A panel of appellate judges has unanimously overturned a lower court’s decision to significantly increase the ground rent for Carnegie House, a residential and commercial building located at 100 W. 57th St. in Manhattan. The ruling provides a temporary reprieve for the building’s 324 apartment residents and its approximately 30,000 square feet of retail space.
Commercial Rent Concerns
The building’s commercial portion, which includes spaces for a Duane Reade, a bike-rental shop, Fresh & Co., Zibetto Espresso Bar, a dry cleaner, and a souvenir shop, faced a proposed annual ground rent increase from $1.1 million to $6 million. Georgetown Company, which manages the retail spaces and rents to 10 stores, pays 25% of the building's total ground rent. The company stated that any increase would be passed on to its store tenants.
Arbitrator Misconduct Cited
The appellate judges cited misconduct by the arbitrator, referred to as an “umpire,” who failed to disclose a job offer extended by the landowners’ lawyer. This oversight led the panel to nullify the entire $24.6 million ground rent award that had been approved by a lower court.
Ownership and Tenant Reactions
The land at Carnegie House is owned by a partnership that includes tech mogul Michael Dell and real estate investors Rubin Schron and David Werner. A spokesperson for the landowners, James Yolles, expressed confidence that a future arbitrator would reach the same conclusion regarding the rent increase, stating, "The tenants can seek all the delays they want, but the numbers are the numbers and we are confident that the next arbitrator will reach the same conclusion." Representatives for Georgetown Company did not respond to requests for comment.
Richard Hirsch, president of the co-op board, called the appellate court's decision a "critical victory" for residents but cautioned that it was only a "temporary stopgap." A building resident and real estate attorney, Scotty Sheriff, commented on the arbitrator’s failure to disclose the job offer, noting the importance of avoiding not only impropriety but also its appearance.