New York Attorney General Letitia James has secured a settlement worth more than $700,000 from a private equity firm accused of abandoning its obligations at a Hudson Yards condominium building, forcing the firm to hand control of the condo board back to residents and pay for years of unpaid fees, fines and repairs.
The settlement, announced Aug. 11 by the Office of the Attorney General, resolves an investigation into SME Capital Ventures and two affiliated entities, 441 W 37 SME LLC and West 37th ST LLC, over their treatment of the 441 West 37th Street Condominium, a nine-unit building in Manhattan’s Hudson Yards neighborhood.
“Private equity firms do not get to pick and choose which laws apply to them,” James said in the announcement.
How a foreclosure left homeowners without an occupancy permit
According to the attorney general’s office, the building’s original developer, Levi Balkany, took a $3 million loan from SME Capital in 2020 to complete construction. When the loan went unpaid, SME Capital won the property at a foreclosure auction in October 2023 and took over the sponsor company that still controlled several unsold units and the building’s offering plan.
From there, the OAG said, SME Capital’s conduct effectively stalled the building’s transition to resident control. The firm continued collecting rent on unsold units β reportedly as much as $12,000 a month for a penthouse and $10,000 a month for standard units β while declining to formally acknowledge its ownership stake in filings, according to the attorney general’s office. It also let the building’s temporary certificate of occupancy lapse, requiring residents to pay $15,824 out of pocket to renew it in June 2025, and ignored more than $140,000 in outstanding fire-safety fines and violations, the OAG said. SME Capital also blocked homeowners from taking control of the condo board, as is standard once a sponsor sells enough units, investigators found.
The OAG opened its investigation in 2024 after residents complained.
Terms of the settlement
Under the settlement, SME Capital and its affiliates must pay more than $700,000 in total, broken out by the attorney general’s office as more than $523,000 in overdue building fees, more than $139,918 in outstanding fines and taxes, and a $54,000 penalty. The firm must also obtain a permanent certificate of occupancy, complete required fire-safety repairs, correct the building’s offering-plan documentation, and β notably β transfer control of the condo board to the homeowners.
The case was handled by Senior Enforcement Counsel Nicholas J. Minella, under the supervision of Bureau Chief Jacqueline Dischell and Chief Louis M. Solomon within the attorney general’s office.
What it means
The settlement is a rare instance of a state regulator forcing an investor to relinquish governance control of a condominium building outright, rather than simply imposing fines. It arrives as regulators nationally have been tightening scrutiny of condo building safety and finances following the 2021 Surfside, Fla., collapse β the same wave of reform that led Fannie Mae and Freddie Mac to retire their “limited review” condo loan option earlier this month. It also lands amid a broader rise in disputes between homeowner associations and the parties responsible for building upkeep, including a nearly 40% jump in HOA foreclosures nationally as associations tighten enforcement over unpaid dues and fees.
For prospective condo buyers, the case is a reminder that a sponsor’s or successor investor’s financial troubles β including foreclosure of the sponsor entity itself β can directly affect a building’s occupancy status, insurance coverage and governance, even years after individual units have sold.
