Provides for the implementation of the Roberts v. Tishman Speyer Properties, L.P. decision with regard to rent regulated housing accommodations

Summary of provisions

This bill would define the class of apartments affected by the Roberts decision and provide two alternatives to address the Roberts decision.

Under the first option the owner of an affected unit would retain the J-51 benefits they received and the affected apartments are rent stabilized, with base rent being set as of October 22, 2005 with all subsequent standard rate stabilization increases permitted. Under the second option available the owner would pay back. all pre October 22, 2009 J-51 benefits they received. Under this scenario the affected apartments would be rent stabilized until the remaining J-51 benefits expire. The base rents under this scenario would be set as of October 22, 2009 with all subsequent standard rent stabilization increases permitted.

Under either option the failure by the owner to use forms, riders, notices, registrations etc. that would not have been utilized when the apartments were thought to be non-stabilized will not preclude rent increases or deregulation upon the expiration of the benefits.

The bill does require that owners use the required rent stabilization forms, riders, notices, registrations etc. going forward. The rents for formerly rent controlled apartments are calculated using a standard DHCR formula, including a standard comparability four year rule component, but in not prior to October 22, 2005.

This bill would also establish applicable procedures for implementation under which an owner may obtain an accounting from the City as to the amount of the potential J-51 payback. In addition the owner shall be required to inform all affected tenants that they are Roberts tenants and of the refund or payback alternatives described above. The owner will be required to give the tenant an opportunity to respond and parties may attempt to reach a negotiated settlement, which shall be binding on both parties if consummated.

The bill also provides for a 4 year extension of the J-51 program.

Justification

The Roberts decision left many important issues affecting both tenants and landlords unresolved. However, in its decision the Court of Appeals declared if its decision created "unacceptable burdens," relief from those burdens would be a matter

for the Legislature. The decision has produced unacceptable burdens and this legislation is a response to that invitation. Building owners who deregulated apartments in the past seeking clarity would be given the opportunity to return to the City all of the J-51 tax benefits received for their buildings and to waive any future benefits which they otherwise would be due or to retain those same benefits. Base rate structures would be established and owners would be insulated from any and all liability resulting from Roberts for the apartments that were deregulated and tenants, under certain scenarios would retain rent stabilization rights for defined periods.

This legislation would create market certainty going forward and allow for parties to avoid many years of costly litigation pending. Building owners who, in good faith, deregulated thousands of apartments in New York City while receiving these tax benefits are subject, as the result of Roberts, to potential rent rollbacks and potentially enormous rent overcharge claims by thousands of tenants who entered into unregulated leases based on market prices with these landlords. The outstanding claims of these tenants undermine the financial well being of many buildings whose mortgage financing are based and evaluated upon rent roll and who are assessed by the City of New York based upon the previously accepted practice of allowing for deregulation in buildings receiving J-51 benefits. Since 1993 over 80,000 apartments throughout the City were deregulated as the result of high rent vacancy provisions and several thousand more have been deregulated through the process of high income, high rent deregulation none of which were challenged over the years by tenants or their representatives. The Citizens Housing and Planning Council estimates that between 19,000 and 37,000 deregulated units are in buildings that have received J-51 benefits. As a result many of these properties are facing financial risk as are city revenues. If Roberts is not remedied tenants who occupied these unregulated units, under no expectation of receiving rent regulatory protection, would receive a windfall. These tenants entered into their leases voluntarily often at levels in excess of the median rent regulated lease levels in the City. Without a legislative solution the subject properties will continue in a state of financial uncertainty which has effectively made many of these buildings unmarketable until such time as questions with regard to their future financial well being can be resolved. These uncertainties are not beneficial to any of the stakeholders. A legisla- tive solution is needed and this bill provides for a fair and equitable resolution of the issues discussed herein.

Prior legislative history

S.5763-2011- passed Senate.

Fiscal implications for state and local governments

None.

Effective date

This bill takes effect immediately.