No Deregulation for New Apartment with No Rent Stabilization History Before J-51 Applied

(Decision submitted by David Hershey-Webb of the Manhattan law firm of Himmelstein, McConnell, Gribben, Donoghue & Joseph LLP, attorneys for the tenant.)

Landlord applied for high-rent/high-income deregulation of tenant's rent-stabilized apartment in 2014, when the monthly legal rent was $2,500 or more, and requested verification of tenant's household income to establish whether the total annual household income was more than $200,000 in 2012 and 2013. The DRA asked landlord to submit a copy of tenant's vacancy lease and later renewal leases issued during the period that the building received J-51 tax benefits, to determine whether landlord gave tenant J-51 lease riders required under Rent Stabilization Law Section 26-504(c).

Landlord did so but also argued that, since the building had been rent stabilized since 1974 -- before it received J-51 tax benefits -- it remained subject to rent stabilization after the J-51 benefits expired in 2010 regardless of whether landlord gave tenant J-51 lease riders. The DRA ruled against landlord, finding that because the leases sent to tenant while J-51 benefits were in effect didn't include J-51 riders notifying tenant that the apartment would be deregulated when the J-51 tax benefits expired, the apartment remained subject to rent stabilization until tenant moved out.

Landlord appealed and lost. The building received J-51 tax benefits between 1999 and 2010. Although landlord claimed that the apartment was rent stabilized before landlord obtained J-51 tax benefits in 1999, landlord produced no rental documents proving the status of the apartment as rent stabilized before 1999. And the apartment was registered with DHCR as exempt from regulation in 1996 and wasn't registered as rent-stabilized with DHCR until 2011, after the J-51 benefits expired. There was no other record of rent registration of the apartment from 1984-1995 or from 1997-2010. Landlord had combined apartments 16A and 16B in 1996 and registered the newly combined apartment as exempt. So the rent registration history of former apartments 16A and 16B as rent stabilized before 1996 was irrelevant. The combined apartment became subject to rent regulation in 1999 solely due to receipt of J-51 tax benefits.

Cenpark Realty LLC: DHCR Adm. Rev. Docket No. EW410063RO (1/30/19) [4-pg. doc.]