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Court Ruling Settles Key Question for Tenants, Landlords


Photo (cc) Dr.DeNo
The state's highest court cleared up a dispute about rent hikes at Peter Cooper Village.

Can New York landlords terminate rent stabilization while receiving tax benefits from the city? This question, which has been on the minds of landlords and tenants throughout New York, has now been answered by the state’s highest court. And the answer is "no." Building owners cannot reap the benefits of both tax abatements and destabilizing apartment rents at the same time.

The Court of Appeals opinion in a lawsuit brought by tenants of Peter Cooper Village and Stuyvesant Town will have widespread repercussions. Tenants who may be affected are pleased with the result, while landlords predict there will be great upheaval in New York’s housing market.

Writing in the New York Law Journal attorney Warren Estis (who has represented the defendants in the past and who filed a brief in this case on behalf of the landlord-based Rent Stabilization Association of New York City) said, "The decision has sent shock waves throughout New York City’s real estate and financial communities."

A Citywide Impact

The case of Roberts v. Tishman Speyer Properties, L.P. involves approximately 4,000 apartments in the Peter Cooper Village and Stuyvesant Town complexes, which cover about 80 acres between 14th and 23rd streets along the East River, but it is binding on all landlords who have rent stabilized apartments and also receive public benefits, in the form of tax relief.

The majority of the high court judges wrote, "Building owners who received [tax] benefits forfeit their rights under the luxury decontrol provisions if their buildings were already subject to the Rent Stabilization Law."

Owners remove apartments from the protection of the Rent Stabilization Law and Code so they can raise rents to market levels.

The tenants claimed that the building owners improperly and unlawfully raised rents on thousands of apartments, bringing them to market level while the property owners received public benefits under New York City’s J-51 tax abatement program, part of the Real Property Tax Law. The plaintiffs "sought a declaration that units in the Peter Cooper Village and Stuyvesant Town properties would remain rent stabilized 'until the last applicable . . . benefits period . . . in or about 2017or 2018.'" They also sought rental overcharges of $215 million and attorney’s fees.

Metropolitan Life Insurance Co. built the affordable housing in the 1940s after World War II. The apartments had been rent stabilized since 1974, when the Rent Stabilization Law came into existence, the tax breaks came in 1982. While taking advantage of the J-51 entitlement since 1992, the owners had realized public benefits of $24.5 million.

Soon after Metropolitan Life sold Peter Cooper Village and Stuyvesant Town to Tishman Speyer Properties, L.P. in 2006 for $5.4 billion, the plaintiff tenants commenced their lawsuit. They based their challenge on the fact that, under Met Life ownership the buildings began receiving tax benefits in the form of exemptions and/or abatements designed to encourage housing rehabilitation and improvements,

Parsing the Regulations

The lower trial court originally dismissed the lawsuit. The landlords’ entitlements, the first judge found, were based largely on advisory information and interpretations issued by the state Division of Housing & Community Renewal, a finding the Court of Appeals later rejected.

The 1993 Rent Reform Regulation Act facilitated rent destabilization. The act provided for “luxury decontrol” or deregulation of higher priced apartments. This applied to vacant apartments that had most recently rented for at least $2,000 a month or occupied apartments with a monthly rental of at least $2,000 whose residents had an annual income of more than $250,000 (later reduced to $175,000).

But there was a carve-out even to the exceptions. Deregulation under the Reform Act "shall not apply to housing accommodations that become or became rent stabilized by virtue of receiving tax benefits" under J-51. In other words, under existing law and codes, rent stabilized apartments cannot be removed from regulation when the building owner benefits from city tax relief.

Landlords, however, began to de-stabilize apartments. They were relying on a State Department of Housing and Community Renewal’s interpretation of an amendment to the Reform Act, which held that "participation in the J-51 program only precluded luxury decontrol where the result of such benefits is the sole reason for the accommodation being subject to rent regulation." The state then amended this to say, "Luxury decontrol shall not apply to housing accommodations which became or become subject to the Rent Stabilization Law and this code solely by virtue of the receipt of tax benefits."

The semantic analysis and parsing of words focused on "become or became," and "solely." The housing department had distributed a fact sheet specifying that "apartments that are subject to rent regulation only because of the receipt of [J-51 benefits] do not qualify for high rent decontrol." The defendants took the state's position to mean that they could take rent-stabilized apartments to market levels despite receiving public benefits. The Court of Appeals, however, gave no "deference" to the agency’s views.

Now, while the main question has been answered and the State Court of Appeals has ruled that landlords are not entitled to de-stabilize apartments and get city tax breaks at the same time, the lower courts, which administrators say are unprepared for a new volume of cases, will be expected to resolve many remaining questions. These include whether the decision is retroactive and whether future court proceedings will be treated as a class action. In the meantime, efforts may be made to have the law changed legislatively in the unpredictable environment of Albany.

