Rents on Stuyvesant Complex Units Were Illegally Decontrolled

New York Law Journal

By Joel Stashenko

October 23, 2009

ALBANY - Rents on thousands of units in one of New York City's largest apartment complexes were illegally decontrolled, the Court of Appeals ruled today.

With the dissenters warning of dire legal and financial fallout from today's ruling, a four-judge majority decided that the owners of the massive Peter Cooper Village and Stuyvesant Town complexes in Manhattan were precluded from taking advantage of luxury decontrol provisions of the Rent Stabilization Law on units where owners had accepted tax incentive benefits.

The majority of the Court said in today's 4-2 per curiam ruling that a "practical" reading of the Rent Stabilization Law and of the debate in the state Legislature in 1993, when lawmakers approved extending New York City's so-called J-51 tax benefits to apartments subject to vacancy decontrol, indicates that the luxury decontrol does not apply to units on which landlords accepted tax breaks for improvements.

The ruling in Roberts v. Tishman Speyer Properties, 131, applies to about one-quarter of the 11,200 units at Peter Cooper Village and Stuyvesant Town, which comprise 110 buildings over 80 acres between 14th and 23rd streets along the East River.

A group of residents had contended that rents on the units were illegally raised past the luxury decontrol threshold once improvements were made to the apartments, with the help of taxpayer-funded programs.

Judge Susan Phillips Read, writing in a dissent joined by Judge Victoria A. Graffeo, predicted that today's ruling would spawn a long series of litigation "over many novel questions."

"In the absence of meaningful legislative action, uncertainty will reign in an industry already rocked by the bursting of the great residential real estate bubble," Judge Read wrote.

She argued that the majority of the Court today rejected a "reasonable and longstanding statutory interpretation" of the Rent Stabilization Laws and eligibility for luxury rent decontrol of units made by the state Division of Housing and Community Renewal.

Today's ruling affirmed a finding by the Appellate Division, First Department (NYLJ, March 6).

Chief Judge Jonathan Lippman did not take part in today's ruling.