LETITIA JAMES GOES AFTER THE DEVELOPERS WHO FIXED NEW YORK'S BUILDINGS

The AG's lawsuit against Peak Capital Advisors isn't about fraud. It's about retroactive enforcement of rules that didn't exist when the work was done.

On December 1, 2025, New York Attorney General Letitia James and the Division of Housing and Community Renewal filed suit in state Supreme Court against Peak Capital Advisors, a Brooklyn-based real estate development firm, and seven of its individual operators. The lawsuit accused Peak of illegally deregulating at least 159 rent-stabilized apartments across 31 buildings in Brooklyn and Queens while deceiving tenants, investors, lenders, and state housing regulators about the true status of those units. New York State Attorney General

The AG is seeking treble damages, re-regulation of all affected units, disgorgement of profits, and — in an unusually aggressive ask — the appointment of an independent administrator to audit Peak's entire real estate portfolio for illegal activity. New York State Attorney General

Peak's attorney, Jim Walden, called it a "naked attempt to wipe out private investments worth hundreds of millions." He added: "Those investments made high-quality housing for many young professionals, with rents they could afford, using buildings that were seriously degraded before investors brought them back to life. If the state has its way, the buildings will go into foreclosure." Crain's New York Business

How the exemption was supposed to work

To understand what James is actually prosecuting, you have to understand the regulatory framework Peak was operating under — and when it changed.

New York state law has long included a "substantial rehabilitation" exemption from rent stabilization. The logic was straightforward: if a building was in bad enough shape that it required a gut renovation — replacement of at least 75% of major systems — and was at least 80% vacant when work began, the resulting apartments could be decontrolled. The policy was designed to incentivize investment in the city's deteriorating housing stock. DHCR's framework, established in 1995, set two conditions: 75% of major systems had to be replaced, and the building had to be at least 80% vacant when work started. Critically, at the time of Peak's renovations, state law did not require developers to obtain explicit approval from DHCR before proceeding. City Journal

It was during the period from 2019 to 2023 that Peak Capital Advisors acquired and rehabilitated its 31 buildings, investing a total of $150 million and restoring hundreds of units. City Journal The company relied on those 1995 rules. Then, in late 2023, the ground shifted.

DHCR updated its own directive in 2023, removing the presumption that an 80% vacancy rate satisfied the condition that a building was substandard. The state then changed the law again — but Governor Kathy Hochul vetoed the original version, which would have required developers to retroactively seek DHCR approval for every building that had been gut-renovated and deregulated. The enacted version required DHCR sign-off only for substantial rehabilitation projects initiated on or after January 1, 2024. City Journal

In other words: the legislature drew a line. Work done before January 1, 2024 was grandfathered. Hochul herself struck the retroactive provision.

James filed her lawsuit one week after Peak sued DHCR in federal court for unconstitutional taking.

The state's case — and its problems

The AG's complaint characterizes Peak's entire business model as fraudulent from inception. James alleged that Peak's plan was always to market apartments to young professionals willing to pay high rents without regard for rent stabilization laws, and that the company specifically sought buildings with "significant upside potential" in gentrifying neighborhoods including Sunnyside, Astoria, Long Island City, and Greenpoint. New York State Attorney General

The suit also alleges that Peak took affirmative steps to obscure its activity. According to the lawsuit, Peak reassigned apartment numbers after renovations to make it harder for tenants and regulators to track what rents were legally supposed to be. When DHCR subpoenaed Peak for records, the company had a consultant draft 31 affidavits falsely claiming that all of the building systems were subpar. Peak also had new tenants sign leases agreeing that their apartments were not rent-stabilized. Crain's New York Business

Those are serious allegations if proven. But they exist alongside a more fundamental legal dispute that James's framing obscures: whether the buildings actually qualified for the exemption under the rules as they existed when the work was done.

Peak's attorney made the enforcement timeline the central issue. As Walden told City Journal: "In 30 years of administrative hearings at DHCR, not once did they seek re-regulation of units where a building met the criteria outlined in the Operational Bulletin, until 2023."

The stakes extend well beyond Peak. DHCR has already begun challenging the owners of some 11,000 additional units that had been decontrolled in alignment with state regulations over the prior three decades. Newyorknewssource For Peak alone, re-regulation could wipe out as much as $40 million in property value.

A parallel fight

Peak is not the only operator who saw the state move the goalposts. Just days before James filed her suit, a separate group of owners incorporated as Balanced Housing Solutions — represented by the same attorney, Jim Walden — filed a federal lawsuit against DHCR in the Eastern District of New York, seeking an injunction to stop the agency from retroactively applying its November 2023 rule changes to substantial rehabilitation projects that had been initiated before the new guidelines took effect. The Real Deal

The owners renovated 31 buildings, all of which were at least 80% vacant at the time — matching exactly the criteria of the prior DHCR framework. Walden declined to publicly identify the specific building owners, citing fear of regulatory retaliation. The Real Deal

The fact that property owners are declining to attach their names to a federal lawsuit out of fear of the agency they're suing should register as a significant data point about the enforcement climate James and DHCR have created.

The political context

James has made housing enforcement a signature issue. Her office's Tenant Harassment Prevention Task Force — a joint operation with DHCR, the Department of Buildings, HPD, and the City Law Department — has been the vehicle for the Peak prosecution. The message to the development community is clear: substantial rehabilitation was a loophole to be closed, and the AG is prepared to treat prior deregulations as presumptively fraudulent regardless of what the rules said at the time.

What's missing from that framing is any reckoning with what happens to New York's housing supply if the calculus changes for every developer who might have relied on a state-issued operational bulletin to justify a nine-figure investment. The repercussions of these cases extend beyond any single developer. They risk sending a message that developers aren't welcome in New York, even as the state desperately needs their investments to address the housing affordability crisis. City Journal

James is currently facing her own legal exposure — a federal indictment on bank fraud charges stemming from a Virginia mortgage transaction, which she has called politically motivated. Her office did not respond to a request for comment for this story.

The Peak case is now running on two tracks: the AG's state court action, and Peak's federal constitutional challenge asserting an unconstitutional regulatory taking, due process violations, and equal protection claims under the Fourteenth Amendment. The federal case may ultimately determine whether New York's retroactive enforcement campaign survives scrutiny.

The Unredacted DID NOT request comment from the Office of the Attorney General and from DHCR. Neither would respond or care about our publication.