The Real Deal New York

Stuy Town tenants score in battle with owner

March 05, 2009 04:58PM
By David Jones

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A New York State Appellate Court reinstated a lawsuit today brought by thousands of current and former tenants at Stuyvesant Town and Peter Cooper Village who alleged that they have been illegally charged market-rate rents on apartments that should have been rent stabilized since the owner received a local tax abatement.

The 2007 suit alleged that Tishman Speyer, which bought the 80-acre complex along the East River, north of 14th Street, for a record-setting $5.4 billion, and former landlord MetLife, had illegally forced at least 3,000 tenants, or 25 percent of the complex, to pay market rents, even though the owners received more than $25 million in abatements through the city’s J-51 program. The program provides tax breaks to landlords that upgrade their buildings.

In 2007, New York County Judge Richard Lowe dismissed the suit, arguing that Tishman Speyer was not required to stabilize all of the Stuy Town and Peter Cooper Village apartments, in part because the complex was built before the J-51 program began. That decision has been reversed.

However, the tenants argued that the law prohibits landlords from deregulating units, while receiving the tax breaks.

“These landlords have been misinterpreting the rent stabilization statutes where so-called luxury apartments had been deregulated,” said Alexander Schmidt, attorney for the tenants. “We were quite confident we would obtain a reversal.”

Schmidt says that tenants on average were “overcharged” between several hundred and a thousand dollars per apartment, and that many tenants left their units because they were unable to afford the market rents. He said if the tenants win, they could recover up to $200 million in back rent from Tishman Speyer and MetLife.

Tishman Speyer, which faces financial challenges due to the acquisition of the complex, says it will appeal.

“We remain firmly convinced that Justice Lowe’s decision to dismiss [in 2007] was the correct one,” a spokesman for Tishman Speyer said in a statement.  “We intend to continue to pursue all potential appeals and defenses.”

Jeffrey Metz, who represented one of the defendants in the case, said if the tenants prevail, the case could have major implications for landlords across the city.

“If the tenants go back to court and get summary judgment, all the units that [were] deregulated, will have to be re-regulated,” he said.  “In a small building, where [an owner] is basically struggling to get by, having one or two deregulated units is the difference between life and death.”

Manhattan Borough President Scott Stringer, who filed a brief in the earlier case, urged Tishman Speyer to sit down and negotiate a settlement with the tenants.

“The residents of Stuyvesant Town and Peter Cooper Village have argued that a building cannot be subject to luxury decontrol if it receives J-51 tax benefits,” he said. “The appellate court, in a strongly worded and unanimous decision, has endorsed that view. It is time for the owners of Stuyvesant Town and Peter Cooper Village to sit down with residents of the complex to resolve this dispute over rent overcharges in a fair and equitable manner.”

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