The tenants in Roberts v. Tishman Speyer were represented by Alexander Schmidt, Speyer Property by Jay B. Kasmer; and Metropolitan Life Insurance by Alan Mansfield. The court also accepted briefs from various interested organizations on both sides of the issue, including the Legal Aid Society, the Rent Stabilization Association of New York City, Office of Manhattan Borough President and the Urban Justice Center.

Emily Jane Goodman is a New York State Supreme Court Justice

Crime Falls, but Why -- and at What Cost?


"Crime is down," is a phrase New Yorkers are getting used to hearing. The notorious peaks in crime during 1970s and '80s, when the city was thought of as dangerous and neglected, gave way in the late 1990s to a steady decrease that has given New York's politicians something to crow about. Mayor Michael Bloomberg certainly hasn't been shy about taking credit for the increased perception of safety on city streets.

"Under Mike, New York City's crime rate is at its lowest level in over 40 years," trumpets Bloomberg's campaign website. "Crime is down nearly 30 percent since he took office. New York is the safest big city in the nation and, under Mike Bloomberg, it will continue to be. Crime in New York continues to decline, including by 12 percent in the first six months of this year."

It's not that anyone disputes those crime statistics -- it's that some experts are not convinced that Bloomberg and his police department should get all the credit for the success. At the same time, civil rights groups say that while the city may be getting safer, the rights of many New Yorkers are being eroded.

How Low Can It Go?

"At the end of 2001 the consensus was that crime could not go any lower," said Deputy Police Commissioner Paul Browne, "but now we are down 35 percent lower than any of the Giuliani years, and the Giuliani administration built its reputation around crime fighting."

In fact, Browne said, if current trends continue, New York is on track this year to have the lowest homicide rate since 1962, when modern record keeping began.

It's not as if conditions seem exactly right for a steady decline in crime.

Bloomberg was elected following 9/11, when the new reality of terrorist threats diverted law enforcement funding, and the economy began to crater. Now, after several good economic years, the economy suffers from an even worse recession. Even the size of the police department has declined from a high of around 40,000 to around somewhere above 30,000 officers, but for the most part, major crime has continued to decline.

Preliminary FBI crime statistics show that New York remains the safest big city in the country, with the lowest crime rate per capita of the nation's 10 largest cities. Major felony crime has continued to drop from a five-year high of 136,491 in fiscal year 2005 to a low of 110,828 in fiscal year 2009.

How Did They Do It?

Andrew Karmen, a sociology professor at John Jay College of Criminal Justice in New York, said he has no explanation for how the crime rate remains low while job losses and poverty mount. The city's unemployment rate is the highest it has been in almost two decades. "No one knows for sure, but some entities like the confusion … because they can take credit for" the drop, said Karmen.

"The mayor has a very good relationship with his police commissioner," said Browne. "That may be obvious, but we speak the same language as far as technology and how it can advance police work."

Browne said that the application of technology in crime fighting has increased under Bloomberg and helped reduce crime. He added that Bloomberg "instinctively knows the application of technology" and said that under Bloomberg the department has made data more accessible and provided real time mapping for officers.

The Real Time Crime Center collects tips from the public and information about crime in the city and combines it with computer mapping to give officers a better understanding of where crime is happening.

Karmen, however, wonders why New York doesn't do as some other cities do and make crime mapping data available to the public on its website. Karmen said there is a certain lack of "transparency" under the Bloomberg administration. According to Karmen, the police department also has stopped releasing a report that details the percentage of cases of major crime it solves each year.

A recent article in the New York Post stated that the department has about a 70 percent clearance rate for murder cases. In other words, 30 percent of all murders go unsolved. That number, as police officials point out, is above the national average of around 60 percent. But New York has historically performed better.

"They take credit for all these crimes they say they prevent," said Karmen, "but murder clearance has slipped from a high in 1998." At that time, Karmen said, the clearance rate was in the 80 percent range.

"The last report was issued in 2001," said Karmen. "Why did they stop putting it out? I know some information doesn't come out in a post-9/11 world, but why should information about basic crime be suppressed?"

Getting Rid of Guns

According to Browne, Bloomberg's crusade against illegal guns has made a major impact on crime in the city. With the help of his organization, Mayors Against Illegal Guns, the mayor has waged a full-out assault on the influx of guns into New York from out of state, and Browne said the impact can be felt on the street. "Stopping the flow of illegal guns into the city has been extremely important," said Browne.

"When there is pressure on the supply, you see the price go up. We now see a gun that you could purchase legally for around $155 and would normally sell on the street for around $230 is now selling for six to seven times that amount," he said.

