R
esidents of Carnegie House, a 324-unit co-op on West 57th Street, are bracing for a potential crisis as their ground lease expires in March 2025. Unless the board and landowners Cammeby's International Group and David Werner Real Estate reach an agreement, shareholders face the possibility of becoming rent-stabilized tenants or signing a new ground lease with potentially crippling rent increases.

    The co-op board is suing the state housing regulator and an entity tied to Cammeby's and David Werner, seeking to halt arbitration over the ground lease renewal. The board wants clarity on how initial rents would be calculated if the units are converted to rent-stabilized housing. A lawsuit filed by the board accuses the owners of orchestrating a "thinly choreographed effort" to cause insolvency and failure of Carnegie House as a cooperative corporation.

    Carnegie House Board President Richard Hirsch said the lawsuit is about seeking clarity for co-op shareholders on what they can expect if the co-op is dissolved. He described the situation as driving a bus blindfolded, emphasizing that the board wants to operate honorably and be treated fairly. The owners have countered that the lawsuit is premature and that arbitration should come first.

    The dispute centers around a proposed 20% increase in annual rent from $4 million to $5 million, which the owners rejected in favor of a significantly higher rate. The co-op has spent tens of thousands of dollars lobbying for legislation to cap rent increases on ground leases and ensure renewals. If Carnegie House is unable to reach an agreement with its landowners, it could set a precedent for other ground lease co-ops facing large rent increases.