Previously Rent-Stabilized Building Subject to Luxury Deregulation After J-51 Benefits Expire

(Decision submitted by William J. Neville of the Manhattan law firm of Mitofsky Shapiro Neville & Hazen LLP, attorneys for the landlord.)

Landlord applied in 2009 for high-rent/high-income deregulation of tenants' rent-stabilized apartment. Tenants claimed that the building received J-51 tax benefits and that therefore they weren't subject to luxury deregulation. They didn't complete the answer form or provide any income verification information. The DRA later notified tenants several times that the building no longer received J-51 benefits, and therefore they must provide the requested information or face a ruling based on their default. The tenants continued to claim that the building was exempt from luxury deregulation and failed to submit any information. The DRA then ruled for landlord.

Tenants appealed and lost. Tenants claimed that they weren't subject to deregulation even after the J-51 benefits expired. But an appeals court had ruled in the 2012 case of Schiffren v. Lawlor that high-income rent deregulation isn't per se prohibited once J-51 tax benefits expire on an apartment that was subject to the Rent Stabilization Law prior to receipt of the J-51 benefits. The 2012 case of 73 Warren Street LLC v. DHCR, relied on by tenants, concerned a building that wasn't otherwise subject to rent stabilization before receiving J-51 benefits. The DHCR's decision in Matter of Phyllis Berk also didn't apply, because that case concerned a rent-controlled apartment subject to different regulations. In this case, since tenants failed to answer the DRA's notice of landlord's application within 60 days, the Rent Stabilization Code required that their apartment be deregulated.

Medevoy: DHCR Adm. Rev. Docket No. AV410042RT (10/9/13) [9-pg. doc.]