The BroadsheetDAILY ~ News of Lower Manhattan ~ 2/18/20

This development stems from a June ruling by New York State’s highest court, which found that as many as 5,000 Lower Manhattan apartments had been illegally deprived of rent stabilization benefits. At issue is the 421-g subsidy program, which was designed to encourage Downtown’s transformation into a residential district, by offering rich incentives (chiefly in the form of tax abatements) to developers who converted former office buildings — south of a line connecting Murray Street to City Hall and the Brooklyn Bridge — into apartment towers. But it also offered a potent lure for tenants who moved into such buildings: Their apartments would be subject to rent stabilization regulations for as long as building owners received the tax benefits.

The language of the 421-g statute that covered all three of these buildings (and 25 other structures, comprising a total of nearly 5,000 apartments) was unequivocal, stating that “the rents of each dwelling unit in an eligible multiple dwelling shall be fully subject to control under such local law.” Ambiguity arose, however, when this was considered in the light of another part of New York’s housing law, known as “luxury decontrol,” which allowed for rent stabilization to be annulled on any apartment once the legal rent reaches a threshold of $2,700 per month.

The problem ensued when developers unilaterally set the rent on the vast majority of the apartments they had created in these newly converted buildings at higher than $2,700 per month. This had the effect of erasing the rent stabilization benefit that the legislature had intended for tenants (usually before the first renter moved in), while preserving the tax benefit for landlords. In the years since, landlords and developers have, in the aggregate, reaped a windfall of tens of millions of dollars from this program. But tenants received very little benefit or protection from the rent stabilization that had been intended for them.

	50 Murray Street

When residents at three rental buildings within the 421-g catchment (50 Murray, 90 West, and 53 Park Place) realized that they were being charged market rents, with no limits on increases, and no right to automatic lease renewal (along with other privileges that come with stabilization), while their landlords reaped a bonanza in tax benefits at public expense, they sued for reimbursement.

That suit wound its way through State courts for a decade, before being finally settled in June, when the New York Court of Appeals found (by a margin of six to one) that, “apartments located in buildings receiving tax benefits pursuant to 421-g are not subject to the luxury deregulation provisions of the Rent Stabilization Law.” The Court’s decision hinged both on a plain reading of the language in the 421-g statute, and a distinction between rent stabilization versus all the other provisions contained in the rent stabilization law. In effect, the judges found that the 421-g statue made the apartments created under this program subject only to rent stabilization itself, but not subject to other codicils within the law that governs it, such as vacancy decontrol.

The clarity provided by this ruling opened the door to multiple lawsuits. The first to file in the wake of the June decision were Bruce Hackney and Timothy Smith, tenants at Ten Hanover Square, who brought their complaint in October. They were followed by Tallen Todorovich, a renter in 63-67 Wall Street, a building with more than 1,000 units. Mr. Todorovich’s suit (like that of Mr. Hackney and Mr. Smith) is seeking to class-action status on behalf of all tenants in their respective buildings who are facing similar circumstances. Mr. Todorovich’s claim was filed in State Supreme Court over the weekend.

Ten Hanover Square

Court papers related to Mr. Todorovich’s lawsuit allege that of the 1,000 apartments in 63-67 Wall Street, only one is registered with City and State regulatory agencies as being subject to rent stabilization. Similar court filings in the case of Mr. Hackney and Mr. Smith indicate that none of the 500-plus apartments at Ten Hanover are registered as legally protected affordable units. The court complaint in Mr. Hackney and Mr. Smith’s case alleges that the landlord’s, “failure to follow rent regulations was part of a fraudulent scheme to deregulate apartments in the building.” That complaint goes on to argue that the landlord’s, “conduct demonstrates an attempt by the Defendant to circumvent the requirements of New York City’s rent regulations, all at the expense of the tenants residing in the building.” In the latest suit, Laurie Romo, a resident at 90 West Street, is seeking class-action status on behalf of other tenants in that building.

Mr. Ferrara, who is also an adjunct professor at New York Law School, told the Broadsheet that, “government may be asleep at the wheel, but justice is most certainly not. This lawsuit sends a clear signal that the days of cheating and profiteering at the expense of rent-regulated tenants are over.”

In a separate (but related) development, the owners of 50 Murray Street have petitioned the United States Supreme Court to overturn the New York State Court of Appeals decision that sided with FiDi renters last June. A brief filed on October 24 raises the question of, “whether the Fifth and Fourteenth Amendments prohibit courts, like other branches of government, from eliminating established property rights without just compensation.” This brief goes on to argue that, “the New York Court of Appeals effected an unconstitutional taking by holding, contrary to decades of settled law and practice, that properties receiving benefits under Section 421-g of the New York Real Property Tax Law are ineligible for deregulation under New York’s rent-stabilization laws.”

In November, lawyers for the tenants filed a brief in response, arguing that the underlying case, “does not involve any ‘important question of federal law,'” and that the U.S. Supreme Court, “does not have jurisdiction to overrule the New York Court of Appeals’ interpretation of a New York statute.” On this basis, the tenants are urging the U.S. Supreme Court to decline to hear the case brought by the landlords, which would have the effect of leaving the State Court of Appeals decision intact.

It appears likely to be several months before the U.S. Supreme Court announces even a preliminary ruling about whether it will grant the petition brought by the landlords. If the highest federal court agrees to consider their case, a final ruling would probably be handed down sometime later this year.

Centuries-Old Aesthetics to Converge with Cutting-Edge Technology at Historic Seaport Warehouse

	245 Water Street

Trinity Church has purchased a historic warehouse in the South Street Seaport district, which it intends to convert into a four-family residence, while also adhering to the environmentally rigorous “passive house” standard. The building, at 245 Water Street (between Peck Slip and Beekman Street), was originally built in 1836, after a fire destroyed the previous structure on that lot. The building was put up by the firm of Hendricks & Brothers, who operated cooper mines in Newark, but had their offices in Lower Manhattan. The family, who had anglicized their names from the Henriques of their native Spain, had been in the cooper business for generations, selling to customers like Paul Revere and Robert Fulton.

The building bade farewell to its commercial and industrial legacy in 2008, when it was initially converted into a two-family residence. But Joshua Levine, the owner for several years, put the property on the market in early 2019, asking $12.82 million. Last August, Trinity Church negotiated a price of $12.3 million and took possession.  To read more…

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	In spite of a putative crackdown on placard parking abuse that was slated to begin Monday, dozens of illegally parked cars bearing law enforcement placards remained on River Terrace this week.

Amid much fanfare, multiple City agencies recently announced that they would take part in a crackdown on illegal parking by government employees, whose personal vehicles bear placards that allow them to leave their cars blocking bus stops, crosswalks, fire hydrants, bike lanes, and lanes needed for use by fire trucks and ambulances.

By Tuesday, it appeared that dozens of law enforcement personnel who work in Battery Park City hadn’t heard, or perhaps knew better.