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Kushner Company Agrees to Pay at Least $3.25 Million to Settle Claims of Shoddy Apartments and Rent Abuses – Alec MacGillis

Kushner Company Agrees to Pay at Least $3.25 Million to Settle Claims of Shoddy Apartments and Rent Abuses

by Alec MacGillis

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The property management subsidiary of Jared Kushner’s family real estate company has agreed to pay a $3.25 million fine to the state of Maryland and to reimburse many of the tens of thousands of tenants in the Kushners’ Baltimore-area apartment complexes for excessive fees and for rent they were forced to pay over the past decade despite serious maintenance problems in the units.

The agreement represents the settlement of a 2019 lawsuit brought against the subsidiary, Westminster Management, by the Maryland attorney general. The state alleged that the company’s “unfair or deceptive” rental practices violated Maryland’s consumer protection laws and “victimized” people, “many of whom are financially vulnerable, at all stages of offering and leasing.”

“This is a case in which landlords deceived and cheated tenants and subjected them to miserable living conditions,” said Attorney General Brian Frosh, a Democrat, at a press conference announcing the settlement Friday morning in Baltimore. “These were not wealthy people. Many struggled to pay the rent, to put food on the table, to take care of their kids, to keep everybody healthy, and Westminster used its vastly superior economic power to take advantage of them.”

Kushner Companies, which has since sold off most of the complexes, did not respond to requests for comment, but in a statement to the Baltimore Banner, it said: “Westminster is pleased to have settled this litigation with no admission of liability or wrongdoing. We look forward to moving past this matter so that we can focus on our ever-expanding real estate portfolio.”

Frosh took issue with that characterization. “You don’t pay three million two hundred and fifty thousand bucks if you’re not liable,” he said. “They may not have formally signed a piece of paper saying that they did it, but they did.”

The state lawsuit followed on the heels of a May 2017 article co-published by ProPublica and The New York Times Magazine describing the Kushner Companies’ highly litigious treatment of tenants at the apartment complexes it started buying in the Baltimore suburbs in 2012. The 17 complexes contained a total of about 9,000 units and provided a strong cash-flow ballast for a real estate company better known for trophy properties in New York.

The article reported that the company had brought hundreds of cases against current and former tenants over unpaid rent and broken leases, including people who had moved out of the complexes before the Kushner Companies even purchased them. The company also pursued tenants who possessed evidence that they did not owe the money claimed, with all manner of court and late fees piling on top of the original claims.

The article also described the shoddy conditions that many tenants had to contend with at the complexes, including mice, leaky roofs and rampant mold.

At Friday’s press conference, Frosh and two former tenants elaborated on the deplorable conditions. Frosh showed images from squalid units, including one of a large cluster of mushrooms growing beside a toilet. Tiffany Dixon described the floor and wall damage in her family’s unit at a Kushner complex called Commons of White Marsh that she said was caused by a large hole under the kitchen sink of an adjacent unit. Dixon recounted the horrifying discovery, after her kitchen stove stopped working, of mice remains inside the oven. Vaughn Phillips described living in a unit in another complex, Fontana Village, that had water pouring out of the kitchen wall for months “to the point where there was a small pond in my kitchen and living area.” Phillips also said that gas leaked from the unit’s kitchen stove and that “mice that would come out and watch TV with me.”

Frosh displayed one of the many internal company emails that his office obtained during its investigation, showing that officials were well aware of the problems. “We desperately need your help at the Commons of White Marsh with the number of roof leaks that are still occurring due to the damage of the storm that was caused from the storm back in March,” the community manager at the complex wrote to the director of construction at Kushner Companies, in September 2018. “I am receiving at least 30 complaints per day and residents coming [in] and screaming in office. We have a large amount of drywall damage and potential for mold is becoming an issue.”

Before the state’s lawsuit in 2019, a group of tenants filed a class-action lawsuit in late 2017, alleging that the company was improperly inflating payments owed by tenants by charging them late fees that are often unfounded and court fees that are not actually approved by any court. That case made its way to the state Court of Special Appeals in early 2021, but a ruling has not yet been issued. (The Kushner entities have denied wrongdoing in that suit.)

The state case against the company won a major victory in April 2021, when an administrative law judge found that Westminster violated consumer laws in several areas, including by not showing tenants the actual units they were going to be assigned to before signing a lease, and by assessing them a range of “spurious” fees. The ruling came after a 31-day hearing in which about 100 current and former tenants testified.

The company had initially downplayed the lawsuit as a politically motivated stunt to embarrass Kushner, the highly influential son-in-law of then-President Donald Trump. But after the ruling by the administrative law judge, the company entered into negotiations with the state. “It became very clear that they had done wrong and we were not going to let them off the hook,” Frosh said.

Frosh said that the state was looking into whether other large landlords in Maryland have been engaging in practices similar to those employed by Westminster. The Baltimore Banner recently reported that Maryland landlords are far more aggressive in using the courts to threaten eviction as a routine practice for collecting rent than are landlords in other states.

Under the terms of the settlement, Westminster must make an effort to reach all of the estimated 30,000 tenants who resided in its Baltimore-area complexes to alert them that they may submit claims of restitution for rent they were forced to pay despite substandard conditions. Former tenants will be able to start submitting claims in three months and will then have a year to do so. The claims will then be assessed by a special master selected by the company with the approval of the state. Separately, the company will automatically reimburse former tenants for excessive court fees and late fees, based on its records; former tenants will not need to file claims for that restitution.

Westminster may end up paying considerably more than $3.25 million, since there is no limit on the amount of restitution the special master can order. (Of the $3.25 million fine, $800,000 will be treated as a down payment on the restitution.)

The former tenants at the press conference expressed satisfaction with the settlement. “I wasn’t looking for financial gain,” Dixon said. “I was just looking for justice. I was looking for someone to acknowledge the negligence so that other people didn’t have to endure what we did.”