The due diligence painted a rosy picture. Then the deal closed
A New York real estate firm tried to dodge a fraud lawsuit in North Carolina over an $8 million apartment deal. The court said no.
On March 13, 2026, the North Carolina Business Court denied Addison Partners' motion to dismiss in a case that should get the attention of anyone involved in multifamily transactions. The allegations at the center of this dispute are straightforward and familiar: a buyer says the seller made the numbers look better than they were.
Here is what happened.
In April 2024, JKH Capital and Dalecrest PO, both based in North Carolina, agreed to buy Tanglewood Apartments, a multifamily complex in Charlotte, from Tanglewood Owners for more than $8 million.
The deal closed in September 2024. Shortly after, JKH started noticing the property was not performing the way the paperwork suggested it would. Occupancy, monthly income, and overall financial health had all been overstated, according to the complaint.
JKH did not just go after the seller. It also sued Addison Partners, a New York-based affiliate that had been deeply involved in the transaction from the start, and Brian Schneider, a managing member of Addison Partners and AP Tanglewood Owner, LLC – the sole managing member of Tanglewood Owners.
And this is where it gets interesting for anyone who structures deals through multiple entities.
Addison Partners does not own or manage property directly. Its role is to find investment-worthy properties, negotiate the purchase, arrange financing, and then hand the contract off to a newly formed entity to close the deal. That is exactly what it did with Tanglewood Apartments back in 2018. It identified the property, signed a letter of intent, secured a Freddie Mac loan, and then transferred the purchase contract to Tanglewood Owners, a new North Carolina company, to take it across the finish line. Over the next several years, Addison Partners advanced more than $1 million in undocumented, interest-free loans to Tanglewood Owners for maintenance, upkeep, and operations.
When the 2024 sale to JKH came around, Addison Partners did not step back. Schneider and fellow managing member Mary Stewart Malone handled communications with JKH using their Addison Partners email addresses and signature blocks. The electronic data room where due-diligence materials were posted belonged to Addison Partners. The purchase agreement itself told JKH to send all notices to the seller care of Addison Partners. At no point did anyone tell JKH that Schneider and Malone were not representing Addison Partners.
Addison Partners tried to get out of the case by arguing it is a New York company with no business in North Carolina. Schneider submitted a declaration saying he was only acting in his capacity as managing member of AP Tanglewood Owners, LLC when he dealt with JKH.
Special Superior Court Judge Adam M. Conrad was not persuaded. The court found that Schneider's declaration carried little weight. It conflicted with the emails, the signature blocks, the data room setup, and Schneider's own deposition testimony. The court also noted that other statements in Schneider's declaration were "false or misleading," which raised credibility concerns.
The court pointed to Addison Partners' own actions: negotiating the original purchase of a North Carolina property, transferring that contract to a North Carolina entity, lending more than $1 million to support operations, and actively participating in a sale to a North Carolina buyer. On top of that, Tanglewood Owners owed Addison Partners as much as $800,000 at the time of the deal, giving it every reason to make sure the sale went through.
The takeaway here is practical. If you run deals through affiliated entities but use one company's email, branding, and infrastructure for communications, you may not be able to hide behind corporate lines when something goes wrong. The court made clear that it does not matter whether you technically own the property or manage the selling entity. What matters is how you present yourself to the other side.
The case now moves forward on the merits. The court ordered both sides to file a revised case management report and proposed case management order by March 30, 2026.
The fraud claims have not been decided yet. But for mortgage and real estate professionals who deal with multifamily acquisitions and due-diligence reviews, this case is one to watch. The question of whether those financial documents were actually cooked up will come later. For now, the message from the court is simple: if you are involved in the deal, you are in the case.
