Were Former Mitchell-Lama Tenants Rent Stabilized Through J-51 Program?

Facts: Landlord's building complex was built in 1974 and was regulated under the Mitchell-Lama program. Landlord removed the building from the Mitchell-Lama program in 2004, and rented vacant apartments to tenants at market rents. Landlord later sought to evict tenants. Tenants asked the State Supreme Court to delay the eviction proceedings while determining whether tenants were rent stabilized. In 1998, while still under Mitchell-Lama, landlord began receiving a J-51 tax abatement based on major capital improvements. Tenants claimed that landlord still received J-51 benefits through the tax year 2005-06, after leaving the Mitchell-Lama program. Tenants argued that, since the building was under J-51 when they rented their apartments, they were subject to rent stabilization. Landlord claimed that the City of New York retroactively terminated the J-51 benefits as of the 2004 date when landlord left the Mitchell-Lama program. Landlord asked the court to dismiss the case without a trial.

Court: Landlord loses. So far, landlord didn't submit proof as to whether J-51 benefits were terminated after the Mitchell-Lama exit date. Landlord can't begin any eviction proceedings against tenants until their J-51 status is determined. In the meantime, tenants can subpoena records from the New York City Department of Finance that may explain when the building's J-51 benefits began and ended.

Denza v. Independence Plaza Associates: NYLJ, 10/17/07, pg. 28, col. 1 (Sup. Ct. NY; Friedman, J)