Impact from Stuy Town decision may widen
November 20, 2009 06:30PM By Adam Pincus
Stuyvesant Town
The recent ruling in favor of tenants at Stuyvesant Town and Peter Cooper Village initially put the city's landlords on the defensive, but now property owners are asking if the city might owe them money because of the decision.
Frank Ricci, director of governmental affairs at the landlord trade group Rent Stabilization Association, said he has fielded calls from "dozens" of landlords asking if the city might owe them for overpayment in taxes.
And in recent weeks the law firm Belkin Burden Wenig & Goldman raised more questions in a bulletin, including whether the city must pay landlords for lost tax abatements.
Adding to the potential chaos, Stephen Meister, a partner who specializes in real estate law at the firm Meister Seelig & Fein, said he had spoken with building owners who might want to leave the city-run J-51 tax abatement program altogether.
The decision by the New York state Court of Appeals Oct. 22 immediately raised questions about whether landlords apart from Stuy Town's Tishman Speyer Properties and Blackrock Realty might owe thousands of dollars per tenant whose apartments were illegally removed from rent stabilization.
The Court of Appeals ruled that the Stuy Town landlords illegally removed apartments from rent-stabilization, and sent the case back to the State Supreme Court to rule on the retroactivity, statute of limitations and other issues.
Landlords who participated in the J-51 program say they relied on two advisory opinions from 1997 and 2003 by the Division of Housing and Community Renewal, the state department that regulates rent stabilization, which gave apartment owners the right to deregulate apartments in certain instances. Those opinions encouraged landlords to participate in the program, giving tax abatements for apartment improvements.
Now a program without clear direction, DHCR is waiting for the lower court to rule before issuing revised opinions, a spokesperson for the agency said in an e-mail.
"The entire matter is under intense review by DHCR as we await further guidance and the agency will not issue further guidance until we feel confident that we will be able to provide the requisite clarity and certainty for the affected owners and tenants that this situation demands," the e-mail said.
An industry source who asked not to be identified believed the agency had been severely undercut by the decision, and its lawyers were likely pouring over case law to prepare for the lower court ruling when it arrives.
"My guess is they are breaking attorneys up into teams that have expertise and having them look at different aspects of this issue," the source said.
So while the process moves forward, landlords have begun looking at the ruling to see how they might ease the impact, or even profit from the ruling.
Ricci said landlords might be able to sue for a reduction in property taxes if the lower court rules changes are retroactive. In that instance, landlords would need to re-regulate some apartments, and property owners argue that change would cut income, which should in turn reduce their property taxes.
The Belkin Burden bulletin asked about a more complex issue tied to the number of units in each building that in the application of the J-51 program have to be classified as either rent-stabilized or free market.
"Since the city proportionately reduced the J-51 tax abatement by the percentage of deregulated apartments, if those apartments are now rent-stabilized, does the city now owe money to the owner?" the paper asked.
The city's Department of Law did not immediately respond to requests for comment.
A Belkin Burden attorney who asked not to be identified, said one of his landlord clients estimated he might be owed $1 million by the city in lost tax abatements accrued over several years.
And Meister wanted to know if landlords who participated in the city's J-51 tax abatement program, can now exit the program because it is no longer operating under the rules as they were presented in advisory opinions.
He said none of his clients has yet approached the city's Housing Preservation and Development, the agency that administers the program, to leave it, saying the rulings were too recent.
"I think HPD should be required to honor landlords who now wish to terminate their J-51 on the grounds that they only applied for them on false pretenses," he said.
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Comments
Anonymous
yeah, figures these guys are busy coming up with yet another way to scam money from the government. these guys better brace themselves. their days of scamming the system are over. we're all onto them and will dog them for as long as it takes to put them behind bars. can you say, "tax evasion or fraud?"
Comment #1 Posted By: Anonymous 11/20/09
Anonymous
The real estate lobby convinced DHCR to interpret the J51 law in favor of landlords even though it was clear that the law states that if you take J51 your building must be rent stabilized. All eyes are on DHCR to make sure they can't be coerced or bought again.
Comment #2 Posted By: Anonymous 11/20/09
Anonymous
DHCR is corrupt. I have no faith that they will do the right thing.
Comment #3 Posted By: Anonymous 11/20/09
Anonymous
J 51 is going to blow up in a lot of places. Get your lawyers while you can. If a building is empty for landlords forced out rent stabilized tenants and it turns out they were illegally thrown out, can they get their apartments back. You better believe it. Be careful before buying one of these small apartment buildings. For the apartments may become rent stabilized again.
Comment #4 Posted By: Anonymous 11/20/09
Anonymous
Change is in the air and corporate type landlords like Tishman Speyer and Laurence Gluck (Riverton Houses) are now under a microscope. Not only do they stand to lose their own money, but their reputations are in the toilet! Of course we all know that they keep most of their money in offshore accounts. And we're looking into that too. Are all their business dealings on the up and up? I doubt it! They will forever be known as shifty businessmen who lost other people's money and tried to evict little old ladies from their homes. They are the real estate version of Bernie Madoff.
