Loft Board Hearing Appearance by Michael Kozek

On February 14, 2019, Michael Kozek appeared before the Loft Board to provide its members with expert testimony and information on the question of primary occupancy and occupant status in considerations of legal coverage for tenants in loft units. You can watch the entirety of the proceedings above.

Website Launch for Ween & Kozek

Excited to announce the launch of our new website, weenkozek.com!! Many thanks to Zarina Hashmi for the beautiful artwork, and to Doug Adesko for incredible photographs. http://weenkozek.com Check it out if you have a moment! weenkozek.com

Michael P. Kozek, in Ask Real Estate section, New York Times

http://www.nytimes.com/2014/07/06/realestate/questions-about-noise-appliances-and-common-charges.html?ref=realestate&target=comments&_r=0#commentsContainer

Michael P. Kozek's Interview On Loft Law

In a recent broadcasting for Bushwick's Bel-Air radio station called "Loft Law & Order," Michael P. Kozek explains how his personal interest in Loft Law developed, and discusses the prominent legal issues and potential remedies surrounding Loft Law. Check out the full interview: http://giothewriter.com/loftlaw/

Recent Supreme Court Decision Gives A Co-Tenant A Means Of Compelling A Noncontributing Co-Tenant To Pay Rent

A long frustrating problem that co-tenants have faced is what to do if their co-tenant/roommate refuses to pay their portion of the rent for an apartment.  If two co-tenants share an apartment, and one bails on the rent, the other remains liable for the entire rent, and is faced with the unenviable decision of whether to refuse to pay the non-paying co-tenant’s rent and face eviction for nonpayment of rent, or to simply pay up and hope that the co-tenant reimburses him or her.  The choice is necessary because the law is clear that co-tenants are jointly and severally liable for the entire rent.  Thus, whether one or both of the tenants pay the rent is not the landlord’s problem or responsibility.   According to a March 2014 decision by the Supreme Court, New York County, there is a solution to this problem.

In Stellweg v. Welch & N.H. Lyons, Inc., 2013 WL 6702832, 2012 N.Y. Slip. Op. 22157(U) (Trial Order) (Sup. Ct., NY Co.) the co-tenant/Plaintiff Stellweg, who by oral agreement with her co-tenant/Defendant Welch paid one-half of the rent on a shared apartment, was faced with this very issue.  Defendant Welch began to withhold such rent after being prohibited from entering the apartment by virtue of an order of protection from the New York City Criminal Court.  Stellweg commenced an action in the Supreme Court, New York County, seeking to partition her co-tenancy interest from that of Defendant Welch, and additionally named the owner as a defendant.  The owner commenced a separate proceeding in housing court seeking to evict Stellweg and Welch for nonpayment of rent.  That summary nonpayment eviction proceeding was consolidated with the Supreme Court action on Stellweg’s motion, which was granted on the condition that Stellweg pay Welch’s arrears.  Stellweg thereafter moved to recover such monies from Welch and to compel Welch to pay his half of the rent on an ongoing basis.   

The Court (Hon. Anil C. Singh, J.S.C.) granted Stellweg’s motion, holding that an implied in law contract existed between the co-tenants and that each tenant had “an unambiguous legal obligation to pay rent.”  Generally, a contract is void unless it is both in writing and signed by the parties to be bound.  N.Y. Gen. Oblig. Section 5-701(a).  Notwithstanding, a contract may be implied, either in law or in fact.  22A N.Y.Jur.2d Contracts Section 522.  A contract implied in law is “an equitable cause of action premised upon unjust enrichment, which is founded not on a contract or agreement but rather on an obligation that the law creates in the absence of an agreement when one party possesses what in equity and good conscience the party ought not to retain and that belongs to another.”  Id.

