Rent-Controlled Unit in Co-op Not Subject to Luxury Decontrol After J-51 Benefits Expire

Landlord applied in 2014, 2015, and 2016 for high-rent/high-income deregulation of tenant's rent-controlled apartment. The DRA ruled against landlord in each separate case.

Landlord appealed and lost. Landlord pointed out that tenant was already rent controlled when the building obtained J-51 tax benefits, but these benefits had long expired by the time landlord sought luxury decontrol. The building also was owned as a cooperative. But landlord's application must be denied as a matter of law. In 2014, in Ram 1 LLC v. DHCR, the Appellate Division, First Department, ruled that rent-controlled apartments remain exempt from luxury deregulation after J-51 benefits have expired because, unlike the rent stabilization law, nothing in the rent control law restores the availability of high-rent/high-income deregulation after J-51 tax benefits expire. And, while buildings that are co-ops or condominiums don't become rent regulated as a condition of receiving J-51 tax benefits, this exception doesn't apply to units that are rent regulated by virtue of another provision of the rent laws. Tenant's apartment, originally rent controlled for reasons other than receipt of J-51 tax benefits, and located in a building converted to cooperative ownership before receipt of the J-51 tax benefits, wasn't subject to luxury deregulation after the J-51 benefits ended.

Gracie Gardens LLC: DHCR Adm. Rev. Docket Nos. FR420033RO, FR420069RO, FR420071RO (3/21/19) [18-pg. doc.]