Comment #5 Posted By: Anonymous 11/21/09
Anonymous
And all of these communists wonder why no one other than the government has any interest in building apartment buildings... This city is finished. Why on earth would any company want to be based here with literally millions of dead beat losers dependent upon a city, state, and nation that are all on the verge of bankruptcy? The sooner this city collapse from the sheer greed of the huge parasite class here, the better.
Comment #6 Posted By: Anonymous 11/21/09
Anonymous
The attorneys in this article who are hunting for publicity are adding fuel to the fire in order to drum up business
Comment #7 Posted By: Anonymous 11/21/09
Anonymous
If landlords paid taxes based on the value of the property --which is determined in great part by Gross Potential Income -- and if the rents are reduced retroactively (i.e. tenant overcharges), will the properties be revalued and hence taxes lowered retroactive to the date of the rent reduction. I agree with the person who said this is going to be a bonanza for attorneys. It could take DHCR ten years to unwind this whole thing.
Comment #8 Posted By: Anonymous 11/22/09
Anonymous
all these guys are sooooo frickin' creepy. shallow attorneys and ruthless landlords. ugh!!!
Comment #9 Posted By: Anonymous 11/22/09
Anonymous
Oh boy! Here goes Mr. Meister with his rhetoric, thinking he's tricking and fooling people. Trying to use smoke and mirrors to lessen the impact on land lords who did not follow the law. There was no false pretenses, Mr. Meister. It was simple: Your pals tried to get away with things that not only forced people out of their homes, but also used Federal funds to pad their bank accounts. The emporer, Mr. Meister, has no clothes.
Comment #10 Posted By: Anonymous 11/22/09
Anonymous
"And all of these communists wonder why no one other than the government has any interest in building apartment buildings... " Wow. Talk about people with twisted and confused concepts. I think the parasites and in the minority; the masses are the ones being eaten alive. We the people have the right to decent dealings and those who abuse with greedy and gluttony should get a reality check.
Comment #11 Posted By: Anonymous 11/22/09
Seth A. Miller
Both Mr. Meister and the attorneys at Belkin, Burden are grasping at straws. Rent regulation cannot be avoided by a landlord just by returning J-51 benefits to the City. The City’s regulations for the J-51 benefits say (28 RCNY §5-03(f)(3)(ii)) “rent regulation shall not be terminated by the waiver or revocation of tax benefits.” The Rent Stabilization Law (§26-504(c)) says that apartments remain regulated regardless of the “termination for any reason of the benefits.” Mr. Meister already lost this argument, in a case involving Independence Plaza North, where my firm represents the tenants. The Court held that a landlord who gets J-51 benefits cannot avoid rent regulation by returning them. The City does not owe landlords a reinstatement of the benefits they forfeited. The City didn’t make them return J-51 benefits for the apartments they illegally deregulated: that is something they volunteered to do. Regardless of what DHCR’s regulation said, the City’s regulations clearly continued to say that every apartment had to remain regulated. The landlords who claim to have “relied” on a different legal opinion were gambling, and should not be bailed out when their bets didn’t pay off.
Comment #12 Posted By: Seth A. Miller 11/23/09
Anonymous
NYC should follow Boston's lead and do away with rent regulation all together. Let the laws of supply and demand determine pricing and we will all be better off. If capitalism has taught us anything, it is that there will always be people looking to profit from an inefficient market. The people of NYC have no one to blame except their government's inability to regulate the market efficiently.
Comment #13 Posted By: Anonymous 11/23/09
Anonymous
#15 you contradict yourself! "follow Boston's lead and do away with rent regulation" and then you say "no one to blame except their government's inability to regulate" You defenders of corruption are despicable! It's time to round up all these crooked landlords and their slimy lawyers and put them in jail!
Comment #14 Posted By: Anonymous 11/23/09
Anonymous
yeah!!!!! let's get out our pitchforks and go after these guys!!!!!!!!!
Comment #15 Posted By: Anonymous 11/23/09
Anonymous
Meister thinks he's entitled to manipulate the law to his and his client's (like Laurence Gluck) advantage whenever he pleases. Madoff thought he was above the law too, and look what's happened to Madoff.
Comment #16 Posted By: Anonymous 11/24/09
Anonymous
bloomberg is letting these guys get away with this stuff. these guys are dangerous and are ruining our city.
Comment #17 Posted By: Anonymous 11/24/09
John D.
Forget going after all these crooked landlords and lawyers. Better yet go after all these people making stupid remarks. They don't have any idea what they're talking about. Any industry that has its pricing regulated by the government whilst existing in a free enterprise environment is doomed to these kinds of problems. Capital will simply leave NYC for more accommodating areas. At some point everyone, including renters, will wish that rent control didn't exist.
Comment #18 Posted By: John D. 12/08/09