Despite this, gun violence continues to be a problem in low-income areas. Experts like Karmen say that preventing gun violence in those neighborhoods cannot be achieved exclusively through police work. Instead, they say, social ills must be addressed through the education and economic opportunity to break the cycle of violence.

Civil rights watchdogs say that part of the police strategy under Bloomberg to reduce gun crime -- stop and frisk -- has not only violated the privacy of residents of poor neighborhoods but done irreparable damage to their futures.

Last year the police conducted 531,159 stop and frisks -- five times the number they conducted in 2002. And the majority (51 percent) of those people stopped were black. Thirty-two percent were Hispanic and 11 percent white.

Other large cities also use stop and frisks where people are asked for information and sometimes searched. The widespread stops began under the Giuliani administration as part of its effort to reduce crime by targeting nuisance offenses. The practice has steadily increased under Bloomberg.

"The mayor gives the police department carte blanche," said Donna Lieberman of the New York Civil Liberties Union, "and it results in the stop of hundreds of thousands of innocent New Yorkers each year."

Browne vehemently disagrees. "Nationally, stop and frisk has been a traditional crime fighting tool. There are a lot of things that are misunderstood about it," he said, adding that critics "have been race baiting to an extent. They say it is disproportionate by race, but they never say it is disproportionate by gender. Should we be stopping 50 percent women?"

Browne said the stops are "not disproportionate according to the descriptions given by victims."

The issue of stop and frisk has come up on the campaign trail this year with both Bloomberg and his challenger William Thompson describing the process as useful but in need of strong oversight.

Advocates say that stop and frisks negatively and unfairly affect minority communities. They say during stop and frisks officers will ask suspects to show anything they should not have. Then suspects who take marijuana out of their pockets so it is in public view suddenly can be charged with a misdemeanor for smoking and or displaying marijuana in public.

Karmen said that the police disproportionately stop and frisk minority suspects. "Studies show more white middle class kids smoke, but there is selective enforcement," said Karmen, adding, "Hispanics and blacks get records, preventing them from getting jobs and loans for college." The Civil Liberties Union released a target="new">report in 2008 showing what they say is a racially biased "marijuana arrest crusade."

The police trumpet the arrests as part of its plan to "get guns off the street, but they are pot-related," according to Karmen. The department, however, says the program has gotten hundreds of guns off the street, 747 handguns in 2008 alone.

Big Brother

Civil rights advocates say that the Bloomberg administration has slowly encroached on the privacy of city residents and expanded the role of the police. For example, they note that Bloomberg stationed5,000 school safety assistants and 200 uniformed police officers in city schools to combat school violence.

The city has hailed the program citing statistics that show violence in school has decreased 22 percent from 2002 to 2008. United Federation of Teachers President Randi Weingarten has celebrated the effort, telling the New York Post, "The work we've done together with the NYPD has, by and large, created safer schools. We've figured out how to defuse situations."

But the Civil Liberties Union says the city has put school discipline in the hands of the police department. There have been reports of children under the age 16 being arrested, handcuffed and dragged out of the classroom because of non-violent behavior. Lieberman said that the arrests "stigmatize and humiliate" children.

Circling the Cameras

Beyond schools, the police have become involved in the lives of ordinary New Yorkers through the creation of the "Ring of Steel" or the Lower Manhattan Security Initiative as it is officially known. The initiative, launched in 2007, is a surveillance system made up of cameras designed to track vehicles, register license plates and keep tabs on suspicious behavior. The system is modeled after one used in London that lead to quick arrests following the subway bombings there.

This year, Bloomberg announced plans to expand the program to midtown from 30th to 60th streets, angering civil liberties activists.

"This is a massive infusion of surveillance program directed at us on the streets of Manhattan, and there are no privacy protections in place against abuse," said Lieberman. The Civil Liberties Union wants firm details about how much data will be collected on innocent people, how the city and federal governments plan to use the information collected, how long they can keep it, and how much federal money is being devoted to the project. The Civil Liberties Union has demanded that the City Council establish a review process to make the project more public.

"The City Council ought to be having hearings and the mayor ought to hear New Yorkers about it," said Lieberman. "New Yorkers are too sophisticated to just say yes."

"We cannot afford to be complacent," Bloomberg said announcing the expansion earlier this month. To reinforce that argument, Bloomberg and the police say that law enforcement has thwarted numerous terrorist plots against the city and note that the city has not been attacked since 9/11.

Police Commissioner Ray Kelly has said that surveillance systems are popular with the public. "Virtually every time it's polled, the public, over 80 percent approval rating on the part of the public for cameras in public places," said Kelly.

