Two more rent-overcharge lawsuits get class-action status
Scharfman, Chestnut Holdings targeted for taking J-51 benefits
As the future of rent overcharge cases hangs in the balance, two major rent-overcharge cases have attained class certification.
A lawsuit alleging that landlord The Scharfman Organization overcharged tenants while receiving J-51 tax benefits at a Washington Heights building received class certification last week.
Four days later, a similar case alleging that landlord Chestnut Holdings overcharged two tenants and possibly more than a hundred others at a Hamilton Heights building also received class certification.
The two lawsuits were brought by the tenant-advocate group Housing Rights Initiative. Aaron Carr, executive director and founder of HRI, said the class certifications in the two cases “couldn’t come at a better time.”
“Whether the fight is in court or in Albany, it’s a fight for affordability,” Carr said.
His group has pursued many such cases in recent years after a pivotal Court of Appeals ruling found that landlords receiving J-51 tax benefits cannot deregulate an apartment when the legal passed a certain threshold and the unit was vacant or occupied by high-income tenants. The 2009 decision allowed the state to calculate rent overcharge amounts based on the most recent legal regulated rent, even if a significant period of time had elapsed.
The expanded look-back period and increased potential damages under the Housing and Stability Tenant Protection Act of 2019 has led to a flurry of new cases. The Court of Appeals is set to decide whether the new rent law will be applied to pending cases. This month it heard blistering arguments from landlord and tenant attorneys.
William Hummell, the attorney who represents Chestnut Holdings, said he had hoped the judge would grant his motion to dismiss the case, “but the laws changed.” The units’ rents were raised under luxury deregulation, according to Hummel, which was appropriate for the three- to four-bedroom dwellings.
“These were substantial apartments, which is not really typical,” Hummel said. “They were deregulated because the rents had been very high due to so many bedrooms in a unit.”
Grimble and LoGuidice is the law firm representing the plaintiffs at 250 Fort Washington. The attorney for the plaintiffs at 310 Convent Avenue, Lucas Ferrara, said he “cries not” for those who took calculated risks and lost.
“Maybe … they should ensure that their real-estate holding companies adhere to the requirements of the law, rather than skirting the rent regulations, and taking advantage of a lack of government oversight, all at the expense of their regulated tenants,” Ferrara said.
Landlord attorneys have argued that before the courts decided the matter it had been far from clear that properties receiving J-51 benefits had to offer all tenants rent-regulated leases.
Luxury deregulation was one of several options previously available to landlords seeking to take apartments out of rent stabilization before the state legislature’s drastic overhaul of the rent rules.
The attorney representing The Scharfman Organization declined to comment.