On February 9, Connecticut Attorney General (AG) William Tong announced an investigation into the owners and managers of the Concierge Apartments in Rocky Hill, CT, for potential violations of the Connecticut Unfair Trade Practices Act after frozen pipes burst and tenants were displaced.
The AG’s civil investigative demand (CID) requests that Los Angeles-based private equity group J.R.K. Property Holdings provide detailed records regarding not only recent events at the apartment complex but also the company’s management and business practices over the past five years. Among other demands, the CID seeks records of tenant complaints, repairs, work orders, prior code violations, inspection reports, leases, and relocation efforts.
The CID was issued against the backdrop of an escalating series of communications between Connecticut officials and representatives of J.R.K. and its subsidiary, Century Hills Property Owner LLC d/b/a Concierge Apartments. Over the course of a week, multiple letters were exchanged (1, 2) and the AG issued multiple press releases critical of J.R.K. and Concierge Apartments (1, 2, 3).
The initial correspondence from Tong and a pair of state legislators focused on immediate concerns such as alternative housing arrangements and monetary relief for affected tenants, and repair and maintenance plans for the apartment complex. Tong launched the broader inquiry only after expressing frustration with the company’s response to the initial outreach, which the AG described as “worse than tone deaf, it is callous.” The AG concluded his second letter to the company with this: “Do better. Now. If I do not see significant progress over the weekend, you will be hearing from my Office on Monday.” The AG issued the CID on Monday.
J.R.K. attempted to course correct after Tong’s second letter, apologizing for the initial response, laying out a timeline for repairs, offering concessions to residents, and scheduling a meeting with the AG. After that meeting, Tong issued a press release describing how he had advocated for residents’ health and safety and stating that his investigation would remain active while conversations about remedying past and present conditions at the apartment complex are ongoing.
Why It Matters
These developments in Connecticut illustrate two broader trends in state AG enforcement: AGs’ increased willingness to leverage their authority under unfair and deceptive acts and practices (UDAP) laws to address conditions in multifamily housing complexes, and their heightened focus on the role played by private equity companies in the operations of their portfolio companies.
State UDAP laws vary in their applicability to leases of real property and to tenants’ living conditions. In recent years, however, many AGs have wielded their UDAP authority to seek relief on behalf of residents who are living in poor conditions or who are displaced by incidents at multifamily housing complexes. Connecticut’s requests for records regarding past code violations and resident complaints indicate how an AG may construct a broader UDAP investigation in response to a single major incident. Even when their legal authority is unclear, AGs may strive to show residents that they are standing up for them by being responsive and using their bully pulpits to address housing emergencies.
AGs also are increasingly focused on the role of private equity in the acquisition, ownership, and/or management of entities that operate in their states. As demonstrated by Connecticut’s CID, private equity companies now are more likely than in the past to be drawn into investigative inquiries arising from the operations of companies in their portfolios. Tong calling “Concierge, and its shadowy web of ownership interests, the poster child for everything that is wrong with private equity” offers a stark illustration of the current environment.
Finally, developments involving the Concierge Apartments highlight the importance of effective crisis management. On-the-ground operational responses, communications with affected individuals, regulators, and the public, and prompt legal advice all play a role in mitigating the fallout from incidents like the broken pipe and evacuation at issue here. Housing providers should maintain appropriate protocols for extreme weather events and other emergencies, including clear chains of command, communication strategies, operational plans, and defined roles for attorneys and other key individuals. In any industry, incident response plans and tabletop exercises can reduce the risk that a company’s reaction to an emergency will exacerbate regulators’ concerns or itself become the focus of a regulatory inquiry.
