J-51 Lease Rider Notice of Deregulation Not Required in Building Otherwise Rent Stabilized

Landlord applied for high-rent/high-income deregulation of tenants' rent-stabilized apartment in 2014. After confirming that tenants' annual household income exceeded the $200,000 income threshold for 2012 and 2013, the DRA asked landlord to submit a copy of tenants' 2000 vacancy lease, along with all lease riders since they commenced occupancy, including J-51 riders. The building had received J-51 tax benefits, which had by now expired. Landlord submitted a copy of the lease but stated that there were no lease riders and that no J-51 rider was required due to the age of the building.

The DRA ruled against landlord, finding that the tenants' lease didn't contain a required notice stating that the apartment was subject to rent stabilization solely as a condition of the landlord receiving J-51 tax benefits and that the unit would become automatically deregulated upon the expiration of the last lease entered into whenever the J-51 tax benefits expired.

Landlord appealed, but the DHCR denied landlord's PAR on Oct. 21, 2019, because HSTPA had repealed luxury deregulation provisions of the Rent Stabilization Law effective June 14, 2019. Landlord then filed an Article 78 court appeal, and the court sent the case back to the DHCR for further consideration.

The DHCR ruled for landlord upon reconsideration. The DRA should have granted landlord's deregulation application because the building was subject to rent stabilization before receipt of the J-51 tax benefits. Therefore, landlord wasn't required to give tenants J-51 lease rider notices in order to seek high-rent/high-income deregulation under pre-HSTPA law. In addition, the lease in effect when the DRA's order was issued expired on Feb. 28, 2019. So the apartment was luxury deregulated effective as of Feb. 28, 2019. Since this was before HSTPA was enacted, landlord's arguments concerning HSTPA were moot.

72A Realty Associates, LP: DHCR Adm. Rev. Docket No. JM410001RP (7/14/21)[5-pg. document]