HMGJ Wins Big For Downtown Manhattan Tenants At The Court Of Appeals

Tenants entitled to rent stabilization status, rent refunds and rent reductions

Thousands of downtown Manhattan tenants will be covered by Rent Stabilization, exempt from deregulation and entitled to rent refunds and reduced rents thanks to a 6-1 win at the Court of Appeals on June 25, 2019, after ten years of litigation. Tenants at 50 Murray Street and 90 West Street were represented by HMGJ partner Serge Joseph and Robert Smith, a former associate judge of the Court of Appeals, now a partner at Friedman Kaplan Seiler & Adelman in Manhattan. Judge Smith argued the appeal.

The Court reversed two Appellate Division, First Department decisions which had held that tenants in apartments made rent stabilized by virtue of their buildings’ participation in the “421-g” tax benefit program were subject to high rent vacancy deregulation. The 421-g tax benefit program was adopted in 1995 as part of a plan to encourage revitalization of downtown Manhattan through conversion of commercial buildings to residential use. In exchange for the tax benefits, developers agreed to make the new apartments Rent Stabilized.

The Court relied upon what it found to be the unambiguous language of the 421-g statute which states that such apartments remain subject to rent stabilization as long as the building is in receipt of the tax benefits. “The legislature’s intention, as reflected in the language of the statue at issue here, is clear and inescapable.”

The Court rejected the Owners’ argument that being subject to rent regulation included being able to deregulate. The Court also rejected the Owners’ argument that it should consider what it called “legislative history,” a letter penned by Mayor Rudolf Giuliani read into the record during the debate on the law by Senator Joseph Bruno, finding that “the Mayor’s letter does not serve to alter the language of the statute.”

The decision will result in thousands of downtown Manhattan tenants having the protections of rent stabilization as well as refunds and reduced rents. The decision comes one week after the State Legislature, recognizing the heavy toll taken on tenants and communities by decades of deregulation, passed the far-reaching rent reforms.

“It has been a very long and arduous fight. We look forward to working with downtown tenants to ensure that as many tenants as possible benefit from the Court’s decision which confirms that the primary goals of the 421-g statute were inarguably to increase the affordable housing stock in downtown Manhattan, and create a stable and thriving residential community, both of which are best served or met by extending rent stabilization coverage to all apartments in buildings receiving 421-g tax benefits” said Mr. Joseph.

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