In another win for landlords, a state Supreme Court judge found that the new rent stabilization law’s rules don’t apply to a 2015 rent overcharge case.
State Supreme Court Judge Robert Reed ruled on Friday that when calculating rent potentially owed to the tenants of Kibel Companies’ 90 West Street, the court could only allow a four-year lookback, rather than the six-year review established in the Housing Stability and Tenant Protection Act of 2019.
Reed cited an April Court of Appeals decision — in the case of Regina Metro. Co., LLC v. New York State Division of Housing & Community Renewal — which found that the HSTPA couldn’t be applied retroactively to rent overcharge cases.
The decision is the latest reinforcement of the Appeals Court order — with an important distinction. At 90 West, Kibel Companies was accused of wrongly deregulating apartments while receiving 421g tax benefits. The Appeals Court decision, however, involved a landlord participating in the city’s J-51 program. Sherwin Belkin, who represented Kibel in the case, said Reed’s ruling shows that the highest court’s decision applies to all overcharge cases.
“I think it’s incredibly important,” he said. “I think many tenant advocates were trying to circumscribe Regina as being a J-51 case.”
Representatives for 90 West’s tenants didn’t immediately return requests seeking comment. Lucas Ferrara, an attorney for a tenant seeking class action status in a related lawsuit, said the courts still need to provide further guidance on how back rent is calculated.
“In light of the ruling by the Court of Appeals in Regina, this decision is not surprising, and shows that the method for determining rent overcharges remains in a state of flux,” he said in an email. “Indeed, because there are still open questions on how to apply the four-year rule in the 421-g context, we look forward to further guidance from the courts.”
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Landlords notch win as judge denies tenants in overcharge case
State courts have long been grappling with the question of whether owners receiving 421g, a tax exemption and abatement provided to landlords who convert commercial buildings for multifamily use, should be able to deregulate units once rents reach a certain rate. A series of tenant lawsuits were filed five years ago, arguing that apartments couldn’t be flipped while landlords received the tax break. Clipper Equity even asked the U.S. Supreme Court to weigh in on the issue, but the court declined in January to take up the case.
Last year, the state’s highest court — in a case that addressed claims at both 90 West and Clipper’s 50 Murray Street — ruled that apartments should remain rent-stabilized through the life of 421g benefits. That decision still stands, but the court left open the question of how rent owed to tenants of deregulated units should be calculated.
Friday’s ruling marks the latest win tied to Regina. A Manhattan judge recently denied class action status in an overcharge case related to the J-51 program. The judge in that case wrote in her decision that tenants couldn’t rely on the HSTPA to strengthen their claims, due to the April Appeals Court decision.
Write to Kathryn Brenzel at kathryn@therealdeal.com