Landlords lob another lawsuit at new rent law

The complaint makes similar constitutionality claims

Community Renewal CEO RuthAnne Visnauskas and Citywide Support director Dino Panagoulias  NYS Homes (Credit: LinkedIn, iStock)
Community Renewal CEO RuthAnne Visnauskas and Citywide Support director Dino Panagoulias  NYS Homes (Credit: LinkedIn, iStock)

UPDATED, Nov. 15, 2019, 3:10 p.m: A group of landlords has filed another lawsuit challenging New York’s new rent law, alleging that the measure is unconstitutional.

The complaint — filed by a group of landlords including Dino, Dimos and Vasiliki Panagoulias — refers to the Housing Stability and Tenant Protection Act of 2019 as a “regulatory scheme” and a “regime in which tenants, not property owners, control who occupies the property, how it is used, and who may be excluded from it.”

The complaint seeks monetary damages and focuses on the law’s impact on individual property owners.

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This is the second lawsuit to challenge the law, which went into effect in June. It reiterates claims made by an earlier complaint filed by the Rent Stabilization Association, the Community Housing Improvement Program and individual landlords. Like that lawsuit, this complaint claims the rent law violates the Fifth Amendment’s “Takings Clause” and the Fourteenth Amendment’s “Due Process Clause.” The rent law amounts to an unjust taking because it severely limits when and how a landlord can increase rents on stabilized apartments — “effectively eliminating” an owner’s ability to use his property for anything other than stabilized housing. As for due process, the complaint states that the rent law doesn’t fulfill its stated purpose of promoting affordable housing.

The new lawsuit further alleges that the law goes against the Constitution’s “Contracts Clause,” which bars governments from passing legislation in order to interfere with private contracts. The complaint claims the new law does just that because landlords are now required to continue charging preferential rent — a rate lower than the legal rent — until an apartment is vacated. Previously, landlords could raise that rent to the legal limit when the lease was renewed. The state’s housing regulator has specified that tenants who had a preferential rent in place or had a renewal lease with an occupancy date on or after June 14, the new law applies. The lawsuit claims landlords are unfairly bound to abide by these lower rents even if tenants signed a lease explicitly spelling out that the lower rent was a one-time deal.

The complaint also appears to cite a June interview The Real Deal conducted with Sen. Julia Salazar.

“One of the sponsors of the 2019 Amendments—a self-described Marxist—explained in the course of describing the 2019 Amendments that land ‘doesn’t truly belong to’ those that ‘have the monetary resources to purchase it and, to put it really bluntly, to take it away from … the collective,’” the lawsuit states.

The complaint alleges that such a view is “irreconcilable with the Constitution’s bedrock protections for private property.” (In the full interview, Salazar indicated that she wasn’t against for-profit housing as long as such a model guaranteed  “that everyone has a place to live” without fear of eviction.)

“The real estate industry is still thriving in New York City,” Salazar said on Friday. “The fear-mongering is in the interest of the plaintiffs of the lawsuit, but it isn’t a reality.”

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She added that it was a “pretty weak argument to cite a Real Deal interview.” She also questioned the landlords’ inability to cover the costs of their buildings when they are pursuing costly litigation, and said it showed that “they have no interest in ensuring that the tenants who live in their buildings are reasonably taken care of.”

Dino Panagoulias said he and his parents, the other two relatives named in the suit, own one building together at 38-06 29th Street, which they’ve owned since 1974. He said he wasn’t familiar with the CHIP lawsuit but felt that individual landlord stories can get lost in a large lawsuit.

“One of the most important thing for me is that my side is heard,” he said. “All too often the media portrays landlords as the devil. Well, that’s not the case. A lot of my tenants, I consider to be my extended family.”

Michael Vinocor, whose LLCs are also named as plaintiffs, said the complaint “speaks for itself” but that changes made to the rent law in June will lead to the deterioration of the city’s housing stock.

“My feeling is if they needed to make reforms, they could’ve done some rational reform,” he said. Vinocor’s entities own 74 Pinehurst Avenue and 141 and 177 Wadsworth Avenue. An LLC tied to Jack Moy and 80 Mulberry Street is also named as a plaintiff.

Attorneys from Covington & Burling are representing the plaintiffs.

The complaint names the state of New York, the New York Division of Homes and Community Renewal, HCR’s Commissioner RuthAnne Visnauskas, the city, the city’s Rent Guidelines Board and its board members as defendants.

“HCR has and will continue to both enforce the rent laws and investigate those who violate the law to protect tenants and the housing stock. The agency does not comment on pending litigation,” Brian Butry, a spokesperson for the agency said in a statement.

Just as RSA and CHIP’s suit, their complaint is filed in the U.S. District Court for the Eastern Division of New York. Representatives for CHIP and RSA noted that unlike their suit, this latest complaint seeks monetary damages and focuses on the impact of the law on particular property owners. The trade group’s lawsuit, in addition to calling out the new rent law, challenges rent stabilization as a concept. This week, five national trade associations pledged financial backing for CHIP and RSA’s suit.

“Because of the broader and more fundamental issues raised in our lawsuit, it has the support of thousands of property owners in New York and national groups that represent a diverse cross section of the industry,” a spokesperson said in a statement. “We are seeking to address 50 years of the Rent Stabilization Law’s failure, and to create real solutions to New York’s housing challenges.”

Update: This story has been updated to include comment from the plaintiffs and defendants, as well as CHIP and RSA, which are also pursuing a challenge to New York’s rent law.