No Deregulation Permitted for Apartment Due to Prior J-51 Tax Benefits

Landlord applied for high-rent/high-income deregulation of tenant’s apartment in 2013, claiming that the apartment’s legal rent was $2,000 or more per month and requesting verification of whether tenant’s annual household income was more than $200,000 in 2011 and 2012. The DRA ruled against landlord, finding that the building had received J-51 tax benefits until 2012 and tenant’s lease didn’t contain a required J-51 notice rider concerning the automatic deregulation of the apartment upon expiration of the J-51 benefits. Therefore, the apartment would remain rent stabilized until tenant moved out.

Landlord appealed and lost. Landlord pointed out that the building was rent stabilized before receiving J-51 tax benefits and that the apartment was never deregulated at any time before or during the J-51 tax benefit period. Landlord argued that the apartment therefore wasn’t rent stabilized due to J-51 status and landlord wasn’t required to give tenant a J-51 notice rider. The DHCR ruled that due to receipt of J-51 tax benefits, the high-income rent deregulation exemption from rent regulation didn’t apply even though the J-51 tax benefits had expired before landlord filed its deregulation application. The apartment would not have been rent stabilized at the time the J-51 benefits expired were it not for the receipt of those J-51 tax benefits. The DHCR had in fact issued a prior order in 1998 deregulating the apartment based on high income and high rent, even though the building started receiving J-51 tax benefits in 1992/1993. So the apartment would have been deregulated but for the J-51 benefits and the Roberts court decision. 

400 E58 Owner LLC: DHCR Adm. Rev. Docket No. DR410050RO (11/3/15) [8-pg. doc.]