State’s highest court strikes down portion of rent law

Court of Appeals backs landlords on retroactive overcharges in 4-3 decision

TRD New York /
Apr.April 02, 2020 12:15 PM
The Court of Appeals ruled today that a portion of New York’s rent law violates due process. (Credit: iStock; UpstateNYer via Wikipedia Commons)

The Court of Appeals ruled today that a portion of New York’s rent law violates due process. (Credit: iStock; UpstateNYer via Wikipedia Commons)

The highest court in the state has struck down a portion of New York’s new rent law, concluding that it violates due process.

The court ruled in landlords’ favor that the Housing Stability and Tenant Protection Act of 2019 should not apply retroactively to cases involving rent overcharges. It also limits the rent used to calculate damages to four years prior to a complaint.

In each of the four cases before the court, the jurists were divided four to three.

“For the first time in its history, our Court has struck down, as violative of substantive due process, a remedial statute duly enacted by the legislature,” Court of Appeals Judge Wilson wrote in a dissenting opinion.

Sherwin Belkin, principal of Belkin Burden Goldman, said that the ruling will likely prove very helpful to lawsuits challenging the statute in that “the majority noted the lack of balance in the new rent law, lack of legislative explanation and substantive injuries caused.”

The ruling applies to all rent overcharge cases preceding the new rent law, not just those concerning the J-51 tax break, as the case at hand did. The exact number of such cases is unknown, but is more than 100.

The J-51 tax break, which landlords can get for renovating a property, has been the subject of several high-profile rulings over the years, most famously at Stuyvesant Town in 2009, when the high court determined Tishman Speyer should not have deregulated apartments while receiving the benefit.

Under the previous rent law, an overcharge was calculated by computing the difference between the regulated rent charged four years before the tenant’s complaint and the rent actually charged during the recovery period. The new rent law extended the statute of limitations, changed the way the regulated rent was determined for overcharge purposes and expanded owners’ liability in such cases.

Tenants asked the court to apply the new law’s calculation method to cases pending when the new law was passed. Some sought to recover overcharges incurred as far back as the 2000s. The ruling unveiled Thursday rejected that request.

Today’s decision will impact scores of J-51 lawsuits with pending claims, which tenant attorneys argued should be covered under the new law. Had the court allowed all pending cases, including appeals, it could even have affected previously dismissed cases.

Chief Judge Janet DiFiore, during a day of J-51 hearings in January, called the new legislation a “sea change” and questioned whether landlords’ liability should change retroactively. That concern has been borne out in the court’s decision today, which is sure to provide relief to J-51 landlords and their investors.

“The tenants in these cases urge us to apply the new overcharge calculation provisions to these appeals that were pending at the time of the HSTPA’s enactment, some of which seek recovery of overcharges incurred more than a decade before the new legislation,” wrote DiFiore, using the acronym for the 2019 rent law.

“As to the HSTPA, today we fulfill this quintessential judicial function in holding that a limited suite of enforcement provisions may not be applied retroactively,” DiFiore continued.

“The proud Court that recognized the legislature’s right to address the crisis caused by tenement-based labor is here unrecognizable, as we deny the legislature the right to determine how best to address New York City’s housing crisis,” wrote Judge Rowan Wilson in his dissent.

“I may not have arrived at the plan devised by the legislature in the [new rent law]. But that is not my job. Our Frankensteinian role in resurrecting Lochner by assembling ill-fitting fragments of moribund doctrines frightens me, because it portends ill for the future.”

All seven members of the high court are nominees of Gov. Andrew Cuomo, who signed the rent law in June.


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