High-Rent/High-Income Deregulation Doesn't Apply to Buildings Subject to Rent Stabilization Under 421-a After July 2, 1984

Tenant moved into a new building receiving 421-a tax benefits in 1994. In 2008 landlord informed tenant that, when the 421-a benefits expired in 2009, he would no longer be subject to rent stabilization. Tenant asked the DHCR to determine his rent stabilization status. The DRA ruled in 2010 that tenant remained rent stabilized because landlord had failed to attach to each of tenant’s leases and renewal leases a rider stating that the apartment would be deregulated when the 421-a benefits ended and the date when the benefits would expire. Landlord didn’t appeal that decision but filed an application for high-rent/high-income deregulation of tenant’s apartment in 2011 when tenant’s monthly rent reached $2,000. The DRA ruled for landlord based on tenant’s income and rent levels.

Tenant appealed and argued that the DHCR had already ruled in 2008 that tenant remained rent stabilized until he moved out despite expiration of the building’s 421-a tax benefits. The DHCR ruled for tenant and revoked the DRA’s deregulation order. Landlord filed an Article 78 appeal, claiming that the DHCR’s decision was unreasonable and contrary to law.

The court ruled against landlord. Landlord appealed and lost. The appeals court found that the DHCR interpreted the law correctly. Under Real Property Tax Law (RTPL) Section 421-a(2)(f)(i), high-rent/high-income deregulation was available only in buildings that became subject to rent stabilization before July 3, 1984, and didn't apply to buildings that became rent stabilized under 421-a after that date. Under RPTL Section 421-a(2)(f)(ii), those apartments--including tenant’s apartment--could be deregulated at expiration of the 421-a benefits only based on proper lease riders or a vacancy. Rent Stabilization Law Section 26-504.1 also specified that high-rent/high-income deregulation didn’t apply to 421-a buildings except as provided in RPTL Section 421-a(2)(f)(i). 

Tribeca Equity Partners, LP v. DHCR: Index No. 100191/15, NYLJ No. 1202773218984 (App. Div. 1 Dept.; 11/22/16; Mazzarelli, JP, Sweeny, Andrias, Webber, Gesmer, JJ)