Sie sind auf Seite 1von 29

Supreme Court, New York County

Index No.: 108052/06

State of New York


Court of Appeals

AM Y ROBERTS, TH OM AS I. SHAM Y, DAVID and


ANNM ARIE HUNTER, M ARGARET CARROLL,
KELLEY and TO NY LANNI, EVAN HORISK and
BETH R OSNER GIOKAS, on Behalf of Them selves
and All Others Similarly Situated
Respondents,

-against-

TISH M AN SPEYER PROPERTIES, L.P., PCV ST


OW NER LP, M ETROPOLITAN INSURANCE AND
A N N U ITY CO M PAN Y, and M E TR O P O LIT A N
TO W ER LIFE INSURANCE COM PANY,
Appellants.

B R IE F O F A M IC U S C U R IA E M IT C H EL L -L A M A R E S ID E N T S C O A L IT IO N
IN O P P O S IT IO N T O T H E A P P E A L

COLLINS , DOBKIN & MILLER, LLP


Attorneys for Am icus Curiae
M itchell-Lam a Residents Coalition

277 Broadway, Suite 1410


New York, New York 10007
Tel: (212) 587-2400
Fax: (212) 587-2410

Of Counsel:
Seth A. M iller August 31, 2009

P R IN T E D A N D R E P R O D U C E D O N R E C Y C L E D P A P E R
TABLE OF CONTENTS

PRELIMINARY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

POINT I: THE LANGUAGE EXEMPTING J-51 ASSISTED


APARTMENTS FROM DEREGULATION IS
DESIGNED TO HARMONIZE WITH THE
REQUIREMENT OF THE J-51 PROGRAM THAT
EVERY J-51 ASSISTED APARTMENT REMAIN
REGULATED THROUGHOUT THE BENEFITS
PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

A: The Statutory Framework.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

B: The Purpose of the J-51 Program. . . . . . . . . . . . . . . . . . . . . . 18

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

-i-
TABLE OF AUTHORITIES

CASES

111 Fourth Ave. Assoc. v. Finance Administration of the City of New York,
101 Misc.2d 950, 422 N.Y.S.2d 558 (Sup. Ct., NY Co., 1979).. . . . 19

31171 Owners Corp. v. HPD, 190 A.D.2d 441, 599 N.Y.S.2d 19 (1st Dept.,
1993). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Alwalt Realty Corp v. Boyland, 5 Misc.2d 1061, 160 N.Y.S.2d 504 (Sup. Ct.,
NY Co., 1957).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Consolidated Edison Co. v. NYS Dept. of Environmental Cons., 71 N.Y.2d


186, 524 N.Y.S.2d 409 (1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Davis v. Mich. Dept. of Treasury, 489 U.S. 803 (1989). . . . . . . . . . . . . . . . . . . . . . 9

Demette v. Falcon Drilling Co., 280 F.3d 492 (5th Cir., 2002).. . . . . . . . . . . . . . . . 8

East-West Renovating Co. v. DHCR, 16 A.D.3d 166, 791 N.Y.S.2d 88 (1st


Dep’t, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

KSLM-Columbus Apartments, Inc. v. DHCR, 5 N.Y.3d 303, 801 N.Y.S.2d


783 (2005).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

LaGuardia v. Cavanaugh, 53 N.Y.2d 67, 440 N.Y.S.2d 586 (1981) . . . . . . . . . . . 6

Local Law No. 60 [1975] of City of NY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Lower Manhattan Loft Tenants v. New York City Loft Board, 66 N.Y.2d 298,
496 N.Y.S.2d 979 (1985). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Pultz v. Economakis,10 N.Y.3d 542, 860 N.Y.S.2d 765 (2008). . . . . . . . . . . . . . . 8

Sack v. DHCR, 250 A.D.2d 537, 673 N.Y.S.2d 420 (1st Dept., 1998). . . . . . . . . . 12

- ii -
State of NY v. Fashion Place Assoc., 324 A.D.2d 280, 638 N.Y.S.2d 26 (1st
Dept., 1996). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

- iii -
STATUTES AND REGULATIONS

L 1955, Ch 410. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

L 1985, chs 288 and 289. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

L 1993, ch 253. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 5, 14

Local Law 16 of 1969 (the “Rent Stabilization Law”). . . . . . . . . . . . . . . . . . . . . . . 6

Local Law No. 118 [1955] of City of NY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Local Law No. 16 [1969] of City of NY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