 In Stellweg, the Court determined that, as a matter of equity, it would be “unjust to relieve [the co-tenant] of his obligation to pay his share of the back rent and his obligation to pay one-half of the rent going forward.” The co-tenant was prohibited from entering the premises completely due to his own wrongdoing.  Moreover, the occupying co-tenant was already physically harmed by the co-tenant, and to be, in addition, financially harmed would not be an equitable outcome.

The Court explained that “an implied contract of this nature makes it possible for [an occupying tenant] to remain in the loft, while preserving [an excluded tenant’s] right to return to the loft when the Order of Protection expires.”  Thus, despite the fact that the co-tenant was not residing in the apartment, the Court held that he was still liable for rent that accumulated during such time.

This decision is a recent success for tenants who have been unjustly deprived of their co-tenant’s rent contribution.  Ms. Stellweg was represented by your author’s firm, Ween & Kozek, LLP.

-Written by Michael P. Kozek and Jessica L. Drury

Mayor de Blasio’s Decision to Increase the Income Threshold for the Senior Citizen Rent Increase Exemption Program will Benefit Numerous Additional Seniors Residing in NYC.

Senior Citizen Rent Increase Exemption (SCRIE), a program administered by the NYC Department of Finance, provides protection from rent increases for low-to-moderate income seniors living in NYC  rent-regulated apartments.  On July 1, 2014, the number of senior citizens eligible to apply for SCRIE will substantially increase.

The increase is the result of Mayor de Blasio’s recent decision to sign legislation increasing the household income eligibility cap from $29,000 to $50,000. If a tenant qualifies for SCRIE, his monthly rent will be frozen at its current level and be exempt from future rent increases. In addition, the City of New York will give the qualifying tenant’s landlord a property tax credit which is equal to the amount of the qualifying tenant’s future rent increases. 

In addition to the income eligibility condition, five additional requirements must be met: (1) the tenant must be at least sixty-two years old; (2) the apartment must be rent controlled, rent stabilized, or hotel stabilized; (3) the tenant must be named on the lease or the rent order or have been granted succession rights to the apartment; (4) the tenant must live in the apartment as his primary residence; and (5) the tenant must spend more than one-third of his monthly household income on rent.

            If the tenant is approved, the tenant will receive an approval letter with the amount of the tenant’s “frozen rent,” the amount the Department of Finance will be crediting the tenant’s landlord (Tax Abatement Credit, commonly referred to as TAC), and when the tenant’s SCRIE benefit period begins and ends.  The tenant’s landlord will also receive an approval letter.

If it takes a few months for the SCRIE unit to approve the tenant’s SCRIE application, the landlord will receive a retroactive SCRIE credit, which is required to be credited to the tenant for the rent payments made by the tenant.  For example, if the SCRIE unit receives the tenant’s application on May 15, 2014, but does not approve the application until August 15, 2014, then the tenant’s SCRIE benefit starts on June 1, 2014.  If the tenant’s application is denied, the tenant can fill out an appeal form and send it back to the SCRIE unit, however, the appeal must be postmarked no later than sixty days from the date of the denial letter.

            If the tenant is approved, the approval letter will indicate when the tenant’s SCRIE benefit period ends.  The landlord is legally required to continue the tenant’s SCRIE benefit for six months after the tenant’s SCRIE benefit expires, even if the tenant is not yet renewed.  If the tenant wishes to continue the SCRIE benefit after the end date, the tenant must submit a renewal application form.  If the SCRIE unit does not receive the renewal application form before the end of the six-month grace period, the tenant must start the process anew and submit the SCRIE Initial Application form.

The SCRIE Initial Application form can be found at nyc.gov/finance.  The application and all the required documents should be mailed to the following address:  New York City Department of Finance, SCRIE Unit, 59 Maiden Lane, 22^nd Floor, New York, New York 10038.

