The Real Estate Board of New York has retained prominent real estate attorney Stephen Meister to appeal the landmark Appellate Court ruling from earlier this month that restored rent stabilization rights to thousands of current and former tenants at Stuyvesant Town-Peter Cooper Village.
The court ruled that New York City residential buildings receiving J-51 tax benefits could not convert rent-stabilized apartments into market-rate units under the city’s luxury decontrol laws. If the ruling stands, landlord Tishman Speyer would have to pay more than $200 million in back rent to current and former tenants.
In addition, landlords across the city would face paying billions in refunds to tenants, and would face the increased risk of default due to existing bank loans that were underwritten based on increases in market-rate rental income.
REBNY fears that if the ruling stands, foreclosures will surge in rental buildings throughout the city, as landlords are unable to meet their debt payments, Meister said.
Steven Spinola, president of REBNY, said if upheld, the decision could impact about 8,000 rental apartments and create general chaos if landlords have to roll back market-rate apartments in J-51 buildings.
“This is a decision that we feel is dramatically flawed,” he said. “We believe the intention of the legislation clearly permits this so it needs to be challenged.”
J-51 tax benefits provide tax breaks to landlords who renovate existing rental apartments. Tenants estimate that Tishman received more than $25 million in tax abatements through the J-51 program at the 80-acre complex along the East River.
“It’s very important that the decision be taken up to the Court of Appeals,” said Meister, a founding partner at Meister Seelig & Fein. “I think the decision was wrong, and I hope it will make it up to the Court of Appeals and be reversed.”
In 2007, New York State Supreme Court Judge Robert Lowe dismissed the original filing by a group of tenants at Stuy Town-Peter Cooper Village. The tenants alleged that Tishman and previous owner MetLife, engaged in a systematic campaign to push them out of their apartments, which would free the units up for renovation and conversion to market-rate.
Under the city’s luxury decontrol laws, landlords can convert an apartment to market-rate if the unit is vacated and gets renovated or if a tenant’s monthly rent exceeds $2,000 per month while his income exceeds $175,000 per year. Alexander Schmidt, attorney for the tenants, said he would not comment on the filing until he saw the brief.
Tishman, which was not immediately available for comment, is struggling with massive debt payments on its record $5.4 billion purchase of Stuy Town-Peter Cooper Village, plus a weak economy that is pushing rents down throughout the city.
It has filed a motion to appeal the decision, according to court documents, and will continue to charge existing rents until the case is resolved. Under an agreement with tenants’ counsel, the landlord will put the difference between the current rents and the rent stabilized rents into a trust, and that money would be refunded if the tenants prevail, along with any back rent due.