J-51 Doesn't Prevent High-Rent/High-Income Deregulation in Co-op Building

Landlord applied in 2005 for high-rent/high-income deregulation of tenants' rent-stabilized apartment. Tenants admitted that their household income exceeded the deregulation threshold for both 2003 and 2004. The DRA ruled for landlord. Tenants appealed, claiming that luxury deregulation didn't apply because the building was subject to 421-a tax benefits. The DHCR ruled against tenants, who sought reconsideration from the DHCR and won. Landlord then filed an Article 78 court appeal, and the case was sent back to the DHCR for reconsideration. The DHCR ruled for landlord. The newly constructed building became rent stabilized in the mid-1970s and the 421-a benefits expired in June 1987. Under RPTL Section 421-a(2)(f)(i), high-rent/high-income deregulation was available after 421-a tax benefit expiration for those apartments that received the benefits before July 3, 1984. The requirement for a 421-a notification lease rider also didn't apply to tenant's apartment since it was under 421-a prior to the effective date of that requirement. The building did later receive J-51 tax benefits and was still receiving them. But the building had converted to cooperative ownership before getting the J-51 benefits. Under 28 RCNY Section 5-03(f)(2)(i), co-op buildings do not become subject to rent stabilization by virtue of receiving J-51 tax benefits. So there was no bar to the applicability of the high-rent/high-income provisions of the rent stabilization law in this case. The building did not once again become subject to rent stabilization as a result of J-51, and tenants were properly deregulated. 

Zucker: DHCR Adm. Rev. Docket No. AP410005RP (1/30/15) [10-pg. doc.]