Co-op Units Revert to Rent Stabilization After Foreclosure

Landlord Federal Home Loan Mortgage Corp. sued for a judgment that foreclosure of a co-op building's mortgage didn't result in the termination of the building's exemption from rent stabilization. Landlord claimed this was unconstitutional. The NYS Court of Appeals ruled that under state law, co-op tenants' apartments reverted to rent stabilization if the building's mortgage was foreclosed. Landlord appealed. A federal court again ruled against landlord. The reversion of the apartments to rent-stabilized status didn't constitute a taking of landlord's property in violation of the constitution. Landlord was still entitled to collect rent-stabilized rents from tenants.

Federal Home Loan Mortgage Corp. v. DHCR: U.S. Dist. Ct. Dckt. No. 947677, 1996 U.S. App. LEXIS 10054 (5/2/96) (2d Cir.; Lumbard, Winter, Batts, JJ) [4-page document]