But Lieberman said police under Bloomberg have used the fight against terrorism to win support for questionable practices.

"Invoking the terrorist threat gives politicians a lot of leeway with the American people," she said, adding "We need more sunlight on the program itself. It seems like they are creating bigger haystacks to find needles."

New Law Protects Assets During Divorce


The mere mention or even the thought of divorce often sets off a race to the bank with each spouse trying to get hold of assets ahead of the other -- and before either one appears before a judge.

But effective this month, as soon as an action for divorce is commenced, the parties cannot take any steps to change their financial situation. Under a bill passed by the state legislature this year, the minute a husband or wife sues for divorce by filing a summons in New York State Supreme Court, he or she is barred from altering the economic status quo of the marriage. As soon as the other spouse receives that summons and a form order, it is too late for him or her to move money or other property to shield it from claims by the plaintiff.

Until the recent enactment of the new statute and implementing court rule, the less wealthy spouse, usually the wife, had to seek an injunction from a state Supreme Court justice, to bar the richer partner from removal, sale or other disposition of assets. This meant she had to seek a court order, incurring legal fees and losing time, before getting any financial protection. During that time, stocks, bonds and cash could vanish.

By maintaining the status quo until the divorce case is actually heard by a judge, and evidence of entitlement and equity can be presented, the new statute avoids costly motions at the beginning of the case. The race to the courthouse, like the race to the bank, may no longer be an emergency.

The change does not affect applications for spousal support, child support or eventual equitable distribution of marital property; it simply means that there is an automatic stay to prevent hiding or liquidation of assets.

The Letters of the Law

As the state Judicial Committee on Women in the Courts explains it, "Both parties are prohibited from selling property, mortgaging real estate, depleting bank accounts, invading pension funds, running up credit card debt, or removing a spouse or child from life insurance and medical plans."

The Administrative Order of the Chief Administrative Judge of the Courts, which implemented the change in the law, spelled it out: "Neither party shall sell, transfer, encumber, conceal, assign, remove or in any dispose of, without the consent of the other party in writing, or by order of the court, any property (including, but not limited to, real estate, personal property, cash accounts, stocks, mutual funds, bank accounts, cars and boats) individually or jointly held by the parties, except in the usual course of business, for customary and usual household expenses or for reasonable attorney's fees in connection with this action."

The statute covers retirement accounts, pension accounts, annuities and insurance. However, there is an exception: All of this can be overridden with the consent of the other party in writing, or by order of the court.

Saving Time and Money

Jacqueline W. Silbermann, former administrative judge for matrimonial matters in New York State, had been attempting to implement this change since 1997 when she observed it working in Connecticut. Since approximately 2000, courts in the Buffalo area have adopted a similar rule, but statewide acceptance required legislative action. That did not happen until now.

"The change puts the burden on the person who wants to change the status quo, rather than the one seeking to keep things in place, the one saying 'let's not move bank accounts, insurance or anything yet,'" said Silbermann "This requires nothing," she adds, "because if you want to change things, you can go to court, and if necessary a judge can decide." Not only is the new way more efficient, she emphasized, but it will eliminate the danger of one angry spouse removing the other from insurance, for example.

For judges it will be a relief to have litigants' assets preserved without court intervention and court orders, especially since most matrimonial judges in New York City have hundreds of cases on their calendars. Ultimately the judges still will order the division of property, but it need not be at the start of the case.

Husbands and wives who might some day divorce are not yet aware of the new law on assets and probably don't realize that the change in court procedures could save them money on legal fees. This could please the less affluent spouse in particular.

At the same time, "monied" spouses, if they are the defendants, may be surprised when they learn that not only are they getting divorced but also that they won't be able to move or liquidate their accounts until later in the proceedings. Documentary proof will establish any withdrawals or transfers made after the date of the serving of a summons. Of course, the new law and rule offer the non-monied spouse, the one who may be seeking equitable distribution, a degree of security from knowing that marital funds cannot be depleted while the couple awaits a divorce settlement.

Lawyers may be glad that their clients have some certainty and that they don't have to rush into litigation in Supreme Court (not Family Court) to obtain an injunction. In the past, that required the person seeking it to establish that there was the risk that marital assets would be disposed of or minimized to the detriment of the party seeking equitable distribution.

Bringing such motions has been costly, particularly with legal fees averaging $250 to $800 an hour. But lawyers have not publicly objected to the loss of legal fees they would otherwise bill for.

Still, most divorces do not come by surprise. It may well be that individuals who expect to divorce have already consulted lawyers and accountants and have moved money or run up credit card bills in advance of the critical date. There is probably no way to keep all the acrimony over finances out of divorce.

Emily Jane Goodman is a New York State Supreme Court Justice



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