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Real Estate Economics • October 23, 2009

Court ruling on rent-controlled apartments could refund $200M to tenants who overpaid

 

Court ruling on rent-controlled apartments could refund $200M to tenants who overpaid
BY Robert Johnson and Larry Mcshane
DAILY NEWS WRITERS
Friday, October 23rd 2009
Siegel for News
 
The Court of Appeals ruling effectively means that thousands of city tenants were overpaying for rent for years and may be entitled to some $200 million in refunds.
The owners of Stuyvesant Town
The 4-2 Court of Appeals ruling could affect 350,000 tenants citywide and provide Stuy Town and Peter Cooper residents with $200 million in rent refunds.
"A tremendous victory," said lawyer Alexander Schmidt, who represented nine tenants in rent-controlled apartments at the middle-class Manhattan complexes.
"In our view, the tenants are entitled to have their past years of rent overpayment refunded."
The class-action suit claimed owners Tishman Speyer Properties and BlackRock Realty, along with prior owner MetLife, were not entitled to tax breaks while pulling apartments from rent- control protection.
The Court of Appeals agreed, while acknowledging its decision may cause "dire consequences" for the city's real estate industry.
Joseph Strasburg, president of the Rent Stabilization Association, said the ruling was "potentially devastating" to landlords - and could eventually impact the city tax rolls.
The decision may force owners to slash rents while simultaneously paying back past overcharges.
Before that happens, more litigation appears inevitable.
The Court of Appeals returned the case to its trial judge to determine damages.
Rents must be reset at about 4,000 units in the two complexes, where some prices were boosted by $2,500 a month, Schmidt said.
Tenants in Stuyvesant Town hailed the ruling.
"They tried to screw the little guy, and we won," said retiree Karen Morse, 66. "This outcome touches my heart."
The J-51 tax breaks were created 54 years ago to encourage landlords to maintain buildings through renovations or upgrades like new boilers or asbestos removal.
Tishman Speyer, which paid a record $5.4 billion for the two properties in 2006, issued a statement calling the ruling "an unfortunate outcome for New York."
"The ruling, which reverses 15 years of government practice, raises a number of difficult issues that will need to be resolved by the courts and various agencies in the coming years," the statement read.
 
 
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