Roberts v. Tishman Speyer Properties, L.P.


New York Law Journal

Judge Ciparick, Smith, Pigott and Jones concur. Judge Read dissents in an opinion in which Judge Graffeo concurs. Chief Judge Lippman took no part.

Decided: Oct. 22, 2009

Jay B. Kasner, for appellants Tishman Speyer Properties, L.P. and PCV ST Owner L.P.

Alan Mansfield, for appellants Metropolitan Insurance and Annuity Company and Metropolitan Tower Life Insurance Company.

Alexander H. Schmidt, for respondents.

The Legal Aid Society; Real Estate Board of New York; New York State Tenants & Neighbors Coalition, Inc. et al.; Community Housing Improvement Program of New York Inc. et al.; Maria del Carmen Arroyo et al.; Rent Stabilization Association of New York City, Inc.; Office of Manhattan Borough President; Urban Justice Center; Mitchell-Lama Residents Coalition, amici curiae.

PER CURIAM—In this lawsuit, nine plaintiff-tenants of Peter Cooper Village and Stuyvesant Town, two adjoining Manhattan apartment complexes comprising 110 buildings and occupying roughly 80 acres between 14th and 23rd Streets along the East River ("the properties" or "the apartment complexes") contend that defendants Tishman Speyer Properties, L.P., and PCV ST Owner LP (collectively, "PCV/ST"), and Metropolitan Insurance and Annuity Company and Metropolitan Tower Life Insurance Company (collectively, "MetLife"), the current and former owners of the properties, respectively, were not entitled to take advantage of the luxury decontrol provisions of the Rent Stabilization Law (RSL)1 while simultaneously receiving tax incentive benefits under the City of New York's J-51 program. We agree.


IN NEW YORK City, multiple dwellings may qualify for tax incentives designed to encourage rehabilitation and improvements (see Administrative Code of City of NY §11-243 [previously §J51-2.5]). Specifically, the City's J-51 program, authorized by Real Property Tax Law §489, allows property owners who complete eligible projects to receive tax exemptions and/or abatements that continue for a period of years. Eligible projects include moderate and gut rehabilitations; major capital improvements (for example, asbestos abatement or boiler replacement); and conversions of lofts and other non-residential buildings into multiple dwellings (see Administrative Code §§11-243 [b] [2], [3], [8]; 28 RCNY 5-03 [a]). Rental units in buildings receiving these exemptions and/or abatements must be registered with the State Division of Housing and Community Renewal (DHCR), and are generally subject to rent stabilization for at least as long as the J-51 benefits are in force (see 28 RCNY at 5-03 [f]). The Department Of Housing Preservation and Development (HPD) administers the J-51 program in the City of New York.

MetLife apparently first applied for and received J-51 benefits for the properties in 1992. At the time, the apartment complexes, which MetLife built in the 1940s, had already been rent-stabilized since at least 1974.

In 1993, the Legislature enacted the Rent Regulation Reform Act (RRRA) (L 1993, ch 253), which provided for the luxury decontrol or deregulation of certain rent-stabilized apartments. The RRRA identified two circumstances in which deregulation was warranted: (1) in vacant apartments where the legal regulated rent was $2,000 per month or more; and (2) in occupied apartments where the legal regulated rent was $2,000 per month or more and the combined annual income of all occupants exceeded $250,000 per year (RSL §§26-504.1, 26-504.2). The RRRA carved out an exception to luxury decontrol, which stated:

"this exclusion [i.e., luxury decontrol] shall not apply to housing accommodations which became or become subject to this law [i.e., the RSL] (a) by virtue of receiving tax benefits pursuant to section…four hundred eighty-nine of the real property tax law [J-51 benefits]"

(RSL §§26-504.1, 26-504.2). The Legislature subsequently expanded the scope of luxury decontrol by lowering the income threshold for defining high-income households to $175,000 and allowing post-vacancy improvements to count toward the $2,000 per month rent threshold (L 1997, ch 116); and permitting deregulated units to remain deregulated even if an owner subsequently charges less than the $2,000 per month threshold (L 2003, ch 82).