Stopgap Funding Saves Bankrupt NYC Apartments From Maintenance Peril | Company Business News

(Bloomberg) — Earlier this week, some New York City apartments landlord Joel Wiener owns were so low on cash that managers couldn’t do standard upkeep; tenants would have to endure broken elevators over the holiday weekend. Now those fixes can happen after a federal judge authorized temporary funding to maintain the buildings.

The properties, which were put into bankruptcy in May, will be permitted to use cash its primary lender Flagstar Bank has an interest in through July 11, Judge David S. Jones said during a Wednesday hearing. The bank and advisers representing Wiener’s properties are trying to strike a longer-term deal to cover the cost of operating more than 5,000 rent-stabilized units in Manhattan, Brooklyn, Queens and the Bronx.

“A lot of humans work for this enterprise and deserve to get paid and tenants need continuity of operations,” Jones said on Wednesday.

The potential funding shortfall emerged after Jones ruled Sunday the properties couldn’t use rental income to cover operating costs because they didn’t provide enough proof that Flagstar’s financial interest was protected. Lawyers for the properties warned in court papers that without access to cash, they may not be able to cover necessary maintenance or utilities.

Wednesday’s action averts such a scenario occurring over the long weekend, and gives lawyers for the building and Flagstar more time to work out a longer-term agreement. 

However, a Flagstar lawyer said they’re still far from a deal and indicated during Wednesday’s hearing that the bank could seek independent oversight of the buildings. The lender has also claimed the properties stopped making mortgage payments in January.

Garrett Fail, a lawyer representing the buildings, said during the hearing that in the last few days elevators in need of repair had broken down, and that funding was needed to be able to collect rent.

Fail opposed the bank’s offer of more limited funding through July 8, saying it would hinder employees’ ability to manage the buildings and said it would be like having a metaphorical “gun pointed to their head” during the July 4 holiday weekend.

Advisers for the buildings have blamed month’s bankruptcies on “sky-rocketed” interest rates and changes to New York housing law that restricted the property owners’ ability to increase rent on tenants.

Zohran Mamdani, the likely frontrunner in New York City’s mayoral race, has vowed to freeze the rent on the city’s 2.5 million rent-stabilized tenants. While residents often see short-term benefits from rent freezes, some economists warn that they inhibit landlords’ ability to make improvements to buildings or fix major issues. 

The case is Broadway Realty I Co. LLC, number 25-11050, in the U.S. Bankruptcy Court for the Southern District of New York.

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