Written by Michael Kozek and Jessica Drury

More on climbing rents in NYC

http://online.wsj.com/article/SB10001424052702303703004577476980984617266.html?mod=WSJ_NY_MIDDLELEADNewsCollection#articleTabs%3Darticle

http://indypendent.org/2012/06/13/soaring-rents-spark-calls-expand-tenant-protection

Tenants & Neighbors With Michael P. Kozek, Esq Part 1

The Appellate Division, First Department Gives the "Substantial Rehabilitation" Exemption A Makeover

Background

     The sanctity of the class of housing accommodations subject to rent stabilization has long been protected by New York State courts in accordance with expressly declared legislative policy.  Decades ago, the New York State legislature recognized and declared that there was a statewide emergency regarding the cost, availability and quality of rental housing.  The remedy to this emergency was expansion of rent regulation, thereby balancing the bargaining power between landlords and tenants, and securing tenants from eviction from their homes at their landlords' will.  Landlords suddenly had to deal in good faith with their tenants, and maintain the condition of regulated housing accommodations.  Rent regulation served a significant public interest.

    Though building owners have long complained that rent regulation is an undue interference with their property rights, the legislature has provided numerous exemptions from rent regulation to address such concern.  Of them, the "substantial rehabilitation" exemption rewards an owner's investment in its property by permitting the residences therein to become free market.  The exemption's rationale is that by investing in the quality and/or quantity of the housing it provides, the owner is contributing to elimination of the statewide housing emergency.

Strict Interpretation Of The "Substantial Rehabilitation" Exemption

     The phrase "substantial rehabilitation" was left undefined for many years.  Owners therefore sought to take advantage of it by making cosmetic improvements to their regulated properties and claiming that the building had been "substantially rehabilitated."  Similarly, owners of commercial properties who desired to convert them to free market residential buildings would perform the bare minimum amount of work required to legalize the building for residential use, and claim that the building should be exempt because it had been "substantially rehabilitated."

     Recognizing these efforts, Courts crafted a rule that the "substantial rehabilitation" exemption should be strictly construed against landlords.  The rule flows from the legislature's policy declaration that rent regulated housing is to be protected.  To allow ease of exemption would be to undermine the whole purpose of enacting rent regulation in the first place.

    Courts addressed owners' threat that they would not invest in their properties absent liberal application of the exemption by noting the availability of three alternative statutory means of recouping such investments without eliminating rent regulation.  First, owners could increase regulated rents up to 6% per year for "Major Capital Improvements they have undertaken in the building.  Second, 1/40th of the cost of individual apartment improvements could be applied to increase the regulated rent.  Finally, owners could establish a so-called "First Rent" at the market rate where they performed significant alterations to the structure of an apartment.  Given the availability of these measures, strict construction of the "substantial rehabilitation" exemption was justified.

The DHCR's Attempt To Define "Substantial Rehabilitation"

    The problem remained, however, of how to define what constituted a "substantial rehabilitation."  The statutes were silent, thereby leaving courts to sketch the contours of the exemption on an ad hoc basis.  The caselaw that developed was all over the place.  Contributing to the confusion, in 1992, the Appellate Division, First Department, came down with a decision in Eastern Pork Products Co. v. DHCR, 187 A.D.2d 320, 590 N.Y.S.2d 77, wherein the Court stated that a "commonly understood" meaning should be ascribed to the phrase "substantial rehabilitated."

    The New York State Division of Housing and Community Renewal (DHCR) stepped in to fill the breach.  The DHCR was given the statutory mandate to interpret and implement the rent regulatory laws in accordance with the legislature's intent.  The DHCR therefore promulgated a Rent Stabilization Code provision that attempted to define the term "substantial rehabilitation."  It followed that up in 1995 by issuing "Operational Bulletin" 95-2, which provided further guidance as to the agency's interpretation of the exemption.  Amongst other elements, O.B. 95-2 requires that in order to constitute a "substantial rehabilitation," the "rehabilitation" must involve replacement of at least 75% of all building-wide and apartment systems, such as plumbing, heating, gas, electric, and the like.  In order to demonstrate that this work had actually occurred, landlords were required to provide documentary proof, including architect's drawings, approved plans, contractor's statements, photographs and proof of payment.  It was the owner's burden; without adequate proof, the exemption simply could not be applied.

