cornwell's residence.
Over the years the house had brushes with celebrity. Tim Harden, the folk singer, lived there in the early 1960s, and Kate Moss, the supermodel, sublet for a while when she was seeing actor Johnny Depp.
Last spring, Mr. Cornwell listed an apartment that had previously rented for $1,950 a month with an agent at Citi Habitats, John Tarjavaara. When Mr. Tarjavaara abruptly left town because of a death in the family, Mr. Meiri brought in several prospective tenants, according to court records.
Mr. Meiri later came back with his father and they put $5,000 in cash on the table, according to court records. They said they would lease the apartment on the spot for $14,000 for the first year and pay in advance. Mr. Cornwell signed an eight-year lease that was written out by the elder Mr. Meiri.
When they came back a few days later with the rest of the money, the Meiris offered $50,000 in advance to rent a second apartment that was about to become vacant, for a 10-year term with the right to renew for another 10 years.
Mr. Cornwell said in an interview he was confused by the offers, didn't know how much they translated to per month and wanted to use a standard real-estate lease, for a standard two-year term. But Mr. Meiri's father told him that he was leaving the country and needed to do a deal now, Mr. Cornwell said.
In an interview, the younger Mr. Meiri said the leases were negotiated fairly, and that he agreed to be responsible for repairs on the apartments. "It was a very friendly situation," he said. "It was mutual."
When Mr. Tarjavaara returned to New York, Mr. Cornwell said the agent told him the Meiris "were trying to steal your house." Mr. Tarjavaara did not return several phone calls.
Mr. Cornwell said he tried to return the lease payments to the Meiris and then went to court to try to break the leases, but lost. In his decision, Justice Sherwood cited a note from Messrs. Cornwell and Doyle written on the day the second lease was signed thanking the younger Mr. Meiri for the gift of a ficus tree.
Mr. Cornwell is now back in court, and he and Mr. Doyle say they spend a lot of time these days monitoring a hallway security camera. They say they're hoping they can catch Mr. Meiri violating the terms of the lease. Perhaps, they say, they'll be able to take him to court again and force him out.
Write to Josh Barbanel at email@example.com