Despite tax abatements, apartment complex is not rent-stabilized

Reuters
by Karen Freifeld
April 3, 2012
See decision here

A lower Manhattan apartment complex did not become rent stabilized when the city of New York mistakenly continued to pay tax abatements, an appeals court ruled Tuesday.

The ruling by the Appellate Division, First Department, reversed a 2010 lower court opinion affecting two cases brought by tenants of Independence Plaza North, a 1331-unit Tribeca development.

In 2004, Independence Plaza North withdrew from the Mitchell-Lama program, which gives landlords incentives for developing affordable housing. Its J-51 tax benefits, for certain capital improvements, should have ended as a matter of law at the same time, according to the decision.

The building's continued receipt of J-51 benefits was "merely the erroneous result" of the city's failure to adjust the building's tax status in 2004, Justice David Saxe wrote in the ruling. "That error did not create rent stabilized status for a development that was not otherwise subject to the Rent Stabilization Law."

The suits were brought by a group of tenants from the building's Mitchell-Lama period who sought continued rent protections, and by tenants who got market-rate leases after Independence Plaza left the Mitchell-Lama program.

Stephen Meister of Meister Seelig & Fein, who represents the complex's owner, said he was pleased by the decision.

Seth Miller of Collins, Dobkin & Miller, who represents the tenants, said his clients would seek permission to appeal.

Saxe noted that the same issue came up in a lawsuit in federal court in which the federal government sought reimbursement for rent increases after Independence Plaza and another building left the Mitchell-Lama program. The federal court also sided with the owners.

The cases are Denza v Independence Plaza Associates, 117673/2005, and Independence Plaza North Tenants' Association v Independence Plaza Associates, 113831/2004, Appellate Division, First Department, New York state Supreme Court.