The Courts Adopt DHCR's Interpretation Of The "Substantial Rehabilitation" Exemption

     After the promulgation of O.B. 95-2, Courts repeatedly adopted and approved of it as providing the substantive requirements for establishing satisfaction of the "substantial rehabilitation" exemption.  In H.M. Village Realty v. DHCR, 304 A.D.2d 346, 758 N.Y.S.2d 32 (1st Dep't, 2003), the Appellate Division, First Department expressed that O.B. 95-2 conformed with its prior decision in Eastern Pork.  Numerous other Appellate Division First Department cases agreed, including Steffey v. DHCR, 276 A.D.2d 407, 715 N.Y.S.2d 835 (1st Dep't, 2000), Woodcrest Mgmt. Corp. v. DHCR, 2 A.D.3d 172, 767 N.Y.S.2d 774 (1st Dep't, 2003), and Pavia v. DHCR, 22 A.D.3d 393, 802 N.Y.S.2d 361 (1st Dep't, 2004).  It was therefore clear to tenants, owners, litigants and the lower courts, that in determining application of the "substantial rehabilitation" exemption, the operative standard was that provided under O.B. 95-2.   That is, until recently.

     In the Appellate Division, First Department's recent decision in 22 CPS Owner, LLC v. Carter, 84 A.D.3d 456, 923 N.Y.S.2d 450 (1st Dep't, 2011), the Court appears to have changed course and reverted the state of the law back to the pre-O.B. 95-2 days of uncertainty.

The Appellate Division, First Department's Departure From Operational Bulletin 95-2

    In 22 CPS, at issue was whether a building located on Central Park South that had been converted in 1980 from primarily commercial to primarily residential use, creating 23 new residential units, was "subtantially rehabilitated," thereby exempting the units from rent stabilization coverage.  In the lower court, the landlord had asserted, without any proof, that the building was exempt from rent stabilization coverage on any basis.  The tenants argued that pursuant to the Emergency Tenants Protection Act of 1974, the building was covered because it was a pre-1974 building containing more than 6 residential units that had never been "substantially rehabilitated."  Despite the lack of any evidence as to the extent of work performed in the building during the conversion process, the lower court held that it was exempt from coverage.

   On appeal, the tenants argued that the lower court erred in determining that the building had been substantially rehabilitated because there was no proof as to the extent of work performed during the conversion. The mere fact of conversion of use, from commercial to residential, does not by necessity lead to the conclusion that sufficient work was performed to satisfy O.B. 95-2.  The tenants argued that the governing standard for determining the exemption is O.B. 95-2, which, amongst other elements, requires that at least 75% of all building-wide and apartment systems be completely replaced.  A conversion in use could be accomplished without meeting O.B. 95-2's standard.  They further argued that it is well established that it is the landlord's burden to prove, upon admissible evidence, the extent and actuality of the work performed, and that as a matter of policy, the exemption has been strictly construed against landlords in order to effectuate the legislature's intentions.  Thus, they concluded, it was erroneous for the lower court to liberally apply the exemption without requiring submission of any proof regarding whether the work satisfied O.B. 95-2.

     In opposition, the building owner argued that because there was a conversion from commercial to residential use, the standards providing in O.B. 95-2 need not be satisfied.  By the owner's logic, the mere facts of a change in use and creation of new residential units were alone sufficeint to constitute a "substantial rehabilitation," without any consideration of the extent of work performed.  The Court, in denying the tenants' appeal, adopted the owner's argument wholesale.

     In a unanimous decision, the Appellate Division, First Department held that despite the lack of evidence regarding the extent of the "rehabilitation" of the building, the change in use was alone sufficient to apply the "substantial rehabilitation" exemption to the building.  The Court cited its 1992 decision in Eastern Pork and other pre-O.B. 95-2 cases as supporting its holding.  The Court, however, disregarded O.B. 95-2 in its entirety, as well as the several Appellate Division, First Department cases that had adopted it as the standard for determining application of the exemption.