New York City Administrative Code §11-243. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

New York City Administrative Code §11-243 (b)(2) and (3). . . . . . . . . . . . . . . . 19

New York City Administrative Code §11-243 (b)(5).. . . . . . . . . . . . . . . . . . . . . . 19

New York City Administrative Code §11-243 (b)(9).. . . . . . . . . . . . . . . . . . . . . . 19

New York City Administrative Code §11-243 (d)(8)(c). . . . . . . . . . . . . . . . . . . . 20

New York City Administrative Code §11-243(d)(6). . . . . . . . . . . . . . . . . . . . . . . 20

New York City Administrative Code §11-243(d)(7). . . . . . . . . . . . . . . . . . . . . . . 20

New York City Zoning Resolution §12-10.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

NYC Admin. Code §11-243(a)(2).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

NYC Admin. Code §11-243(i)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Real Property Tax Law §489 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 15, 16

Real Property Tax Law §489 (7) (b) (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

- iv -
Real Property Tax Law §489 (7)(b)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Rent Stabilization Law § 26-501.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Rent Stabilization Law §26-504 (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 6, 12, 15

Rent Stabilization Law §26-504.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3, 8

Rent Stabilization Law §26-504.2.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3, 8

-v-
PRELIMINARY STATEMENT

Amicus curiae Mitchell-Lama Residents Coalition (“MLRC”) respectfully

submits this brief in opposition to the appeal of Tishman Speyer Properties, L.P., et al.

(“Appellants”) from the decision and order of the Appellate Division, First

Department dated March 5, 2009 (the “Decision”). The Decision reversed the

dismissal of the Complaint of Plaintiffs-Respondents Amy Roberts, et al

(“Respondents”). The Complaint alleged that their apartments had once been rent

stabilized and were rented to them as deregulated, but that the fact that they are

located in buildings that now receive and for decades have repeatedly received tax

exemptions and abatements under the provisions of New York City Administrative

Code §11-243 (the “J-51 Ordinance”) makes them exempt from deregulation pursuant

to Rent Stabilization Law (“RSL”) §§26-504.1 and 26-504.2.

MLRC is a statewide membership organization composed of the Tenants’

Associations of 33 current and former Mitchell Lama developments, as well as

approximately 5,000 individuals living in those developments.

MLRC submits this brief in order to address issues not likely to be raised by the

Respondents. Specifically, the pre-1974 Mitchell Lama developments that have

recently withdrawn from the Mitchell Lama program while continuing to receive J-51

tax benefits1, comprising thousands of rent stabilized apartments, do not fit into the

1
Janel Towers and Bruckner Towers, in the Bronx, both fit this description.

-1-
categories that Appellants posit to be the key to deciding whether a building has

“become subject to [the rent stabilization] law . . . by virtue of receiving [J-51] tax

benefits,” within the meaning of RSL §§26-504.1 and 26-504.2.

Appellants posit that all rent stabilized buildings can be divided into two

categories: those which become rent stabilized for the first time when they begin to

receive J-51 benefits, and those that were already rent stabilized when they began

receiving benefits. The apartments in Janel Towers and Bruckner Towers do not fit

into either category. They were not already rent stabilized when they began receiving

J-51 benefits, and they did not become rent stabilized solely by virtue of receiving J-

51 benefits. They are in neither category, yet when they withdrew from the Mitchell

Lama program in the middle of a multi-year J-51 benefits period, these developments

became rent stabilized instantaneously.

The developments in which some of the members of the MLRC live are rent

stabilized because of the impact of two separate legal mandates, one imposed by the J-

51 Program and the other imposed by the more general provisions of the Rent

Stabilization Law, acting in concert. They are a concrete example of the reason why

Appellants’ theory is unworkable. The statutory language exempting apartments that

“became or become subject to [the rent stabilization] law . . . by virtue of receiving

[J-51] tax benefits” does not refer to the date when they became rent stabilized, but

instead refers to the statutory basis for making them rent stabilized. This language

-2-
plainly does not require that an apartment be rent stabilized solely because of the

receipt of J-51 benefits before it can be exempt, since an apartment can become rent

stabilized by virtue of more than one statutory requirement simultaneously.

