J-51 Apartments Improperly Deregulated

Facts: Deregulated tenants of Peter Cooper Village/Stuyvesant Town complex sued, 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 that would continue to 2017 for improvements made to the buildings. 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 Rent Stabilization Law's exemption from high-rent vacancy deregulation for apartments subject to J-51. 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 and that the apartments were properly deregulated. The court ruled against tenants and dismissed the case. Tenants appealed, claiming that the law barred high-rent deregulation of all apartments subject to rent stabilization “by virtue of” J-51. Landlord argued that this exception applied only to apartments that were subject to rent stabilization “solely” by virtue of J-51. Landlord pointed out that the J-51 exception didn’t apply because the complex 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. The intermediate appeals court ruled for tenants and refused to follow the DHCR's interpretation of the law. Landlord then appealed to New York's highest court.

Court: Landlord loses. Although landlord now argued that the exception to luxury deregulation applied only to units that "became or become" subject to rent stabilization "by virtue of receiving tax benefits pursuant to" the J-51 law, this interpretation was in conflict with the most natural reading of the law. Rent Stabilization Law Sections 26-504.1 and 26-504.2 bar high-rent deregulation of apartments if they are subject to rent stabilization “by virtue of” J-51. And although landlord's interpretation now was different from the DHCR's, the DHCR's interpretation of the law also was incorrect and need not be followed.

Roberts v. Tishman Speyer Properties, L.P.: NYLJ, 10/23/09, p. 25, col. 3 (Ct. App.; Ciparick, Smith, Pigott, Jones, JJ; Read, Graffeo, JJ (dissenting))