Real Estate - July 20, 2017

Tenants win 421g case at 90 West Street

Tenants win 421g case at 90 West Street

40 plaintiffs, backed by Tish James, sued owners of building managed by Kibel Companies for rent overcharges

90 West Street with Public Advocate Letitia James (Credit: 90 West and Getty Images)

In the second victory this month for tenants living in buildings built with the help of a 421g tax break, a Manhattan Supreme Court judge ruled Wednesday that the owners of 90 West Street illegally deregulated apartments and overcharged on rents for years.

In their case, the tenants of 90 West had the support of Public Advocate Letitia James and 37 state and city lawmakers.

In his decision, Judge Robert R. Reed wrote that the landlord, an entity tied to Kibel Companies, violated the “clear language” of rent-stabilization laws, which requires owners availing of 421g to keep apartment rent increases capped at levels set by the city’s Rent Guidelines Board.

Landlord attorneys have consistently argued that unlike other developer tax benefits such as 421a and J51, building owners receiving 421g should be allowed to practice so-called luxury decontrol, which allows for the removal of apartments from regulation once their legal rent crosses $2,700.

In his decision, Reed referenced a July 5 order in favor of tenants of Clipper Equity’s 50 Murray Street, where tenants successfully argued that the landlord had unlawfully deregulated apartments. In the same spirit, Reed said “interpreting section 421g to contain a high rent deregulation exception would render the rent stabilization protection virtually meaningless.”

Sherwin Belkin, a landlord attorney who represented the owners of 90 West Street, said he will appeal Wednesday’s decision. Belkin also represents Clipper Equity at 50 Murray Street, and will appeal that decision, too.

Taylor West, a tenant at 90 West who helped organize tenants who brought the lawsuit, said the tenants were “prepared to go the distance.”

Last August, James and more than three dozen elected officials, all Democrats, filed an amicus curiae memorandum in the case, expressing their support for the tenants of 90 West and cautioning that loose regulation of 421g would exacerbate the housing crisis. The judge allowed the amicus to be admitted into the case and cited it in his final decision.

For now, tenants at 90 West can once again consider themselves rent-stabilized, but damages will be determined by a special referee yet to be appointed by the court. And until an appeals court makes a ruling on 421g, future suits could go either way.

In May, Judge Shlomo Hagler ruled in favor of Kibel Companies at another of its buildings, 85 John Street, deciding that two plaintiffs were not entitled to a rent-stabilized apartment, in part because legislative intent demonstrated that 421g was designed to allow luxury decontrol.

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