Tenants Remain Regulated After J-51 Benefits Expire

Landlord asked the DHCR for an Order of Decontrol for each of the building's 10 tenants. Landlord claimed that a prior landlord completed a substantial rehabilitation of the building in 1975 and obtained a new Certificate of Occupancy. Prior landlord obtained a mortgage from the city, and, under the mortgage terms and the Private Housing Finance Law (PHFL), the apartments became rent controlled. Landlord argued that the PHFL permitted decontrol of the apartments because the mortgage was no longer in effect after a tax lien foreclosure action, prior landlord had obtained J-51 tax benefits that had now expired, and at least 10 years had passed since rent-controlled tenants took occupancy. The DRA ruled for landlord, and tenants appealed. Tenants claimed that they remained rent controlled under other provisions of law.

The DHCR ruled for tenants. Prior landlord had substantially rehabilitated the building based on the extent of the demolition work and replacement of multiple building systems. The building's J-51 benefits ended on June 30, 1993. And landlord properly met the requirements for decontrol under applicable PHFL provisions. However, landlord's receipt of J-51 benefits in 1976 and continuing after 1985 placed the apartments under rent control separate from the PHFL requirements. Real Property Tax Law Section 489.7(b)(2) requires that the apartments of tenants who were in occupancy when the J-51 benefits expired each remain rent controlled until the next vacancy occurs. 

Lee: DHCR Adm. Rev. Docket Nos. ZA420059RT - ZA420064RT (7/26/13) [8-pg. doc.]