Implications Of The Appellate Division, First Department's Holding In 22 CPS

     22 CPS indicates a return to uncertainty for rent regulated tenants, and a trend towards liberal application of exemptions for rent stabilization by the courts.  Owners now have a license to apply for the exemption solely upon a claim that they have performed a change in use in their buildings, and need not demonstrate whether any work was performed, nor the extent of work performed.  In so construing the exemption, the Court eliminated the "substantial rehabilitation" exemption's built-in incentive to owners to invest significantly in their properties, as the bare minimum amount of work appears to be satisfactory.  By the same token, the Court may eventually render the Major Capital Improvement and individual apartment increases obsolete.  Owners have no incentive to apply for such increases, when they can simply apply for outright exemption upon the same amount of work.  In sum, the Appellate Division, First Department's decision in 22 CPS will have substantial negative impacts upon the class of rent stabilized housing in New York City.

Thanks for reading.  Be well, and always know your rights.


Postscript:

Your author's lawfirm, Jeffrey S. Ween & Associates, represents the tenants in 22 CPS, LLC v. Carter.  The tenants are currently seeking leave to appeal to the New York State Court of Appeals.

2011 Extension of New York State's Rent Regulation Laws

Though inadequate in many respects, the New York State legislature reached a deal on extending and expanding the rent regulation laws.  As stated in this press release http://assembly.state.ny.us/Press/20110624c/, the highlights of the amendments are:

(1) Extension of the rent regulation laws for another four years [There is simply no justification for not making them permanent or, at the very least, extending them for a greater period of time--the legislature is now set up for another fight four years from now, continuing the uncertainty for rent regulated tenants];

(2) The threshold for high income deregulation was increased to $200,000.00 from $175,000.00 in gross adjusted income per household;

(3) The threshold for vacancy deregulation was increased to $2,500.00 from $2,000.00 per month;

(4) The percentage of the cost of individual apartment improvements that a landlord can apply to increase the legal rent was decreased from 1/40th to 1/60th [The law leaves intact the egregious allowance that landlords may apply these increases without any evidence of their expenditures or approval by the Division of Housing and Community Renewal]; and,

(5) Building owners are only permitted one vacancy increase per year.

New York State Tenants' Rights Guide

If you are a tenant wanting to know more about your rights, here is a great place to start: http://www.oag.state.ny.us/bureaus/real_estate_finance/pdfs/tenants_rights_guide.pdf

Landlords May Not Collect Rent From Loft Law Tenants During Legalization

       After a long hiatus, I am returning to my idle blog.  To my loyal readers, I hope you haven't abandoned me.

       As I have previously discussed, the New York City Loft Law was enacted to remedy hazardous, illegal residential occupancies of commercial units by requiring landlords to obtain certificates of occupancy for such residential use.  The statute, Multiple Dwelling Law Article 7-C (the "Loft Law"), encourages landlords to expeditiously legalize such units by limiting their right to collect rent from tenants who are subject to the Loft Law.  MDL Section 302 (1) (b) thus provides:

"No rent shall be recovered by the owner of such premises for said period [i.e., the  legalization period], and no action or special proceeding shall be maintained therefore, or for possession of said premises for nonpayment of such rent."

       While MDL Sec. 302 (1) (b)'s language sounds unforgiving to landlords, its apparent blanket prohibition is not without exception.  MDL Secs. 284 (1) and 285 provide that landlords of buildings subject to the Loft Law (known as "interim multiple dwellings") may be permitted to collect rent during the legalization process despite the lack of a certificate of occupancy if they comply with certain applicable legalization timetables.  

       Without getting into too much detail, there has been much litigation over this statutory scheme, particularly where both the landlord and the tenants have alleged that the other has impeded the legalization process.