As set forth in greater detail in this brief, the deregulation provisions of the

Rent Stabilization Law§§26-504.1 and 26-504.2 were designed to harmonize with the

regulatory mandates of the J-51 Program. The plain language of the statute exempts

apartments that became or become rent stabilized by virtue of the operation of the J-

51 program. The statute that gives the City of New York (the “City”) the power to

implement the J-51 Program, RPTL §489 (the “Enabling Act”), the J-51 Ordinance,

the portions of the Rent Stabilization Law that specifically deal with the effect of

receiving J-51 benefits (e.g., RSL §26-504(c)), and the regulations (28 RCNY §5-01

et seq) adopted by the City of New York to govern the receipt of J-51 benefits, all

comprise a single unified program (the “J-51 Program”) that uniformly requires every

apartment in a building receiving benefits to remain rent stabilized throughout the

benefits period. No exception was ever made to permit the deregulation of single

apartments in assisted buildings.

Thus, even though a building, such as the buildings in which some members of

the MLRC live, at Janel Towers and Bruckner Towers, might at the very same instant

become rent stabilized by virtue of the losing its exemption from rent stabilization and

by virtue of receiving J-51 benefits, there is therefore no uncertainty about whether it

-3-
is exempt from deregulation. Nothing in the law requires a building to be treated

differently if it was already stabilized before getting J-51 benefits than it would be

treated if it became stabilized solely as a result of getting J-51 benefits. A building

can become rent stabilized by virtue of more than one statutory mandate, as is the case

when developments are withdrawn from the Mitchell Lama program at a time when

they continue to receive J-51 benefits.

ARGUMENT

POINT I: THE LANGUAGE EXEMPTING J-51 ASSISTED


APARTMENTS FROM DEREGULATION IS
DESIGNED TO HARMONIZE WITH THE
REQUIREMENT OF THE J-51 PROGRAM THAT
EVERY J-51 ASSISTED APARTMENT REMAIN
REGULATED THROUGHOUT THE BENEFITS
PERIOD

A: The Statutory Framework

The language at issue in this appeal was enacted in 1993 (L 1993, ch 253, §6)

to coordinate the deregulation of high income and high rent apartments with the

existing statutory scheme under which every apartment in a building receiving J-51

assistance was required to remain rent stabilized throughout the benefit period.

The statute created a process for deregulating apartments occupied by high

income tenants and deregulating on vacancy apartments where the rent exceeded a

$2,000.00 threshold, declaring those apartments to be excluded from rent

-4-
stabilization, but stating that “this exclusion shall not apply to housing

accommodations which became or become subject to this law (a) by virtue of

receiving tax benefits pursuant to section four hundred and twenty-one-a or four

hundred eighty-nine of the real property tax law.”

This language was designed to dovetail with the numerous statutes and

regulations that were already in effect and which governed the J-51 program as it

existed in 1993.

The language that exempts apartments that “became or become subject to this

law . . . by virtue of” the J-51 Program is, firstly, a cross reference to the statute that

governs the manner by which a J-51 assisted apartment becomes rent stabilized. It is

a reference to RSL §26-504 (c), which required at the time and still requires that all of

the “dwelling units in a building or structure receiving benefits” be made rent

stabilized, that every such apartment remain rent stabilized at least throughout the

time when tax benefits are received, and, if the tenant is not properly notified in every

lease of the benefits and their approximate expiration date, that every such apartment

remain stabilized until the tenant vacates. The language requiring every assisted

apartment to continue to be stabilized throughout the benefits period was not repealed

or amended in 1993 or at any time thereafter.

The J-51 Ordinance states (NYC Admin. Code §11-243 (i) (1)) that “the

benefits of this section shall not apply . . . to any existing dwelling which is not

-5-
subject to the provisions of the . . . city rent stabilization law.” The definition of

the term “existing dwelling” (NYC Admin. Code §11-243(a)(2)) makes it clear that

the whole building is required to be rent regulated: the term means “a class A

multiple dwelling or a building consisting of one or two dwelling units over space

used for commercial occupancy.” That language was in effect in 1993, and was not

modified or repealed then or thereafter.

The Enabling Act that gave the City the power to enact the J-51 Ordinance,

RPTL §489 (7) (b) (1), states that “any local law or ordinance may also provide” that

J-51 benefits “shall not apply to any multiple dwelling, building or structure . . .

which is not subject to the provisions of the emergency housing rent control law or to

local law enacted pursuant to the local emergency rent control act.”2 The operative

language – “multiple dwelling, building or structure” – provides for entire buildings

to be rent regulated, not individual apartments. That language was never modified to

permit or require any individual assisted apartment to be deregulated.

