Tenants in a Harlem building complex just got a landmark settlement that could bode well for other New York City renters whose rent-stabilized apartments were illegally deregulated.
Four hundred current and former tenants of Lenox Terrace received $1.1 million in the settlement of a class action lawsuit against the owners of the six-building complex.
“The lawsuit arose out of the Roberts case, which was a Court of Appeals decision that said all apartments in buildings getting J-51 tax abatements were rent stabilized,” says Sam Himmelstein, a lawyer who represents residential and commercial tenants, tenant associations, and co-op shareholders.
J-51 abatements are tax incentives given to landlords to repair and renovate older buildings. A condition of the tax break is that tenants in the building receive limited rent increases and stabilized leases.
And back in 2010, the Court of Appeals ruled that landlords receiving J-51 abatements could not raise rents on their apartments to market rate using “luxury decontrol,” a process which allowed them to destabilize apartments when the rent was above $2,000 and the tenant moved out, or the tenant had an annual income above $250,000. (These rent and income thresholds changed in subsequent years.)
This ruling, decided in favor of tenants in the Stuyvesant Town complex, meant that thousands of apartments throughout New York City had been illegally deregulated, and tenants were entitled to recoup rent overcharges.
“Other class action lawsuits were commenced based on that decision, and we’ve been litigating five of them,” Himmelstein says.
For tenants of the Lenox Terrace complex, the settlement followed a decade of litigation. Not only will they receive rent refunds, but they will also get rent reductions and continued rent stabilized status.
“Our firm had represented the tenants association at this building for many years prior to this class action, and they were very helpful with identifying members of the lawsuit and the analysis we did upfront,” says David Hershey-Webb, partner at HMGDJ Law who litigated the case. “This is a great example of the benefits of having a strong, organized tenants association.”
Lenox Terrace had received two different J-51 abatements, and while the owner was receiving the tax breaks, they rented units as market-rate apartments. As a result of the lawsuit, these tenants will now have their rent reduced by up to hundreds of dollars a month.
“It’s possible that there are other buildings like this, where tenants have not come forward as a group,” Hershey-Webb says. “They may be paying market rents and not know they’re entitled to something better.”
Some renters may not want to go to the trouble of researching their building, forming a tenants association, and filing a lawsuit, but the benefits of becoming rent stabilized are significant: Stabilized tenants can generally stay in their apartments for as long as they want, their rent is increased by only small percentages, and they could pass on their apartments to family members.
“In this current climate of economic uncertainty, it could result in people questioning whether they’re being charged the correct rent,” Hershey-Webb says.
You can see whether your building has received a J-51 abatement on the city Department of Finance website. If your landlord was receiving tax breaks when you moved in, your apartment should be stabilized, and you may be entitled to getting back rent overcharges. And forming a tenants association, if there isn’t already one in your building, is a good way to put pressure on your landlord and share the costs of hiring an attorney.
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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 or call (212) 349-3000.