A lender is allegedly refusing to take back the keys of a rent-regulated building in Harlem, showing how low that corner of New York’s multifamily sector has sunk.
L+M Development Partners is suing Santander Bank for declining the deed in lieu of foreclosure at 320 St. Nicholas Avenue, Bisnow reported. The landlord filed the complaint in New York County Supreme Court last week.
The complaint was first reported by PincusCo. Both companies declined to comment to Bisnow on the legal dispute.
Lisa Gomez’s L+M argues that the loan documents for the building give it the right to walk away from the property.
Legislation directly impacted the property and its future.
The loan dates back to 2019 when Signature Bank originated $12 million to finance the conversion of four rent-regulated units into 12 apartments. But in 2023, New York amended the Housing Stability and Tenant Protection Act of 2019, removing landlords’ ability to generate new first rent on reconfigured apartments.
The owner stopped work on the property after the amendments were passed, L+M claims, and began warehousing the apartments — removing them from the market — arguing its renovations were no longer legal.
Santander entered the picture in 2023 when it bought a 20 percent stake in the failed Signature’s loan book, which was backed by both rent-stabilized and rent-controlled properties. The FDIC chose Santander to manage the debt, yet it doesn’t appear to be working with its borrower.
In June, it informed L+M of the default in Harlem and demanded payment. Three months later, L+M offered to turn over the property’s deed.
Santander told L+M that the loan documents don’t require the bank to accept in deed-in-lieu, according to the complaint. L+M argued the process was implicit in the loan.
In January, Santander sent a default notice to L+M claiming the loan is recourse to the borrower; mortgage agreement documents appear to show the opposite. There is a “bad boy guarantee,” which states the bank can go after other assets under specific conditions, including fraud, misconduct, abandonment and physical waste.
That appears to be exactly what Santander is trying to do, likely hoping to collect assets that are worth more than the relatively small 320 St. Nicholas.
— Holden Walter-Warner
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