2
The Rent Stabilization Law of 1969, Local Law No. 16 [1969] of City of NY is, on its face, a local law
enacted pursuant to the Local Emergency Housing Rent Control Act. It states, in its findings and declaration of emergency
(§1, now codified at Rent Stabilization Law § 26-501) that it is enacted under the “authority conferred by chapter twenty-one
of the laws of nineteen hundred sixty-two.” See, LaGuardia v. Cavanaugh, 53 N.Y.2d 67, 440 N.Y.S.2d 586 (1981)
(discussion of the legislative history of rent stabilization). Acting under this enabling authority, in 1975 the City first required
J-51-assisted buildings to be rent stabilized. See, Local Law No. 60 [1975] of City of NY, now codified, in greatly amended
form, at Rent Stabilization Law §26-504(c).

-6-
As of 1993 the City had promulgated a comprehensive set of regulations to

administer the J-51 program. See, 28 RCNY §5-01 et seq.3 The regulations

specifically require that:

for at least so long as a building is receiving the benefits of


the Act . . . all dwelling units in buildings or structures
converted, altered or improved shall be subject to rent
regulation pursuant to: . . . the Rent Stabilization Law of
1969.

28 RCNY §5-03(f)(1). These regulations state, in unmistakable language, that “all

dwelling units” in a building receiving J-51 benefits must remain rent regulated “for

at least so long as a building is receiving the benefits.

When the Legislature exempted J-51 assisted apartments from deregulation in

1993, therefore, it did so in a manner designed to coordinate with a City program that

explicitly required that “all dwelling units” in buildings receiving assistance be

regulated and remain so throughout the time when the building receives benefits.

There is no evidence that the 1993 amendments to the Rent Stabilization Law

were designed to curtail, repeal or narrow the J-51 program. Rather, the statute

simply cross references the enabling legislation for the J-51 Program, stating that

apartments that became subject to rent stabilization by virtue of the J-51 program are

exempt from deregulation. The reference to apartments that “became” subject to rent

stabilization in the past is a clear indication that the standards in existence under the J-

3
Those regulations were first published in the City Record on December 20, 1989, p 3454, col. 2.

-7-
51 Program, including the sweeping language of the regulations that requires every

assisted apartment to remain stabilized throughout the benefits period, would remain

unchanged.

In this context, the plain meaning of the language in RSL §§26-504.1 and 26-

504.2 exempting apartments that became or become stabilized by virtue of receiving

J-51 assistance is that any apartment required to be stabilized by virtue of the then-

existing J-51 Program must remain stabilized, even if it would otherwise qualify for

deregulation. Pultz v. Economakis,10 N.Y.3d 542, 860 N.Y.S.2d 765 (2008). The

phrase that exempts them if they “became or become” stabilized “by virtue of” the J-

51 Program refers to how rent stabilization becomes applicable, not when. A legal

consequence can come about by virtue of more than one legal rule at the same time, as

the Appellate Division recognized in its Decision. Citing, Demette v. Falcon Drilling

Co., 280 F.3d 492 (5th Cir., 2002). The use of the words “became or become” does

not require an inquiry into whether the J-51 Program was the first legal rule to require

stabilization of a given apartment. Rather, it plainly exempts J-51 assisted apartments

from deregulation whenever the J-51 Program requires them to be exempt, by virtue

of being located in a building in which every apartment must remain stabilized for at

least so long as it receives tax benefits.

Because the deregulation provisions of RSL §§26-504.1 and 26-504.2 can

easily be harmonized with the mandate of the J-51 program that requires every

-8-
apartment in a building receiving assistance to remain rent stabilized, regardless of

how high its rent might have become, both rules must be given their full effect.

Matter of Consolidated Edison Co. v. Department of Environmental Conservation, 71

N.Y.2d 186, 524 N.Y.S.2d 409 (1988). There is no evidence that the Legislature

intended to repeal this central requirement of the J-51 program, and repeals by

implication will not be inferred. Id.

In their brief, Appellants Tishman Speyer Proerties, L.P. and PCV ST Owner

LP (the “Current Owners”) rely on the principle that statutes must be interpreted so as

to give effect to the overall statutory scheme. Br., p. 31, fn. 13, citing Davis v. Mich.

Dept. of Treasury, 489 U.S. 803 (1989); see also, Lower Manhattan Loft Tenants v.

