Landlords Sue Rental Board, Claiming 'Sham Process' Led To Rent Freeze

A month after the New York City Rent Guidelines Board voted to freeze rents on all stabilized leases, a group of landlords has filed a lawsuit claiming that the process was illegally influenced by the mayor.

The complaint, filed Wednesday, accuses the RGB of failing to act independently and reverse-engineering the evidence used to justify its freeze on both one- and two-year leases.

A rent freeze was a central promise of Zohran Mamdani’s campaign, but legally, the mayor cannot influence the RGB’s decision-making. After securing office, he stacked the board with “loyalists” and “spent millions in City funds to fill the Board’s hearings with tenant advocates,” the lawsuit claims.

“This was a sham process with a predetermined outcome that Mayor Mamdani dictated by fiat,” Dechert co-Chair Randy Mastro, who served as former Mayor Eric Adams’ first deputy and is representing the plaintiffs, said in a statement. “That is not the way government decisions by independent boards are supposed to be made, and we have therefore now had to bring this Article 78 proceeding as a check on the Mayor's abuse of power.”

The mayor’s office didn't immediately respond to Bisnow’s request for comment. A team of Rosenberg & Estis attorneys is also counsel to the five landlords, who own buildings in Staten Island, Brooklyn, Queens and the Bronx.

A lawsuit was widely expected after landlord representative Christina Smyth resigned from the board the day of its final vote. Smyth slung similar accusations against the RGB, stating that “this year’s RGB order was decided last year on the campaign trail.”

The lawsuit cites several instances when the city may have intervened in the board’s process. Lawyers also have asked the court to expedite discovery of any interactions between the Mamdani administration and the RGB that would substantiate its claims of illegal influence.

The night of the preliminary vote, Deputy Chief of Staff to the Deputy Mayor for Housing Arvind Sindhwani allegedly entered the RGB’s green room, which is restricted to board members and executive staff. Security told him he was not permitted to be in the room, though the complaint does not detail whether he spoke with board members at the time. 

Additionally, the Mayor’s Office of Equity and Racial Justice held a “special briefing” to the board on May 21. During the presentation, representatives allegedly advocated for tenant relief by highlighting the city's affordability crisis. It was the first time any mayoral office had testified in front of the board, the complaint said. 

Since becoming mayor, Mamdani has pulled back on publicly advocating for a rent freeze. Still, he has enacted policies to increase tenant organizing power and strengthen landlord enforcement. That includes reviving the Mayor’s Office to Protect Tenants, led by longtime rent freeze advocate Cea Weaver. 

He also created the Office of Mass Engagement and gave it a $53M budget. The office’s first effort was canvassing for increased tenant testimony at RGB hearings. The lawsuit states that the canvassing list only included rent-stabilized tenants, not landlords.

“The canvassers themselves — partially drawn from the Mayor’s own office — operated with the goal of promoting the freeze outcome, not facilitating neutral civic engagement,” the complaint said.

The lawsuit further alleges that the board ignored evidence supporting a rent increase and relied on “speculative” interventions, not yet enacted by the city, to assist landlords. 

That includes using data that showed net operating income rose by 6.2%. The annual report, put together by RGB researchers, is heavily criticized for including all buildings with regulated units, regardless of whether they have market-rate apartments that offset losses.

The numbers also do not account for debt service. Other reports show that since the passage of the Housing Stability and Tenant Protection Act of 2019, more than half of buildings are cash flow negative after mortgage payments. The legislation stripped away ways that landlords could increase rents outside of the RGB’s restrictions, causing property values to tank. 

The RGB’s Price Index of Operating Costs also showed that costs have skyrocketed across the board for property owners. Despite that evidence, during an open session, tenant representative Adán Soltren said, “I don’t think we should be using this at all unless there’s a price of operating cost of living index,” according to the complaint.

The lawsuit includes testimony from the plaintiffs, previously presented to the RGB. Violet Zharku, whose family owns three fully rent-stabilized buildings in Queens, said her properties are technically NOI-positive but are in the red after making repairs and debt payments. Her family has been forced to cover shortfalls using personal savings and loans and is looking to sell the properties.

Another plaintiff, Sophia Hepheastou, inherited a small Bronx portfolio from her father-in-law, a Greek immigrant, according to the suit. She and her husband have continued to work full-time jobs and now operate the buildings at a loss.

“We manage these properties out of a sense of obligation — to the tenants who have lived in these buildings for decades, and to honor our family members who built something from nothing and trusted us to carry it forward,” Hepheastou wrote in her testimony to the RGB. “If we are not given meaningful relief this year, we will be forced to make difficult decisions which will undoubtedly impact tenants—necessary maintenance will no longer be available which will be the worst case scenario for tenants.”

The lawsuit further alleges that the board overstated the affordability needs of rent-stabilized tenants, using medians that are skewed by low-income tenants. 

Tenants earning under $20K comprise approximately 18% of renter households, 88.6% of which are rent-burdened. However, because there are no earning requirements to secure a stabilized apartment, 30% of rent-stabilized tenants earn $100K or more annually. 

Only one RGB member, Arpit Gupta, voted against the rent freeze. After the vote, the public representative said the evidence supporting a freeze was “incomplete.”

“The cost picture that we’re looking at for landlords is quite high. We’re looking at very high cost increases in all of these categories that landlords are dealing with,” Gupta said. “So to freeze rents in a condition where these costs are going quite high presents a challenge.”

Gupta has opposed the city’s “one-size-fits-all” regulations on rent increases, instead advocating for increases based on building conditions. 

This year was the first time in the RGB’s 57-year history that rents on both one- and two-year leases were frozen. In 2017, a judge dismissed a lawsuit that claimed that the RGB should be restricted to only considering building finances, not tenant affordability, in rent adjustments.

Wednesday’s lawsuit seeks to bar the rent freeze, which goes into effect Oct. 1, allowing current rent increase guidelines to continue in the interim. If ultimately successful, the RGB may have to reconsider its vote.