The Court of Appeals has ruled that the owners of Stuyvesant Town, shown here in 2006, may have to pay an estimated $200 million in rent overcharges and damages to tenants of some 4,000 apartments.
The New York State Court of Appeals ruled yesterday that the owners and former owner of the sprawling Stuyvesant Town and Peter Cooper Village apartment complexes east of First Avenue between 14th and 23rd Streets improperly began charging "market" rents and may have to pay about $200 million in rent overcharges and damages to about 4,000 tenants.
Four of the court's six judges held that the owners improperly raised rents above certain levels while receiving J-51 tax breaks from the city for major renovations.
The Appellate Division of the State Supreme Court ruled in March that the landlords had indeed improperly raised rents and decontrolled apartments and yesterday's decision upheld that ruling.
In its decision, the Court of Appeals acknowledged that the developers had predicted "dire circumstances for our ruling, for themselves and the New York City real estate industry generally." However it added that "if the statute imposes unacceptable burdens, defendants' remedy is to seek legislative relief."
In a statement, Tishman Speyer Properties said that the decision as "an unfortunate outcome for New York," adding that "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 government agencies in the coming months and years."
An article in today's edition of The New York Times by Charles V. Bagli said that "Alexander H. Schmidt, a lawyer who represented the original nine plaintiffs in the class-action case, said he was thrilled by the decision, not just for his clients but also for the 'thousands of current and former market-rate tenant class members they represent.' 'The court's ruling is a landmark victory for them and for similarly situated tenants citywide,' he said. 'We hope that, now that their appeals on the governing issue of law have been exhausted, Jerry and Rob Speyer, the Tishman organization and MetLife will do the right thing by the tenants, and for the good of the city, by acting quickly to resolve all of the class members' rent overcharge claims by settling this case, and ending the litigation.'"
Previous reports have indicated that the reserve fund for the complexes of the partnership between Tishman Speyer Properties and BlackRock has been dwindling and that the partnership "could default."
In their dissent Judges Susan P. Read and Victoria A. Graffeo said that the notion that the owners' "losses ultimately will turn on legal issues and defenses yet to be resolved is cold comfort." "In the absence of meaningful legislative action, uncertainty will reign in an industry already rocked by the bursting of the great residential real estate bubble," the dissent continued.
Landlords can "deregulate" apartments with "stabilized" rents when the rent for a vacant unit is $2,000 or more or when the rent of an occupied unit is above $2,000 and the tenant's household income is more than $175,000 two years in a row.
About 6,875 of the 11,227 apartments at the complexes are rent regulated. The complexes include 110 mid-rise red-brick buildings.
The New York State Court of Appeals ruled yesterday that the owners and former owner of the sprawling Stuyvesant Town and Peter Cooper Village apartment complexes east of First Avenue between 14th and 23rd Streets improperly began charging "market" rents and may have to pay about $200 million in rent overcharges and damages to about 4,000 tenants.
Four of the court's six judges held that the owners improperly raised rents above certain levels while receiving J-51 tax breaks from the city for major renovations.
The Appellate Division of the State Supreme Court ruled in March that the landlords had indeed improperly raised rents and decontrolled apartments and yesterday's decision upheld that ruling.
In its decision, the Court of Appeals acknowledged that the developers had predicted "dire circumstances for our ruling, for themselves and the New York City real estate industry generally." However it added that "if the statute imposes unacceptable burdens, defendants' remedy is to seek legislative relief."
In a statement, Tishman Speyer Properties said that the decision as "an unfortunate outcome for New York," adding that "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 government agencies in the coming months and years."
An article in today's edition of The New York Times by Charles V. Bagli said that "Alexander H. Schmidt, a lawyer who represented the original nine plaintiffs in the class-action case, said he was thrilled by the decision, not just for his clients but also for the 'thousands of current and former market-rate tenant class members they represent.' 'The court's ruling is a landmark victory for them and for similarly situated tenants citywide,' he said. 'We hope that, now that their appeals on the governing issue of law have been exhausted, Jerry and Rob Speyer, the Tishman organization and MetLife will do the right thing by the tenants, and for the good of the city, by acting quickly to resolve all of the class members' rent overcharge claims by settling this case, and ending the litigation.'"
Previous reports have indicated that the reserve fund for the complexes of the partnership between Tishman Speyer Properties and BlackRock has been dwindling and that the partnership "could default."
In their dissent Judges Susan P. Read and Victoria A. Graffeo said that the notion that the owners' "losses ultimately will turn on legal issues and defenses yet to be resolved is cold comfort." "In the absence of meaningful legislative action, uncertainty will reign in an industry already rocked by the bursting of the great residential real estate bubble," the dissent continued.
Landlords can "deregulate" apartments with "stabilized" rents when the rent for a vacant unit is $2,000 or more or when the rent of an occupied unit is above $2,000 and the tenant's household income is more than $175,000 two years in a row.
About 6,875 of the 11,227 apartments at the complexes are rent regulated. The complexes include 110 mid-rise red-brick buildings.
Architecture Critic
Carter Horsley
Since 1997, Carter B. Horsley has been the editorial director of CityRealty. He began his journalistic career at The New York Times in 1961 where he spent 26 years as a reporter specializing in real estate & architectural news. In 1987, he became the architecture critic and real estate editor of The New York Post.
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