New York City Loft Board, 66 N.Y.2d 298, 496 N.Y.S.2d 979 (1985) (Loft Law

interpreted in pari materia with overall scheme of rent regulation). This principle

does not help the Appellants. Rather, it contradicts their interpretation of the statute.

In this case, giving effect to the overall statutory scheme compels the

conclusion that the Legislature made no changes in the operation of the J-51 Program

when it created a mechanism for deregulating high-rent and high-income apartments.

It changed none of the language of the program, even though the requirement that

every assisted apartment remain rent stabilized throughout the benefits period, was a

well-known feature.

-9-
Appellants’ position on this appeal would give the deregulation statute an

absurd reading, inconsistent with its plain meaning, inconsistent with the statutory

framework that it is plainly designed to harmonize with, inconsistent with the

historical context in which it was adopted, and inconsistent with both the purpose of

the deregulation provisions of the RSL and the purpose of the J-51 program.

According to Appellants, the Legislature only exempted “newly created,”

“post-1974,” apartments from deregulation, because other apartments, in fact the vast

majority of the apartments assisted by the J-51 program, were not apartments that

“became or become” rent stabilized “by virtue of” the J-51 program. The distinction

the Appellants attempt to draw appears nowhere in the RSL.

Appellants interpretation of the operative language contradicts its plain

meaning. The phrase “became or become subject to this law . . . by virtue of

receiving tax benefits” plainly refers to the statutory mechanism that requires an

apartment to be rent stabilized, and plainly does not refer to the date upon which it

became rent stabilized. Although the dictionary contains some definitions of

“became” that apply when the word is used in connection with a sequence of events,

the dictionary also contains definitions that apply when the word is used to convey

causation. See, e.g., WordWeb Online, http://www.wordwebonline.com/en/BECOME

[accessed July 24, 2009] (“enter or assume a certain state or condition”). The

deregulation statute, containing no reference to any limitation on the J-51 exemption

- 10 -
by date, plainly uses the word “became” to refer to the statutory basis for treating an

apartment as stabilized.

For this reason, the decision of the Appellate Division was correct in

determining that an apartment could become subject to rent stabilization by virtue of

receiving tax benefits even if it had already been a rent stabilized apartment. The

receipt of tax benefits adds an additional statutory basis for regulation, so that

apartments that once were rent stabilized only by virtue of one statutory command

then become rent stabilized by virtue of two statutory commands.

The rent stabilized apartments in the world cannot be easily divided into the

two categories posited by the Appellants.

For example, some of the constituents of the MLRC reside in Mitchell Lama

developments that either have exited the Mitchell Lama program or are expected to

exit soon. Two of them, Janel Towers and Bruckner Towers in the Bronx, are

developments built before 1974 that exited the Mitchell Lama program with J-51 tax

abatements in place. Those developments became rent stabilized when they exited

the Mitchell Lama program.

In those developments, comprising thousands of tenants, there is no way to

apply the two categories that are the subject of Appellant’s’ hypothesis. They became

rent stabilized by virtue of losing their Mitchell Lama exemption (KSLM-Columbus

- 11 -
Apartments, Inc. v. DHCR, 5 N.Y.3d 303, 801 N.Y.S.2d 783 (2005)), and by virtue of

the receipt of J-51 tax benefits (RSL §26-504(c)), at the very same instant.

In its historical context, it is plain that the Legislature’s choice of the phrase

“became or become” was intentional, and the intent was not to limit the scope of the

J-51 exemption from deregulation.

In 1985 the Legislature drastically expanded the class of apartments that

became rent stabilized by virtue of receiving J-51 tax benefits, when it imposed rent

stabilization upon any apartment that had received tax benefits prior to June 30, 1985,

even if those benefits had long since expired. See, L 1985, chs 288 and 289, now

codified at RPTL §489 (7) (b) (2) and RSL §26-504 (c) (hereinafter referred to as the

“1985 Amendments”) Every apartment that came within the broad retroactive scope

of the 1985 Amendments was an apartment at “became” rent stabilized by virtue of

receiving tax benefits, even though tax benefits were no longer being received. See,

e.g., Sack v. DHCR, 250 A.D.2d 537, 673 N.Y.S.2d 420 (1st Dept., 1998) (construing

the 1985 amendments as retroactively imposing re-regulation on an apartment that

had been decontrolled in 1982).

