The owner of the historic 16-story Emmet Building, located at 95 Madison Avenue in New York City, filed a voluntary petition for Chapter 11 bankruptcy on March 22, 2021 — highlighting construction debt valued at over $38,000 to at least two subcontractors.
According to the US Bankruptcy Court for the Southern District of New York, property owner Ninety-Five Madison Company owes $26,644.50 to New York City subcontractor Harty Built and $11,494.49 to Agir Electrical of Brooklyn, NY.
Ninety-Five Madison Company’s Chapter 11 bankruptcy petition notes the following estimates:
- 1-49 creditors
- $1-$10 million in liabilities
- $50-$100 million in assets
The attorney representing Ninety-Five Madison Company throughout their bankruptcy proceedings — Charles Simpson of Windels Marx Lane & Mittendorf — declined to comment.
When filing for Chapter 11 bankruptcy, the debtor proposes a plan of reorganization to an overseeing bankruptcy court in exchange for keeping the business alive. The purpose of reorganization is to also pay back the debtor’s creditors over time.
The bankruptcy petition lists Rita Sklar as the managing member of RAS Property Management and the general partner of Ninety-Five Madison Company.
According to Wayne Desimone, the attorney representing Harty Built, his client is listed as a creditor due to a complaint filed three years ago for unpaid construction services at 95 Madison Avenue.
“[Harty Built’s complaint] is still pending,” said Desimone. “[Harty Built] did some construction work for [Nine-Five Company], roughly $27,000 worth of construction work.”
“I started a Supreme Court action [in 2018]. It came and I eventually filed a note of issue that I was ready for trial. Since the courts are closed [from COVID-19], I’ve just been sitting,” said Desimone.
A spokesman from Aigr Electrical nor their attorney could be reached for comment.
Ninety-Five Madison Company faced past mechanics liens
The two subcontractors listed in Ninety-Five Madison Company’s bankruptcy filing are not the only contractors to encounter payment issues with the property owner.
Mechanics liens, also known as construction liens, are filed by unpaid contractors to gain a security interest in the serviced property until they receive payment. Liens attach to the property, hindering the property owner from selling or refinancing unit the debt is paid.
Within a June 2019 petition filed by a now-deceased member of the limited partnership to “divest Sklar” from partnership, the court document states Sklar herself “refused to pay for front doors which had been ordered for 95 Madison Avenue resulting in the lawsuit” filed by Fran-Co. Remodeling Corp.
“I don’t believe [Fran-Co. Remodeling Crop.] didn’t get paid because [Ninety-Five Madison Company] was having financial problems,” said Robert Mahler, the attorney of Fran-Co. Remodeling Corp.
“I had no indication of any financial problems. But that was a different world. We didn’t know what their financial health was, we just cared about [Fran-Co. Remodeling Corp.]. We didn’t do a full discovery of all of their finances. We just cared that they didn’t pay my client’s bill.”
According to Mahler, the complaint with Ninety-Five Madison Company was settled in 2019.
“[The lien claim] took a while to go through the court system,” said Mahler. “They delayed and delayed — typical defense attorney [procedures]. [Ninety-Five Madison Company] then switched attorneys and did it a second time. It was basically a delay on their part. They refused to comply with discovery demands. Then I had to go before the judge to make a motion to have the case dismissed for not complying. Then they finally complied with the discovery demands. That’s typical what defendants try to do.”
According to the June 2019 petition to divest Sklar, Ninety-Five Madison Company “paid more in legal fees than it owed on the doors” after Sklar alleged a “conspiracy” over delivery charges from Fran-Co. Remodeling Corp.
The now two-year-old petition was filed to divest Sklar of “any managerial authority over 95 Madison Avenue” and to dissolve Ninety-Five Madison Company.
Risks to contractors working on historic properties
For contractors looking to work on similar historical properties owned by large real estate companies, Ninety-Five Madison Company’s filing proves bankruptcy risk exists everywhere.
Mahler advises contractors to enter these types of projects with a complete understanding of mechanics lien deadlines and the contract itself.
“Make sure [contractors] file their mechanics liens as soon as possible if they don’t get paid,” said Mahler. “There’s a very limited time frame they have to file.
“Also, make sure the contract is a reasonable contract so [the contractor] gets a decent enough payment upfront. And if the owner stops paying them while the work is being completed, then they stop their work as a good contract should say. Some of these contracts don’t say that.”