FOR IMMEDIATE RELEASE
New York-Based Urban Standard Capital Faces Legal Action Over Allegations
of Fraudulent Lending Practices, Michigan Court Refuses to Dismiss Case
New York City, September 9, 2024 – Urban Standard Capital, a New York-based hard money bridge lender, is facing serious legal action in Michigan, accused of misleading commercial real estate borrowers by altering loan terms at the last minute and retaining significant portions of good faith deposits. The lawsuit, brought by Blackacre Management, an regional developer with a strong track record of office-to-multifamily conversions, led by Dalen Hanna and Maha Banno, shines a light on the lender’s predatory practices.
In late 2023, Blackacre had been on the verge of closing an $8 million loan with Urban Standard Capital when, just 48 hours before the scheduled closing, the lender—led by its principal, Seth Weisman—demanded an additional $2 million cash injection. Unable to produce the funds on such short notice, the deal fell apart. Despite having already provided a $50,000 good faith deposit, Blackacre was only offered $11,000 back, with Urban Standard Capital claiming the remainder had been spent on first-class flights, stays at the upscale Shinola Hotel in downtown Detroit, and other unsubstantiated expenses including the alleged drafting of legal documents riddled with errors.
In response, Blackacre, through the project’s special purpose entity, filed suit in Michigan, accusing the lender of conversion and other fraudulent practices. Urban Standard Capital removed the case to federal court and sought dismissal on jurisdictional grounds, arguing that Michigan law should not apply to them. However, the federal court flatly rejected these claims, keeping the case in Michigan and outlining the extensive factual basis for denying the lender's motion to dismiss.
Despite the collapse of the loan, Blackacre successfully secured a $9.6 million loan just a few months later, illustrating that the failure was not due to the merits or fundamentals of the project, but rather Urban Standard Capital’s unwillingness or inability to proceed under the agreed-upon terms. "Offering loan terms and being unable to close is one thing. Offering a loan with no intention of ever closing for the sole purpose of profiting from a good faith deposit is both malicious and illegal," said a representative of Blackacre.
This case adds to growing concerns about hard money bridge lenders, such as Urban Standard Capital, that require substantial good faith deposits from borrowers only to change the terms at the last minute. Borrowers are left with minimal refunds while the lenders pocket large portions of the deposits. The lawsuit serves as a warning to other developers and real estate professionals to be cautious when dealing with unregulated lenders promising quick closings.
At this juncture, several attempts to settle the case have failed, and the case will nw proceed to discovery to determine whether this is a common practice of Urban Standard Capital. Given the growing concerns, Blackacre is considering pursuing class action certification to represent other borrowers who may have been similarly misled and financially harmed by the lender's deceptive practices.
ENCLOSED:
Copy of Lawsuit
Copy of Order Denying Motion to Dismiss
Copy of News Article regarding Plaintiff’s $9.6 million loan