The 1985 amendment to RSL §26-504 (c) specifically provided that rent

regulation would continue notwithstanding the “termination for any reason of the

benefits,” so that if the City terminated benefits because of an owner’s wrongdoing,

the tenants would remain rent regulated. State of NY v. Fashion Place Assoc., 324

- 12 -
A.D.2d 280, 638 N.Y.S.2d 26 (1st Dept., 1996). This principle includes situations

where an owner attempts to avoid rent regulation by forfeiting benefits after

beginning to receive them. Id. Under the 1985 amendments, the resulting apartments

became and remained rent stabilized, despite the fact that the building no longer

received J-51 benefits.

Moreover, the 1985 Amendments also stated clearly that, from June 30, 1985

forward, an apartment would remain rent stabilized even after the expiration of tax

benefits, unless the tenant’s initial lease and every lease thereafter contained notice of

the effect of the tax benefits upon the tenancy. See, East-West Renovating Co. v.

DHCR, 16 A.D.3d 166, 791 N.Y.S.2d 88 (1st Dep’t, 2005).

Thus, in 1993 the Legislature was mindful that there was a large category of

rent stabilized apartments that became rent stabilized by virtue of the receipt of

benefits, in buildings that no longer receive benefits. That is why the Legislature used

the word “became” to delineate the apartments that would be exempt from

deregulation. The Legislature was required to use the phrase “became or become” to

make it clear that the category of apartments that is exempt from deregulation is far

broader than the category of apartments currently receiving benefits. The language is

by no means surplusage.

Moreover, as originally enacted in 1993, the phrase “become subject to this law

. . . by virtue of receiving tax benefits” could not have the meaning posited by the

- 13 -
Appellants, because it would be an anachronism. The original 1993 statute did not

permit apartments to be deregulated whenever they reached a legal rent of $2,000.00

per month. Instead, the only apartments originally deregulated were apartments

already in existence. In the case of high income deregulation, the apartment had to

have “a legal regulated rent of two thousand dollars or more per month as of October

first, nineteen hundred ninety-three.” See, L 1993, ch 253, § 6. In the case of high

rent deregulation, the $2,000.00 threshold would have had to have been reached

between the effective date of the statute (July 7, 1993) and October 1, 1993.

As originally enacted, therefore, deregulation only applied to apartments

already in existence as of 1993. This fact alone shows the absurdity of Appellants’

theory. Under Appellants’ theory, an apartment newly created in 2005, and receiving

tax benefits, would be exempt from deregulation, because it “became” subject to rent

stabilization solely by virtue of receiving benefits. However, under Appellants’

theory, apartments in existence in 1993, that already had a legal regulated rent of

$2,000.00 or more, would not become exempt from deregulation on the receipt of J-

51 benefits, since they were already rent stabilized and could not “become” rent

stabilized. Therefore, under Appellants’ theory, the Legislature exempted a group of

apartments from deregulation with zero members in it.

In this context, it is absurd to suggest that the Legislature used the phrase

“became or become subject to [rent stabilization] by virtue of receiving tax benefits”

- 14 -
as a way of drastically narrowing the scope of the exemption so that it only applied to

apartments where the J-51 Program was the sole reason for becoming rent stabilized.

The phrase was plainly not added to the statute in order to repeal, by implication, the

explicit command of every component of the J-51 program, that every apartment in an

assisted building remain stabilized throughout the benefits period. The Legislature

knew perfectly well how to amend the provisions of the New York City

Administrative Code, since the Rent Stabilization Law itself is but a chapter in the

New York City Administrative Code. Since the advent of deregulation it has not

amended the J-51 ordinance, has not amended the J-51-specific language in RSL §26-

504 (c) and has not added, to the J-51 Enabling Act (RPTL §489), any reference to

deregulation.

In this context, the adoption, by the New York State Division of Housing and

Community Renewal (“DHCR”), of a regulation that limits the exemption to

apartments that are regulated “solely” by virtue of the receipt of J-51 tax benefits

(Rent Stabilization Code §§2520.11(r) (5) and (s)(2)), is entitled to no deference. The

regulation contradicts the plain meaning of the statute, purports to repeal a valid and

binding New York City ordinance, and rests upon no assertion of any particular

expertise in the subject matter.

As noted in the decision of the Appellate Division, the opinion of an

administrative agency is entitled to little deference on matters of pure statutory

- 15 -
interpretation. Dworman v. DHCR, 94 N.Y.2d 359, 725 N.E.2d 613 (1999). The

issues on this appeal involve only matters of statutory interpretation. This court has

been asked to decide the meaning of the language exempting J-51 assisted apartments

from the deregulation provisions of the RSL. That decision does not depend upon

any particular facts about the apartments or about the housing market that would be

within the agency’s special expertise.

