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Fight for College Kids’ Rent Turns Nasty

TROY, N.Y. (CN) - The fight for college students' rent took a nasty turn here as a property group claims in court that Rensselaer Polytechnic Institute defamed and financially harmed it through "a malicious and wholly improper campaign" that encouraged tenants to break their leases or withhold rent.

Troy Property Group claims that Rensselaer Polytechnic's goal was to force it into foreclosure and "to promote its own housing."

Carbondale, Ill.-based Troy Property Group sued the highly regarded engineering school in Rensselaer County Court.

Troy Property Group owns and operates locally about 30 apartment buildings in Troy, under the name Campus Habitat, according to the complaint.

Campus Habitat's website, which provides a New York City corporate address, states that the company acquires, renovates and manages student housing near universities in eight states, including Southern Illinois University in Carbondale, Western Michigan University in Kalamazoo, the University of Wyoming in Laramie and RPI in Troy.

In Troy, Campus Habitat's list of managed units range from studio to eight-bedroom apartments - all furnished and including utilities, with many advertised as offering 42-inch plasma TVs. The units, within a few minutes' walk of the RPI campus, are in row houses or former single-family homes; most have a Campus Habitat plaque near the front door.

RPI, with an undergraduate and graduate enrollment of more than 6,000, is the country's oldest technological research university. Founded in 1824, it sits atop a steep hill overlooking downtown Troy.

Troy Property Group has been a Troy landlord for more than a decade, leasing apartments to students at RPI and nearby Hudson Valley Community College, a two-year school. According to the complaint, the company has 242 RPI students as tenants for the 2011-12 academic year.

But last fall, the complaint states, when cash flow from the apartments was falling short of mortgage payments on the properties, Troy Property began talking with SEFCU, a federal credit union that holds the mortgages, on renegotiating interest rates.

At the time, SEFCU suggested the company contact RPI, which had expressed interest in buying some of the apartment buildings. But "discussions stalled and no agreement was reached," the complaint states.

In early 2012, though, an associate dean at RPI began making inquiries of Troy Property representatives - and SEFCU - about the company's finances, its maintenance schedules and utility payments, according to the complaint.

Despite reassurances, RPI shortly thereafter "maliciously and without reasonable justification" released a "Rensselaer Emergency Notification" that alerted students in the Troy Property buildings that "the continuation of their ability to reside in that residence may be in immediate jeopardy," according to the complaint.

Copies of the alert were emailed to students campus-wide, posted on the apartment buildings, sent to Hudson Valley Community College, and distributed to the community and local media, according to the complaint.

The alert, attached to the complaint as an exhibit, cited 31 properties rented to students through Campus Habitat that could be affected. The alert claimed the landlord was behind in mortgage payments and had unpaid real estate and utility bills; it also indicated that apartment buildings associated with Campus Habitat operations near Southern Illinois University had gone into foreclosure.

The Southern Illinoisan, a daily newspaper in Carbondale, and WSIL, the ABC-TV affiliate there, reported in late December that two banks brought foreclosure actions against properties housing Southern Illinois students and that receivers had been put in charge.

In Troy, however, "RPI knew ... that TPG [Troy Property Group] has been making mortgage payments to its lenders although it is currently in the process of renegotiating its mortgages, that TPG has been paying its utility bills and no shutoff notices have been issued, and, that, although TPG had changed managing agents in November 2011, the management teams for the buildings had not changed and remained in place and on the premises," the complaint states.

Troy Property Group claims that references in the RPI alert to the Illinois foreclosures and the possibility of similar action in New York if mortgage payments were missed "were intentionally disseminated to falsely suggest that TPG's Troy properties were involved in a foreclosure action when, in fact, no such action existed at that time."

That soon changed, though, when SEFCU filed a foreclosure action on Jan. 24, which Troy Property claims it learned of a week later, after foreclosure notices were posted on its buildings.

The complaint blames the foreclosure filing on "RPI's improper communication with SEFCU concerning TPG," which Troy Property Group claims "encouraged and induced SEFCU to abandon its negotiations with TPG and institute its foreclosure action."

As a result of the alert, the complaint states, more than 40 students breached their leases by vacating Troy Property buildings, while others withheld rent, putting the money into escrow "based upon advice ... from RPI."

Troy Property Group claims: "RPI maliciously, wrongfully, knowingly, intentionally and without reasonable justification or excuse made such [defamatory] representations to place TPG in a negative light and to promote its own housing."

The RPI alert said the college was "prepared to provide Rensselaer housing or Rensselaer-affiliated housing" for affected students.

Like other communities, Troy has seen an influx of new student-focused housing as commercial real estate developers seek opportunities.

Last fall, United Group of Cos. Inc., a Troy-based developer, opened College Suites at City Station, a $13 million complex that takes up a city block with new ground-floor retail and 48 graduate-student apartments. It's part of a larger planned commercial project that will give a facelift to a section of the city by adding office space, a movie theater, more student housing and a parking garage.

In 2009, Albany developer Columbia Cos. renovated a downtown Troy motel into a dorm-like complex for 200 RPI undergraduates, and in 2006 a related entity, BBL Development Group LLC, worked with another Albany developer to build the 39-unit Polytech Apartments for students on the edge of the RPI campus.

United Group, which has developed undergraduate and graduate housing across New York state, in addition to designing professional offices and senior apartments, says its student housing program "is designed to positively affect retention and recruiting for educational institutions" by providing safe, modern complexes that incorporate the latest in technology and amenities.

Troy Property Group seeks treble damages and punitive damages for tortious interference with contract, tortious interference with prospective economic advantage, violation of New York general business law, and defamation.

It also wants an injunction, to stop RPI "from continuing to make such false and misleading statements," and recovery of the "consequential damages resulting from RPI's conduct."

Troy Property Group is represented by Russell Yankwitt and Kathy Marks, with Yankwitt & McGuire of White Plains.

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