A Blow to Landlords
October 22nd, 2009
Residents of rent-regulated apartments got a rare piece of good news this morning as the state’s highest court ruled that Tishman Speyer and Black Rock Realty improperly raised rents on thousands of apartments in Stuyvesant Town and Peter Cooper Village.
The tenants’ good news could spell serious problems for the building owners, though. The decision takes them “closer to defaulting on $3 billion in loans they used to purchase Manhattan’s largest apartment complex,” Bloomberg.com reported.
The property has a current market value of $1.99 billion, according to one estimate. Tishman and Black Rock bought it for $5.4 billion in 2006. That investment has come to look increasingly unwise as the housing market has collapsed, fewer tenants moved out than the owners anticipated and the partnership faced this legal challenge.
The court, in a four to two ruling, determined that the new owners of the huge complexes could not both accept tax breaks for the apartments and raise the rents to market levels. The plaintiffs in the case argued that “the current and former owners of the properties, respectively, were not entitled to take advantage of the luxury decontrol provisions of the Rent Stabilization Law (RSL) while simultaneously receiving tax incentive benefits under the City of New York’s J-51 program. We agree,” the majority opinion said.
In 2007, nine residents of the complex sued the current owners, along with the former owner, Met Life, on behalf of current and former tenants. Noting that some 2,800 apartment in the complex had been “luxury decontrolled,” the plaintiffs wanted all homes in the complex to remain rent stabilized until the last tax breaks under the J-51 program run out in 2017 or 2018 and also sought to have to $215 million in rent overcharges refunded.
The decision may have repercussion far beyond the blocks on Manhattan’s East Side. It “could also affect landlords of as many as 80,000 apartments across the city who also may have improperly raised rents and deregulated apartments while receiving special tax breaks,” City Room reported.
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