On December 23, 2009, attorneys at the law firm of Himmelstein, McConnell, Gribben, Donoghue and Joseph secured a potentially major victory for tenants in New York City.
W Associates v. Maverick Scott. On that day, Housing Court Judge Bruce Scheckowitz ruled that the tenant’s apartment located at 37 Wall Street was subject to rent stabilization, notwithstanding that his initial monthly rent was $4,920, because the landlord was receiving tax benefits under the 421-g program.
The decision was significant because it had the potential of extending rent stabilization coverage to 5,000 units in the Financial District, a neighborhood in Lower Manhattan undergoing a residential housing boom.
By way of background, in 1995 the State Legislature enacted the RPTL § 421-g to enable New York City to revitalize Lower Manhattan through, inter alia, providing financial incentives to owners to convert their commercial buildings to residential and mixed-use buildings. The Legislature found that Lower Manhattan was in a state of economic decline as a result of several trends, including that corporations and financial institutions were leaving the Wall Street area at increasing rate; advancements in telecommunications had made it easier for companies to do business on Wall Street without physically being located in the area; and many buildings that were once well-suited for commercial use on Wall Street had become antiquated and unable to accommodate the necessary telecommunications infrastructure needed to compete in the global market.
The Legislature provided one condition to the grant of tax breaks to apartment building owners: each apartment in buildings receiving the tax breaks would be subject to rent stabilization while such benefits were in effect. The plain language of the statute imposes rent regulation on all apartments in buildings enjoying tax benefits under RPTL §421-g, “unless exempt under such local law from control by reason of the cooperative or condominium status of the dwelling unit.” RPTL § 421-g(6).
The rent stabilization laws[1] have been described as an “impenetrable thicket of legislation that still confounds the neophyte to the most learned and proficient.”[2] However, the benefits of rent stabilization coverage to tenants are clear, well known, and undisputed. Among the many benefits are: (a) predictable and modest rent increases not related to the whims of market conditions; (b) the right to renewal leases; (c) protections against arbitrary evictions; (d) succession rights to certain family members upon the death or permanent vacatur of the tenant of record; and (e) the right to repairs or continued level of services.
The decision garnered extensive publicity. For instance, on January 7, 2010, a Financial District local and widely distributed weekly newspaper, Downtown Express, published an article entitled “5,000 Financial District Apartments Could be Eligible for Rent Regulation.” Significantly, the article listed the address, number of apartments, and amount of tax breaks of the 16 buildings in the Financial District receiving benefits under the 421-g program. On April 27, 2010, the New York Times published an article entitled, “A Surprise on Wall Street: Luxury Rentals May Benefit from Stabilization.” See also, The Real Deal article, entitled “Thousands of FiDi Apartments Could Be Re-Regulated After Court Ruling on 37 Wall Street”, published on January 8, 2010; and Gothamist, “Swanky Wall Street Building Could Get Rent Controlled”, published on April 28, 2010. There were also widespread television news coverage of the decision.
Recognizing that rent stabilization coverage promotes a vibrant and stable community, local elected officials have also attempted to disseminate information about the decision to their constituents residing in the Financial District. State Senator Daniel Squadron organized a forum in January 2010, which attorneys at Himmelstein, McConnell, et al. participated in. Paul Newell, a Democratic District Leader, has spearheaded an outreach to organize tenants in the Wall Street area to pursue rent stabilization coverage. Tom Goodkind, Chairman of Community Board 1’s Housing Committee regularly convenes meetings on 421-g and rent stabilization.
The mystery is that nearly four years after the well-publicized decision and these organizing efforts, tenants in buildings receiving 421-g benefits have shown little interest in securing rent stabilization coverage. According to a recent article in the Wall Street Journal, the number of tenants who have filed a complaint, request to the New York State Homes and Community Renewal, or otherwise sought rent stabilization protection is 10.[3]
Possible reasons for this lack of interest abound. One possible explanation is simply demographics: Many of these residents are young, recently out-of-college, who do not intend to remain in their apartment for long and move frequently.
Another explanation focuses on the housing market in the Financial District: Rent has not yet heated up. Landlords therefore have not sought extravagant and speculative rent increases from their tenants. But once it does, owners will not be so restrained, and tenants faced with such disruptive practices will awake from their slumber.
Still another explanation points to the changing labor market for these tenants: it is believed that many work in fluid job markets, which require them to move often. To these tenants, the stability offered by rent stabilization is not important to them.
Whatever the reason, the longer tenants wait to secure rent stabilization coverage, the more difficult, if not impossible, it becomes to do so in the future. The tax breaks on many of the buildings have either already expired[4], or will soon expire[5]. Moreover, waiting any longer to seek rent protection will also preclude tenants from securing rent reductions in the future. The statute of limitations on a rent overcharge claim is four years. In other words, if a tenant challenges the monthly rent, DHCR or the Court will determine the legal rent based on an examination of the rent history, but cannot look beyond the four years immediately prior to the tenant’s complaint.
Serge Joseph
[1] Rent Stabilization Law of 1969; ETPA;
[2] See, Matter of 89 Christopher v. Joy, 35 NY2d 213, 360 NYS2d 612, 318 NE2d 776 (1974) (Brietel, C.J.); City of New York v. New York State Division of Housing and Community Renewal, 97 NY2d 216, 739 NYS2d 333, 765 NE2d 829 (2001) (Kaye, C.J.).
[3] Wall Street Journal, October 4, 2012, “Interest Lags in A Rare Rent Break”.
[4] Expired on June 1, 2010: 45 Wall Street;
Expired on June 1, 2011:200 Water Street; 71 Broadway, 200 Water Street; 71 Broadway;
Expired on June 1, 2012: 110 Greenwich Street; 17 John Street; 21 West Street; and 75 West Street
[5] Will expire on June 1, 2013: 53 Park Place; and
Will expire on June 1, 2014: 85 John Street.
