Exemption from Deregulation Continues After J-51 Benefits End

Landlord applied in 2008 for high-rent/high-income deregulation of tenant’s rent-stabilized apartment. The DHCR ruled against landlord, finding that high-rent/high-income deregulation didn’t apply to buildings that became subject to rent stabilization solely as a result of J-51 tax benefits, even after the benefits expired. Landlord appealed and lost. The court and, later, the appeals court found that the DHCR’s decision was reasonable. The building wasn’t rent-regulated until 1977 when landlord obtained J-51 tax benefits. Tenant moved into his apartment in 1984. The J-51 benefits expired in 1990. Landlord argued that, under the appeals court’s decision in Roberts v. Tishman Speyer Properties LP, the luxury deregulation exclusion applied only while a building currently was receiving J-51 benefits. Landlord also pointed out that the Real Property Tax Law Section 421-a tax benefit program specifically allowed for luxury deregulation after the 421-a benefits expired. But the DHCR reasonably rejected the Roberts argument because, in that case, the buildings were still receiving J-51 benefits and the court didn’t address what happened after J-51 expired. Also, the 421-a statute contained different provisions that didn’t apply under J-51 law. In addition, since tenant remained in occupancy after the building’s J-51 benefits ended and none of tenant’s leases had contained a “J-51 rider” informing him that his rent-stabilization status would expire when J-51 benefits ended, tenant remained rent stabilized and wasn’t subject to luxury deregulation.

73 Warren Street, LLC v. DHCR: 2012 NY Slip Op 04820, NYLJ, 6/18/12, p. 18, col. 1, 2012 WL 2140177 (App. Div. 1 Dept.; 6/14/12; Mazzarelli, JP, Catterson, Renwick, Abdus-Salaam, Manzanet-Daniels, JJ)