       In the recent case Jo-Fra Props., Inc. v. Leland Bobbe, --- N.Y.S.2d ---, 2010 WL 5113189, N.Y.L.J., Dec. 23, 2010, at 35, col. 1 (1st Dep't, 2010), the Appellate Division, First Department had the opportunity to revisit this statutory scheme.  In Jo-Fra, the landlord brought an ejectment action against Loft Law covered tenants of several buildings it owned on West 28th Street in Manhattan.  The landlord also sought alleged past due use and occupancy from the tenants and attorney's fees.  The tenants moved to dismiss the use and occupancy claim by summary judgment arguing that the landlord was barred from collecting use and occupancy pursuant to MDL Secs. 302 and 285 (1) because it had not completed legalization of the building within the timetables set forth under the Loft Law.

      On the landlord's appeal of the lower court's dismissal of its use and occupancy claim, the Appellate Division, First Department unanimously affirmed.  The Court found that during the 20-year period from 1984, when one the buildings was first registered with the Loft Board, until 2004, the landlord had not performed any of the required steps for legalizing the building.  While the tenants of the unregistered buildings did not file an application for coverage until 2004, and the landlord did not register the unregistered buildings until 2007, the Court held that there was no factual dispute that all of the buildings were at all times covered under the Loft Law, despite the lack of registration.

      The Appellate Division, First Department, went on to reiterate the long standing, well established requirement under the Loft Law that landlords are only permitted to collect rent from covered tenants during the legalization despite the lack of a certificate of occupancy if they comply with MDL Sec. 284 legalization timetables.  The fact that the owner had belatedly taken steps to legalize the building that did not meet MDL Sec. 284's deadlines, and that several of the buildings were not registered until 2007, was no basis to relieve the landlord of the strict rent collection prohibition.  As the Court stated, the Loft Law is not permissive in nature; it places a mandatory obligation upon a owner to legalize the building within the statutory timeframe upon pain of rent forfeiture.

     Thanks for reading.  Be well, and always know your rights.

     

Tenants seek legal recourse over bedbugs | The Real Deal | New York Real Estate News

Tenants seek legal recourse over bedbugs | The Real Deal | New York Real Estate News

Want to Know If or Report that Your Building Has Bedbugs?

Click this link: http://bedbugregistry.com/metro/nyc

Twitter Account

To my readers,

You can now follow me on Twitter regarding all things related to NYC landlord-tenant law: http://twitter.com/MPKozek

RENT STABILIZATION UNDER THE J51 TAX BENEFIT PROGRAM: SEGMENT 1

GENESIS OF THE J51 TAX BENEFIT PROGRAM

In 1955, the New York State Legislature enacted Real Property Tax Law (RPTL) § 489, which authorized cities to promulgate local laws that would provide tax incentives to multiple dwelling owners for rehabilitating their properties or converting them from commercial to residential use.  The legislature’s intent was to encourage an increase in the creation of affordable and safe housing.

New York City followed the state legislature’s lead in enacting Administrative Code (Admin. C.) § J51-2.5, now codified as Admin. C. § 11-243, et seq.  The statute contains what has become more commonly known as the “J51” program.  The J51 program incentivizes building owners to renovate their properties by giving them property tax benefits.  There are two elements of tax benefits: (1) an exemption from annual increases in the property’s assessed taxable value; and, (2) an abatement of the annual property tax assessment for the covered property.

rent stabilization as a quid pro quo for TAX subsidization

As a condition of receiving the tax benefits, a sort of quid pro quo, the J51 program mandates that owner of buildings that receive such benefits may only continue to take advantage of the tax subsidization if all of the dwelling units in the covered building are subject to the Rent Stabilization Law, Rent Control Law, or Private Housing Finance Law for the entire tax benefit period.  Over recent years, dispute arose between tenants and owners regarding whether units that became subject to rent stabilization by virtue of the J51 program could be “luxury” deregulated during the J51 period.  As set forth in greater detail below, owners have unequivocally lost that argument.

