UES Salon Duped Landlord By Swapping Locations, Skipping Rent: Lawsuit

Upper East Side NY

06 May, 2022

10:40 AM

Description

UPPER EAST SIDE, NY — It's a hairy situation: an Upper East Side salon is being sued by its old landlord, who claims the business racked up debts, then avoided repaying them by secretly opening a new location and transferring all of its assets. The suit was filed Wednesday by the owners of 1379 Lexington Ave., a Carnegie Hill apartment building on the corner of East 91st Street where Burgundy Color Bar opened up a ground-floor salon in 2016. The upscale beauty salon signed a 10-year lease for the space, soon developing a "recognized brand, products, services," and accruing a devoted customer base in the neighborhood, according to the landlords' lawsuit. Starting in 2020, however, Burgundy's owners started falling behind on rent payments, telling landlords that the COVID-19 pandemic had caused a drop in business, the suit says. To help them stay open, the landlord provided more than $100,000 in rent concessions during 2021, in the form of abatements and debt forgiveness, according to the lawsuit. During that same period, however, Burgundy's owners had been "secretly diverting the business to a new location just up the street" on Madison Avenue near East 92nd Street, the landlords say they later learned. Burgundy Color Bar's new location on Madison Avenue near East 92nd Street, which opened in 2020. (Google Maps) By creating a new business entity and transferring all their assets to it, Burgundy's owners had engaged in a "textbook fraudulent-conveyance scheme," the suit claims — referring to an effort to escape debt by moving funds to another entity. Burgundy Color Bar did not respond to an email requesting comment. The Lexington Avenue landlords, listed under an LLC, are identified in city records as Icon Realty Management, which owns dozens of buildings around the city. The rent breaks given to Burgundy at its Lexington Avenue location were not needed to keep the salon alive, the landlords claim — rather, they were meant to "facilitate the transition of the business" to a new location while paying as little rent as possible at the old one. By November, Burgundy's owners said they were insolvent and ultimately closed up shop on Lexington last month. The new Madison Avenue salon, meanwhile, opened during the summer of 2020. The lawsuit, filed against the salon as well as its owners, asks a judge to force Burgudy to pay back the rent breaks, as well as punitive damages and attorneys' fees; and to cancel the asset transfer to the salon's new location.