In fact, DHCR’s initial position in the wake of the initial enactment of high-rent

in high-income deregulation in 1993 was to exempt all J-51 assisted apartments from

deregulation during time when they received tax benefits. See, e.g., DHCR

Operational Bulletin 95-3 (A 67-68).

DHCR changed its position, in a private January 16, 1996 letter to Sherwin

Belkin, Esq., an attorney who represents landlords (who represents two of the

Appellants now, but may not have represented them at the time) (A 58-59). The letter

revoked a prior opinion letter, and took the position now urged by the Appellants. As

authority, the agency cited only two sources: that it did not find any mention of the J-

51 exemption in the legislative history of the 1993 statute, and the dictionary. DHCR

did not purport to have examined HPD’s regulations, RPTL § 489, the J-51

Ordinance, or any material concerning the history, purpose or function of the J-51

Program.

- 16 -
DHCR, therefore, adopted its current position in reliance upon sources that the

courts are equally, if not better, equipped to evaluate: legislative history and the

dictionary meaning of statutory language. It expressly did not rely upon any

information about which it had any particular expertise.

DHCR promulgated its regulation (Rent Stabilization Code §§2520.11(r) (5)

and (s)(2)) in December, 2000, approximately seven and one-half years after rent

stabilized apartments first began to be deregulated. Up to that point, although some

insiders may have known about the agency’s letter to Mr. Belkin, the only information

available to the general public was that every apartment in the building assisted by the

J-51 program was required to remain rent stabilized during the entire time when the

building received benefits. This, after all, was what HPD’s regulations plainly said.

After DHCR promulgated its regulation, there were then two conflicting sets of

regulations on the books: those of the DHCR and those of HPD. Undisputedly, this

litigation represents the first time any party has obtained a judicial opinion as to

which set of regulations is binding.

Appellants now claim they relied upon DHCR’s position, although the record

contains no factual basis for that claim. In the face of two conflicting mandates and

no resort to the courts to resolve the conflict, their claim of reliance should be viewed

with skepticism.

- 17 -
Unlike DHCR’s position, the regulatory requirements of the J-51 program have

not changed. The public and the tenants of rent stabilized buildings are entitled to

rely upon the statutes, ordinances, and regulations that have required, since long

before the advent of deregulation, that every apartment in a J-51 assisted building

remain regulated throughout the time when it receives benefits. Because that

requirement has never been repealed, the public has the right to rely upon it.

Therefore, the appeal should be denied.

B: The Purpose of the J-51 Program

The J-51 Program is the direct successor to former J-41-2.4 of the New York

City Administrative Code (Local Law No. 118 [1955] of City of NY), enacted under

the authority of former Tax Law §5-h (L 1955, Ch 410).4 According to the 1955

Legislative Annual, the original purpose of the program was as follows:

“it is believed that, in as much as new housing is not being


produced at a fast enough pace to provide decent, safe and
sanitary homes for lower income families, some provisions
must be made to encourage owners to alter and improve
salvageable buildings.”

1955 NY Legis Ann, 1955, at 267-268, as quoted in, Vorsanger, New York City’s J-

51 Program: Controversy and Revision, 12 Fordham Urban Law Journal 103 (1983-

1984).

4
It was renumbered as J51-2.5 pursuant to L 1963, Ch 100 §1346.

- 18 -
From the earliest days of the program, owners who sought to use J-51 benefits

to fund work that would result in deregulation were held to be ineligible for benefits.

Alwalt Realty Corp v. Boyland, 5 Misc.2d 1061, 160 N.Y.S.2d 504 (Sup. Ct., NY Co.,

1957) (abatement denied for work to decontrol apartments by splitting large

apartments into smaller ones).

The original J-51 program was limited to subsidizing renovations in existing

substandard residential buildings. Vorsanger, Id. It was greatly expanded over the

years, so that it now covers, for example, conversions of buildings from commercial

to residential use (New York City Administrative Code §11-243 (b)(2) and (3)), the

substantial rehabilitation of existing building if funded by a government program to

provide housing for low and moderate income tenants (New York City Administrative

Code §11-243 (b)(9)), and the “moderate rehabilitation” of existing buildings (New

York City Administrative Code §11-243 (b)(5)).

