Building Receiving 421-g Tax Benefits Not Subject to Luxury Deregulation

Tenants in a building that received Real Property Tax Law (RPTL) 421-g tax benefits sued landlord, and asked the court to declare that they were rent stabilized. The court ruled for tenants. Landlord appealed, and the lower court decision was reversed. Tenants then appealed to New York's highest court and won.

Apartments in 421-g buildings, which were converted from office space to residential use, were not subject to the luxury deregulation provisions of the Rent Stabilization Law. The Appellate Division had reasoned that most, if not all, apartments in 421-g buildings would never be rent stabilized because initial rents were set at or above deregulation thresholds. But the Court of Appeals found that the legislative intent was found in the language of the 421-g statute. The law stated that during "the entire period for which the eligible multiple dwelling receiving" 421-g tax benefits, it "shall be fully subject to control" under the Rent Stabilization Law (RSL), "notwithstanding the provisions of that regime or any other local law" that would remove dwelling units from regulation. The dissenting judge agreed with landlord that the "nothwithstanding" clause in the law was intended to import into RPTL 421-g(6) the entire RSL, including those provisions that would remove the units from control. But the high court's majority disagreed and noted that 421-g(6) provided a mechanism for landlords to "decontrol" units that would not otherwise have been subject to such control after the tax benefits ended.

Kuzmich v. 50 Murray Street Acquisition LLC: 2019 NY Slip Op 05057 (Ct. App.; 6/25/19; Stein, Rivera, Fahey, Garcia, Wilson, Feinman, JJ; DiFiore, CJ [dissent])