            The issue of what happens after the tax benefits expire is a bit trickier.  Buildings that were already subject to rent stabilization on another basis when the tax benefits began are unaffected by the expiration of such benefits—rent stabilization will continue on that other basis after and despite the expiration of the J51 tax benefit period. 

For dwellings that become rent stabilized solely as a result of the tax benefits, they will continue to be rent stabilized after the expiration of the benefit period unless (and this is a BIG UNLESS) the landlord complies with certain statutorily required notice provisions: the initial lease, and all renewal leases, must contain a prominent notice, in twelve point type, informing the tenant that the unit shall become deregulated upon the expiration of such benefits, and of the approximate date that the tax benefits are set to expire.  Absent strict compliance with this statutorily required notice provision, a unit that became subject to rent stabilization solely as a result of the building’s receipt of J51 benefits, will continue to be subject to rent stabilization even after the expiration of such benefits.

the impact of J51 on luxury deregulation of rent stabilized units

            Recently, an ambiguity in the J51 statute that owners relied upon to deregulate units was resolved by the New York State Court of Appeals, the state’s highest court.  The case was called Roberts v. Tishman Speyer Properties, L.P., and involved the enormous Peter Cooper/Stuyvesant Town Complex in Manhattan.  The ambiguity language in the J51 statute that the Court had to deal with, and which would have a substantial impact on the stock of rent stabilized housing throughout New York City, was the phrase “by virtue of.”  But first, a little background.

            Under the Rent Stabilization Law, there are provisions for high-rent and high income deregulation of rent stabilized units that is commonly known as “luxury” deregulation.  A rent stabilized unit can be “luxury” deregulated (1) if it becomes vacant and has a legal registered rent of $2,000.00 at the time of the vacancy; or, (2) if, for two consecutive years, it has a rent of at least $2,000.00 per month and is occupied by persons who have an annual adjusted gross income of $175,000.00.

            There is, however, an exception from luxury deregulation for units that become subject to rent stabilization under the J51 tax benefit program.  Section 26-504.1 of the Rent Stabilization Law states that luxury deregulation does not apply to units that become rent stabilized “by virtue of” receiving J51 benefits.  Landlords throughout the city took advantage of this language, alleging that it meant solely by virtue of the receipt of J51 benefits.  They took the position that if the unit would have been regulated for any other reason in addition to the J51 benefits, the unit could be luxury deregulated.

            In Roberts v. Tishman Speyer, tenants challenged the owners’ interpretation, and the Court of Appeals ultimately resolved the issue of whether “by virtue of,” means “solely by virtue of.”  Current and former tenants of the Peter Cooper Village/Stuyvesant Town Complex sued their landlord alleging that they had been improperly luxury deregulated because their buildings had received J51 tax benefits.  Their landlord countered, arguing that the receipt of J51 tax benefits did not exempt the tenants’ apartments from luxury deregulation because the exemption only applies where the receipt of J51 benefits is the sole reason for regulation.

            The Court of Appeals unequivocally rejected the landlord’s argument, holding that luxury deregulation is always inapplicable when a building receives J51 tax benefits; i.e., regardless of whether a unit would have been regulated for some other reason, it is exempt from luxury deregulation.  The Court reasoned that not only does the ordinary meaning of the phrase “by virtue of,” not mean that it is the single or only cause, but that as a matter of statutory interpretation, the RSL makes no distinction between whether the property was subject to rent stabilization solely due to the building’s receipt of J51 benefits, or for some other reason.

            The law of the land after Roberts v. Tishman Speyer is that a unit subject to rent stabilization by virtue of the landlord receiving J51 tax benefits, without regard to whether the unit would also be subject to regulation for some other reason, is exempt from luxury deregulation.