The focus, however, has always remained upon the same basic purpose: “to

increase the supply of moderate rental housing with satisfactory standards.” 111

Fourth Ave. Assoc. v. Finance Administration of the City of New York, 101 Misc.2d

950, 422 N.Y.S.2d 558 (Sup. Ct., NY Co., 1979); see also, 31171 Owners Corp. v.

HPD, 190 A.D.2d 441, 599 N.Y.S.2d 19 (1st Dept., 1993) (J-51 Program is an “effort

to improve and maintain the urban housing stock”).

- 19 -
To focus the benefits the J-51 program upon the creation and maintenance of

affordable housing, both the Enabling Act and the J-51 Ordinance have been

repeatedly amended to impose complex requirements concerning the kind, location

and value of the buildings and apartments that are eligible for assistance. For

example, the limitation on the amount of the total assessed valuation of the building

that will receive an exemption under the program is designed on its face to focus

benefits on buildings with a lower assessed value. (New York City Administrative

Code §11-243 (d)(8)(c)). For example, there are geographic limitations applying

special requirements to certain areas in Manhattan: a “minimum tax zone” (New York

City Administrative Code §11-243(d)(6)) and a “tax abatement exclusion zone” (New

York City Administrative Code §11-243(d)(7)), because those were thought to be

ones where there was a potential that tax abatement money could be used to assist

luxury housing.

Under the Rent Stabilization Law, one of the most significant factors in

increasing rent stabilized rents is the major capital improvements program, under

which landlords receive a permanent rent increase for building wide improvements.

Rent Stabilization Code § 2522.4(a)(2)

The J-51 program provides a significant source of funding for work that

qualifies for major capital improvements increases. As a result, the J-51 Ordinance

contains specific provisions under which rent increases that are subsidized under the

- 20 -
J-51 program are required to be reduced. New York City Administrative Code §11-

243(dd) requires that the amount of a rent increase for Major Capital Improvements

be reduced by “one-half of the total amount of the tax abatement benefits which the

property receives pursuant to such application with respect to such alterations or

improvements” as are the subject of a tax abatement. Similarly, 28 RCNY §5-03(f)(6)

requires that an owner waive a portion of any MCI increase equal to “one-half of the

total annual amount of the tax abatement benefits which the property receives.”

In this context, exempting J-51 assisted buildings from high income and high

rent deregulation serves the purpose of the J-51 program. The exemption is designed

to create a disincentive against the use of a taxpayer funds to perform work that

assists in the deregulation of affordable apartments, and as a means of focusing

benefits only on apartments that will remain rent regulated.

The complexity of the J-51 ordinance reflects the efforts of the City Council

and the Legislature to implement mechanisms that would focus J-51 benefits upon the

creation and maintenance of affordable apartments, and prevent the use of those

benefits for the creation of luxury apartments. Appellants have made the policy

argument that if they are required to charge rent stabilized rent of over $2,000.00 per

month, rather than unregulated rents that are presumably well in excess of the amount

that the Legislature now deems to be “high rent”, they would no longer participate in

the J-51 tax abatement program. They argue, without factual support in the record,

- 21 -
that they would not have participated in the program if they knew that, after the rents

in the development reached $2,000.00 per month they would continue to rise only in

the manner regulated by rent stabilization. Their argument, however, begs the

question, since it is not at all clear that the Legislature or the City Council desired that

landlords who plan to deregulate large numbers of apartments receive J-51 benefits.

The purpose of the deregulation provisions of the RSL was to deregulate

apartments deemed to be “high rent” apartments, either on vacancy or when occupied

by tenants whose income was deemed to be “high income.” They were not intended

to permit owners to use taxpayer funds to assist them in raising rents above the

deregulation threshold, or to withdraw existing regulatory protections from buildings

receiving taxpayer subsidies.

Therefore, the Decision of the Appellate Division should be affirmed.

- 22 -
CONCLUSION

For the foregoing reasons, the Decision of the Appellate Division, First

Department should be affirmed.

Dated: New York, New York


August 31, 2009

Respectfully submitted,

COLLINS DOBKIN & MILLER, LLP


Attorneys for Proposed Amicus Curiae Mitchell-
Lama Residents Coalition
277 Broadway, Suite 1410
New York, New York 10007
Telephone: (212) 587-2400

____________________________
By: Seth A. Miller

- 23 -