The Real Deal New York

The regulation situation

The precedent-setting rent regulation case that kept real estate lawyers (and landlords) busy this year
By Rich Bockmann | October 02, 2018 03:00PM

New York Court of Appeals (Credit: Wikimedia Commons)

Considering that some 1 million New York City apartments are rent-regulated, cases with the potential to impact policy in that area are closely watched in real estate circles.

And this year one of those cases was front and center.

The case stems from a 2014 lawsuit filed by tenant Richard Altman against S.W. Management, claiming that the previous owner of his apartment had illegally deregulated it nine years earlier.

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In 2015, much to the dismay of landlords citywide, a court ruled in Altman’s favor, ordering S.W. Management to pay him back $165,000 and drop his rent down to the $1,829 per month he was paying when the unit was deregulated.

But this past April, the New York Court of Appeals reversed the lower court’s 2015 decision.

The case — officially known as Altman v. 285 West Fourth LLC — could have resulted in more than 100,000 market-rate apartments reverting to regulated status.

“There was a lot riding on the case,” said Rosenberg & Estis’ Jeff Turkel, whose firm represented defendant S.W. Management in the case. “Literally thousands of apartments would have been reregulated if Altman had not been reversed. But as a result [of the ruling], the owners dodged a bullet. … That was a major win for the industry and a major blow to tenants.”

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The April decision set a precedent that apartments deregulated between 1997 and 2011 didn’t need to strictly meet the $2,000 rent threshold for deregulation, which is triggered when a tenant vacates a unit.

Attorneys who work in the space characterized the ruling as the most significant decision concerning regulated apartments since 2009, when Stuyvesant Town tenant Amy Roberts sued owner Tishman Speyer. That case centered on stabilized units at the massive housing complex. A judge found that property owners tapping the J-51 tax break for improving buildings could not also use luxury decontrol to deregulate apartments.

The S.W. Management ruling, experts said, helps resolve conflicting court decisions.

“When [the 2015 decision] came down, it cratered the entire landscape of deregulation because it was such a significant departure from what was widely accepted law,” said Matt Brett, an attorney at Belkin Burden Wenig & Goldman.

Brett — who represented the landlord group Community Housing Improvement Program, the Rent Stabilization Association and the Real Estate Board of New York as amici curiae supporting S.W. Management in the Richards case — added that it “led to a lot of chaos.”

Brett said this latest decision gives investors more assurance about the free-market status of apartments deregulated before 2015.

“It does give more clarity and certainty to prior deregulations so that owners can understand with confidence that the deregulation they had done — as long as they followed the rules that were in place — were appropriate,” he said.