Lawsuit: Kushner Cos. charges illegal fees to its tenants

Associated Press

The real estate company run by the family of Jared Kushner is being sued by two tenants in Maryland for allegedly adding excessive and illegal fees to their rent.

The lawsuit filed Wednesday says businesses owned by the Kushner Cos. have been charging late penalties of 5 percent of tenants' rent, but not just for what they claim to be late rent. The penalties were also tacked on for late "agent fees" and "court fees," in violation of Maryland law, the lawsuit says.

It describes the charges as part of a fee-churning scheme that keeps renters under constant fear of eviction, and guessing what they owe.

The lawsuit filed in the Circuit Court of Baltimore is seeking class action status.

The Kushner Cos. said it has done nothing illegal.

"We have been in compliance with Maryland's laws and regulations and intend to vigorously defend ourselves against these allegations," said spokesman Eric Wachter.

The suit was filed on behalf of Tenae Smith, a mother of two with a baby on the way living in Dutch Village apartments, and Howard Smith, who lives in Carroll Park Apartments in Baltimore County. The two are not related.

Tenae Smith, 28, is a staff attorney at Senior Legal Services with the Baltimore City Bar Association. She said she first noticed the fees on a ledger she received after filing a rent escrow suit against the management company in December of last year stemming from living conditions she described as "not safe and healthy." She was shocked by the list of fees, and said they make it difficult to survive and support a family.

"I can't catch up," Smith said. "It's very stressful, especially when you have two children. I do live paycheck to paycheck, I'm a new attorney, trying to make ends meet, make savings, start a family, and it just keeps getting tougher and tougher."

The complexes are managed by Westminster Management, a subsidiary of Kushner Cos., which is also an owner under various other names.

Jared Kushner stepped down as CEO of Kushner Cos. earlier this year before becoming a senior adviser to his father-in-law, President Donald Trump.

The lawsuit cites instances when both Tenae Smith and Howard Smith had paid their rent, but were hit with late penalties because they had not paid extra fees that were allegedly misallocated to rent. The suit claims extra "court" fees were charged even though no court had awarded them. It also alleges that when both tenants sent in the lower, but proper amount of rent, the payments were refused because the fees weren't included, thus adding to the past-due amount.

The suit says both tenants were then sent eviction notices. It claims the fee churning is part of a routine business practice.

"We think it's outrageous that landlords charge improper fees to their tenants, and we think it's doubly outrageous when they then misallocate rent payments to those fees in order to generate more fees," said Andrew Freeman, an attorney representing the plaintiffs. "We think it's triply outrageous when they then extort the payment of those fees from tenants by threatening to evict them if they don't pay."

Freeman said Westminster Management operates roughly 17 complexes in Maryland with thousands of units, and the lawsuit would apply to those who have been required to pay illegal fees in the past three years. Freeman said he has spoken to several tenants about possibly joining the suit, but couldn't provide a specific number.

The Kushner Cos. has drawn criticism for its efforts to raise money for two of its projects — its struggling Manhattan skyscraper at 666 Fifth Avenue and a planned 56-story twin-tower residential building in Jersey City, New Jersey. In both cases, government ethics experts and lawmakers have accused the company of trying to use its ties to the White House to raise cheap financing from the Chinese investors.

The company abandoned its Chinese deal for 666 Fifth Avenue in March. It has denied it tried to use its White House ties to raise money for its Jersey City project.

The company's ownership of garden apartment complexes has also drawn scrutiny. Earlier this year, Democratic lawmakers requested thousands of pages of documents pertaining to properties owned by Kushner Cos. in Maryland. U.S. Sens. Ben Cardin and Chris Van Hollen, and U.S. Reps. Elijah Cummings, Dutch Ruppersberger, John Sarbanes and Anthony Brown, sent a letter to Kushner Cos. to remind it that the company must comply with Department of Housing and Urban Development regulations because it receives federal rental subsidies.

Jared Kushner has sold off some real estate investments in the family company since joining the White House. A financial disclosure report released in July said he still owns a stake in Westminster Management. The report showed he received $1.6 million in income from the holding.

In September, the Kushner Cos. announced it had bought a garden apartment complex near Princeton, New Jersey, adding to its holdings of about 20,000 apartments in multifamily buildings in six states. The company has said it is looking to buy other apartment complexes across the country.

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Condon reported from New York.

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