            The Court of Appeals left undecided a substantial issue, however: whether its decision should be applied retroactively.  Retroactive application could mean that (1) all of the apartments that had been deregulated would fall back into rent stabilization; (2) the rents for those apartments would be rolled back to their legal limits; (3) tenants who had been overcharged would be entitled to repayment of the amount that they were overcharged rent; and, (4) owners could be subject to treble damages (three times the total amount of their rent overcharge) for willfully overcharging their tenants.  Owners of buildings receiving J51 benefits therefore held out hope that the lower court, to which the Court of Appeals remanded this very issue, would hold that the decision was prospective. 

Huge Blow for Landlords Throughout NYC Who Deregulated Units that Were Rent Stabilized under J51

In a blow to landlords throughout NYC, the Supreme Court has ruled that the Court of Appeal's decision regarding luxury deregulation of units that became subject to rent stabilization under the J51 tax benefit program applies retroactively.  The impact of this decision is substantial.  Tenants throughout NYC who were improperly deregulated are now entitled to have their rents rolled back, and return of the amount of rent that they were overcharged.

You can read the decision here:  http://www.nylj.com/nylawyer/adgifs/decisions/080610lowe.pdf

Next week, I will post an article providing a full history of the J51 program, and describing the impact of the Court of Appeals' landmark decision in the Roberts v. Tishman Speyer Properties case.

Identity and Location of the Three Unprotected Industrial Business Zones

As of today, the three Industrial Business Zones that will not be protected under the new Loft Law legislation are North Brooklyn, Greenpoint-Williamsburg, and Maspeth, Queens.

For a description of the IBZ program, see the NYC Economic Development Corp's website here: 
http://www.nycedc.com/FinancingIncentives/TaxExemptions/IndustBusZones/Pages/IBZs.aspx

For maps of the three IBZs, see:
http://www.nyc.gov/html/imb/html/ibz/ibz.shtml

Governor Patterson Expands Loft Law

After a fierce battle between opponents of rent regulation and proponents of ensuring safe housing for a large class of New York City residents, just before midnight on June 21, 2010, Governor Patterson took the brave step of signing into law new legislation that will make the Loft Law permanent, and expand its coverage.

The Loft Law was originally enacted to provide protection to the many illegal residential occupants of commercial units throughout New York City, particularly downtown Manhattan.  In a nutshell, it provided a means by which commercial buildings that were occupied residentially could be brought into code compliance with housing maintenance, health, safety, and fire protection standards.  Not all buildings qualified though.  Only commercial buildings that were occupied residentially by three or more tenants, separately, during the entire window period from April 1, 1980 to December 1, 1981 qualified.  The qualified buildings were termed "interim multiple dwellings" for the period during which they underwent conversion to legal residential occupancy.  After the completion of such conversion, the legal residential units therein were brought into the rent regulation system.  While certain amendments to the Loft Law in 1987 provided expanded protections, those amendments did not provide coverage to any commercial units that were used for residential purposes after 1987.  To the dismay of many New Yorkers, the Loft Law was set to expire this year.

The new legislation has addressed both the Loft Law's limited coverage, and potential expiration.  To alleviate any concerns about the Loft Law's expiration, the new legislation has made the Loft Law permanent.  The new law also expands the Loft Laws coverage to a new class of buildings.  The definition of "interim multiple dwelling" has been amended to include commercial buildings in New York City that were occupied residentially by three or more families, living separately, for 12 months during the window period from January 1, 2008 to December 31, 2009.

Mayor Michael Bloomberg fought hard against the bill, seeking to limit the Brooklyn Industrial Business Zones to which it applies.  Those 16 IBZs, created by Bloomberg to encourage manufacturing in New York City, include Greenpoint-Williamsburg, and North Brooklyn.  Ultimately, only 3 of the 16 IBZs were included, leaving the residential tenants in the other 13 zones without any means of obtaining legal and safe occupancy.

All in all, the new legislation should be considered a great success.

Be well, and always know your rights.