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Ask Sam: Am I rent-stabilized if I live in a 421-g building in the Financial District?

A pending court decision could impact thousands of renters.

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Question:

My building in the Financial District was converted to residential several years ago under the 421-g tax abatement program. Should I be rent-stabilized? If so, what would that mean for my rent?

Answer:

As of now, 421-g buildings are not stabilized, but this could change due to a case that will be heard in the Court of Appeals, says Sam Himmelstein, a lawyer at the firm Himmelstein, McConnell, Gribben, Donoghue & Joseph LLP, who represents residential and commercial tenants and tenant associations.

From 1995 to 2006, commercial buildings in the Financial District were converted to residential use under the 421-g program, a tax abatement program designed to help revitalize the neighborhood.

“Landlords got tax breaks for doing so, but the issue is that for years, tenants were not treated as rent-stabilized,” Himmelstein says.

In buildings with similar tax abatement programs, like 421-a, tenants are rent-stabilized as a condition of the tax break. Serge Joseph, a partner at HMGDJ Law, has represented tenants from 421-g buildings in court, arguing that they should be stabilized. Decisions from the lower courts have been mixed; a mid-level appellate court previously ruled in the landlords’ favor, but now the case is going to the Court of Appeals, the highest court in the state; a decision is expected early next year.

“The legislation was enacted in 1995 and the language is pretty clear,” says Joseph. “But when the bill was making its way through the state Senate, months after it had passed the Democrat-controlled Assembly, then-Mayor Giuliani and Senate Leader Joseph Bruno, both Republicans, sent letters to each other interpreting the law in a way permitting for deregulation of most of the apartments in buildings participating in the program. They then had their letters read into the Senate record. And this has been what the landlords and some of the courts have accepted as the basis for interpreting the legislation to permit deregulation.”

If the Court of Appeals rules that the apartments should be stabilized, between 5,000 and 10,000 tenants will be affected.

“Almost all of these apartments had initial rents above the threshold for deregulation, which used to be $2,000, and then went up to $2,500 and then $2,700,” Himmelstein says. “The landlords’ argument is that the legislation never intended to make the apartments rent-stabilized because there was recognition they would already be above the vacancy deregulation threshold.”  

But if the Court of Appeals rules in favor of the tenants, they will then be under the protection of rent stabilization, which would mean new leases, stronger protections against eviction, and limitations on how much landlords can raise their rent, as set by the Rent Guidelines Board.

“There should be discussion and determination of what their legal rent should be, since they were not treated as rent stabilized in the past, and they may be entitled to recover from past overcharges,” Joseph says.

This would apply, too, to tenants in buildings where the tax abatement already expired, as long as they were residing there while it was still in effect.

The appellate division, which previously ruled against the tenants, granted the firm’s appeal to take the case to the Court of Appeals, which could bode well for residents of 421-g buildings.

“It could mean they’re not so sure about the decision, or think that the issue needs to be resolved by the highest court in state,” Himmelstein says.

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Read all our Ask a Renters Rights Lawyer columns here.


Sam Himmelstein, Esq., represents NYC tenants and tenant associations in disputes over evictions, rent increases, rental conversions, rent stabilization law, lease buyouts, and many other issues. He is a partner at Himmelstein, McConnell, Gribben, Donoghue & Joseph in Manhattan. To submit a question for this column, click here. To ask about a legal consultation, email Sam at [email protected] or call (212) 349-3000.

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