Deregulated J-51 Tenants Can Pursue High-Rent Vacancy Increase Claim

Facts: Deregulated tenants of Peter Cooper Village/Stuyvesant Town housing complex sued landlord, claiming that landlord improperly deregulated their apartments. The complex had been rent stabilized since 1974. In 1992, prior landlord obtained New York City J-51 program tax benefits for improvements made to the buildings, and landlord would continue to receive J-51 tax abatements until 2017. In recent years, when apartments became vacant, and the next legal rents were $2,000 or more, landlord gave new tenants deregulated leases. Tenants claimed that this violated the exception for J-51 units contained in the Rent Stabilization Law’s high-rent vacancy deregulation provisions. Landlord, relying on the DHCR’s 2000 Rent Stabilization Code amendment, claimed that the exception applied only to apartments subject to rent stabilization solely due to J-51. Landlord argued that the apartments were properly deregulated under the high-rent vacancy provisions of the Rent Stabilization Law. The court ruled against tenants and dismissed the case. Tenants appealed.

Court: Tenants win. Rent Stabilization Law Sections 26-504.1 and 26-504.2 bars high-rent deregulation of apartments if they are subject to rent stabilization “by virtue of” J-51. Landlord argued that this meant that only apartments subject to rent stabilization “solely” by virtue of J-51 were exempt from high-rent vacancy deregulation. Landlord claimed that the provision didn’t apply to the housing complex, because it had been rent stabilized for 18 years before receiving J-51 benefits. Landlord also pointed out that the DHCR had interpreted the law in the 2000 code amendment and in a 1996 Fact Sheet in the same way that landlord did. But the meaning of the law required no special expertise by the DHCR, so the court wasn’t obligated to follow the DHCR’s interpretation. The plain meaning of the “by virtue of” language in the law meant “because of” or “by reason of.” It didn’t mean that only a single cause or reason had to exist for the J-51 exception. And it was irrational to treat apartments subject to rent stabilization solely by virtue of J-51 differently than J-51 units also otherwise subject to rent stabilization.

Roberts v. Tishman Speyer Properties, L.P.: NYLJ, 3/11/09, p. 26, col. 1 (App. Div. 1 Dept.; Gonzalez, PJ, Nardelli, Acosta, DeGrasse, JJ)