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Attorney General Wins More Than $1 Million in Rent Credits for Harassed Tenants, Secures Placement of Homeless Tenants

Letitia James

AG James’ Investigation Found Private Equity Lender Madison Realty Capital to Have Aided and Abetted Notorious Landlord by Lending More Than $100 million.
Madison Knew Landlord Toledano Was Engaging in Fraud and Tenant Harassment.


NEW YORK – New York Attorney General Letitia James today announced an agreement that secures more than $1 million in rent credits for harassed tenants and provides housing placements for 10 homeless families. The agreement with private equity firm Madison Realty Capital comes after Attorney General James found that the company aided and abetted tenant harassment and other fraud by notorious landlord Raphael (Rafi) Toledano.

“Today’s agreement stands up for all the tenants harassed and pushed out of their homes by a fraudulent landlord and the lender that financed his unlawful operation,” said Attorney General James. “Madison Realty Capital aided one of our city’s worst landlords in his unlawful scheme, but we’re holding the company to account and delivering real relief to the many victims through rent credits and housing placement. My office will continue to stand up for tenants who rely on affordable, rent-stabilized housing by stopping dishonest landlords and their unscrupulous financiers dead in their tracks.”

With the financial backing of Madison Realty Capital, Toledano harassed tenants through coercive buyouts; executed illegal construction practices; and failed to provide tenants with utilities, repairs, and other necessary services. Even with this track record, in 2015, Madison Realty loaned Toledano over $100 million to purchase a 15-building portfolio in the East Village, despite his limited experience in managing a portfolio of this size, evidence of prior tenant harassment, and plans to continue to vacate rent-stabilized tenants and renovate units in violation of law.

Attorney General James’ investigation found that Madison Realty Capital knew or should have known of Toledano’s history, that the proposed conversions were unlawful, and that the aggressive schedule for buyouts and renovations was likely to result in tenant harassment. As a result of the loan that allowed Toledano to take over management of the East Village Properties, Toledano did exactly that — harassing hundreds of tenants, engaging in dangerous construction practices, and failing to provide basic services. In March 2017, the East Village properties filed for bankruptcy.

Under the terms of this agreement — which also resolves claims filed against Toledano’s former business entities in New York bankruptcy court — Madison Realty Capital must now take ownership of the 15 buildings in the East Village portfolio subject to $1.05 million in rent credits. These rent credits will be shared among the remaining tenants who suffered through Toledano’s mismanagement of these properties. The owners of the buildings will also ensure placement of 10 formerly-homeless families and will adhere to Tenant Health and Safety Protections During Construction there. Almost 200 of the 280 apartments in the portfolio will be registered with the New York state Division of Homes and Community Renewal (NYSHCR) at or below a rent of $2,000 per month (50 will be registered at or below $1,000 per month). The Office of the Attorney General (OAG) will also receive $150,000 to use for restitution of harms caused by Madison Realty Capital and Toledano, including the loss of affordable housing in New York City. Madison Realty Capital has also agreed to abide by the New York state Department of Financial Services’ guidelines for state-chartered banks if it lends to an owner of regulated housing in the future.

Attorney General James’ investigation of Madison Realty Capital grew out of her investigation — done in partnership with the NYSHCR’s Tenant Protection Unit — of Toledano’s tenant harassment, unsafe construction, and other illegal conduct.

“Tenants Taking Control applauds Attorney General James for investigating Madison Realty Capital and standing up for the tenants harmed by the company’s conduct,” said Liz Haak, a member of Tenants Taking Control (TTC), formerly Toledano Tenants Coalition. “Prior to AG James’ intervention, Madison Realty Capital planned to profit from Mr. Toledano’s illegal harassment of tenants. We are grateful that she was able to negotiate this agreement. TTC does have ongoing concerns about Madison Realty Capital’s management of our buildings, but we hope this settlement will pave the way for a mutually beneficial working relationship as Madison Realty Capital takes full ownership of our homes.”

“Madison Realty Capital funded Raphael Toledano’s harassment and illegal efforts to push tenants out of rent-stabilized apartments,” said Greg Baltz, a staff attorney at TakeRoot Justice. “Through their organizing, the members of Tenants Taking Control exposed both landlords and lenders’ incentives to harass rent-stabilized tenants. Thank you to Attorney General James and her staff for zealously pursuing their investigation of Madison Realty Capital and ensuring that the company follows New York guidelines and laws in all future multi-family lending.”

“Raphael Toledano’s campaign to displace long-term, rent-regulated Lower East Side tenants en masse would not have been made possible without the funding he received from Madison Realty Capital,” said Liam Reilly, an housing organizer at Cooper Square Committee.
“Unfortunately, however, for both Toledano and Madison Realty Capital, vigilant and well-organized tenant coalitions, like Tenants Taking Control, provide an example for how strong a community’s defenses become when it stands together to push back against aggressive landlords and real estate speculation. Attorney General James and her team’s investigation into Madison Realty Capital deserve applause not only for its advocacy on behalf of tenants, but also for its efforts to encourage more responsible multi-family lending in New York in the years to come.”

The OAG reached a civil agreement with Toledano in June 2019 after finding that he had engaged in a pattern of fraudulent and illegal conduct throughout his work as a landlord and real estate developer.

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