Roberts v. Tishman Speyer Properties, L.P., 2007 NY Slip Op 32639(U) (N.Y. Sup. Ct. 8/16/2007)

• Decision Date: 16 August 2007
• Docket Number: 0100956/2007
• Parties: AMY L. ROBERTS, THOMAS I. SHAMY, DAVID AND ANNMARIE HUNTER, MARGARET CARROLL, KELLEY AND TONY LANNI, EVAN HORISK, and BETH ROSNER GIOKAS, on behalf of themselves and all others similarly situated, Plaintiffs, v. TISHMAN SPEYER PROPERTIES, L.P., PCV ST OWNER LP, METROPOLITAN INSURANCE AND ANNUITY COMPANY, and METROPOLITAN TOWER LIFE INSURANCE COMPANY, Defendants.
• Court: New York Supreme Court

Page 1

2007 NY Slip Op 32639(U)

AMY L. ROBERTS, THOMAS I. SHAMY, DAVID AND ANNMARIE HUNTER, MARGARET CARROLL, KELLEY AND TONY LANNI, EVAN HORISK, and BETH ROSNER GIOKAS, on behalf of themselves and all others similarly situated, Plaintiffs, v. TISHMAN SPEYER PROPERTIES, L.P., PCV ST OWNER LP, METROPOLITAN INSURANCE AND ANNUITY COMPANY, and METROPOLITAN TOWER LIFE INSURANCE COMPANY, Defendants.

0100956/2007

Supreme Court of the State of New York, New York County.

August 16, 2007.

Motion Date May 15, 2007.

RICHARD B. LOWE, III, J.

Motion sequence numbers 003 and 004 are consolidated for disposition.

In this purported class action, plaintiffs claim that defendants wrongfully charged tenants of Stuyvesant Town and Peter Cooper Village rents exceeding permissible stabilized rent levels, while at the same time receiving tax benefits under section 11-243 of the New York City Administrative Code, commonly referred to as J-51 tax benefits. The first cause of action of the four-count complaint seeks damages, including interest and attorneys' fees, for defendants' alleged improper rent overcharges. The second cause of action seeks a declaration that plaintiffs' apartments will continue to be subject to rent stabilization as long as defendants receive J-5 I tax benefits. The third cause of action asserts a claim for deceptive acts and practices under section 349 of New York's General Business Law (GBL). The fourth cause of action asserts a claim for unjust enrichment.

Plaintiffs allege that Stuyvesant Town and Peter Cooper Village (Property) constitute New York City's largest apartment complex, consisting of 110 apartment buildings that contain 11,200 units and over 20,000 residents. Plaintiffs are rental tenants residing at the Property, and the purported class consists of all persons who are or were tenants charged rents that exceed rent stabilization levels while defendants received J-51 tax benefits.¹ Defendant Metropolitan insurance and Annuity Company owned the Property from 2002 to 2004, and, by virtue of a merger, defendant Metropolitan Tower Life Insurance Company owned the Property until November 17, 2006, when it was purchased by its current owner, defendant PCV ST Owner LP (PCV). Defendant Tishman Speyer Properties, L.P. (Tishman) is the general partner of PCV.

Plaintiffs aver that the Property has been subject to New York's Rent Stabilization Law (RSL) since 1974 under the Redevelopment Companies Law. Starting in 1992, Metropolitan Life Insurance Company, a former owner of the Property, allegedly began applying for and receiving J-51 tax benefits. According to plaintiffs, these benefits provide partial property tax exemption and abatement benefits to buildings undertaking rehabilitation work, conditioned upon the units in these properties being subject to rent stabilization laws while receiving the tax benefits. Plaintiffs claim that, since 1992, the owners of the Property have received approximately $24.5 million in J-51 tax benefits. Defendants allegedly deregulated more than 25% of the Property's units and charged market rents exceeding rent stabilization levels, even though they were receiving the J-51 tax benefits. According to plaintiffs, the most recent J-51 tax benefits for the Property expire in 2017 or 2018.

Metropolitan Insurance and Annuity Company and Metropolitan Tower Life Insurance Company (together, MetLife) now move (in motion sequence number 003) to dismiss the complaint based upon documentary evidence, for failure to state a cause of action, and, raised in a footnote of their opening brief, based upon lack of legal capacity to sue, res judicata and statute of limitations. In motion sequence number 004, Tishman and PCV move to dismiss the complaint based upon documentary evidence and for failure to state a cause of action.

Amicus curiae memoranda are submitted on behalf of defendants by non-parties Community Housing Improvement Program, Inc. and Rent Stabilization Association of NYC, Inc. An amicus curiae memorandum is submitted on behalf of plaintiffs by non-party the Office of the Manhattan Borough President.

Factual Background and Statutory Overview

The following overview of New York's rent stabilization laws places in context the facts of this case and the disputed legal issue.

"The RSL was originally enacted in response to a severe housing shortage following World War II and has been periodically extended by the Legislature as it perceives a continuing need." Federal Home Loan Mtge. Corp. v New York State Div. of Hous. & Community Renewal, 87 NY2d 325, 332 (1995) (internal quotation marks and citation omitted). "The central, underlying purpose of the [RSL] is to ameliorate the dislocations and risk of widespread lack of suitable dwellings that accompany a housing crisis." Id. (internal quotation marks and citation omitted). However, "[i]n 1971, the State Legislature determined that new construction had essentially come to a standstill and, in response, enacted ... [t]he Vacancy Decontrol Law (VDL) and the Urstadt Law," both of which loosened restrictions on rent regulation. Matter of KSLM-Columbus Apts., Inc. v New York State Div. of Hous. & Community Renewal, 5 NY3d 303, 311-12 (2005) (internal citation omitted). The Urstadt Law also "barred the adoption of more restrictive regulations on housing accommodations that were already subject to rent regulation." Id.

Subsequently, there was a shortage in the housing market. In response to this shortage, the Legislature enacted the Emergency Tenant Protection Act (ETPA) in 1974. The net effect of this legislation was "to bring apartments in buildings of six or more units within New York City's rent stabilization system, including apartments that had been decontrolled under the VDL, were in buildings constructed after 1969 but before January 1, 1974, or became vacant after 1975." Id. It is at this point, in 1974, that plaintiffs claim that the Property became subject to rent stabilization, pursuant to the Redevelopment Companies Law, now replaced by the Private Housing Finance Law (PHFL).

J-51 was enacted pursuant to section 489 of the New York Real Property Tax Law (RPTL) in order "to improve and maintain the urban housing stock," and authorizes "cities to enact local laws providing multiple dwelling owners with tax incentives to rehabilitate their properties." Matter of 31171 Owners Corp. v New York City Dept. of Hous. Preserv. & Dev., 190 AD2d 441, 443 (1^st Dept 1993). J-51 provides that "any increase in the assessed valuation of real property shall be exempt from taxation for local purposes to the extent such increase results from the reasonable cost of [certain conversions, alterations or improvements.]" Administrative Code § 11-243 (b). J-51 also states that it "shall not apply ... to any existing dwelling which is not subject to the provisions of ... the city rent stabilization law or to the private housing finance law." Administrative Code § 11-243 (i) (1).

The New York City Department of [lousing Preservation and Development (HPD) is "the City agency charged with administering the J-51 program." Matter of Bleecker St. Mgt. Co. v New York State Div. of Hous. & Community Renewal, 284 AD2d 174, 175 (1^st Dept 2001); Administrative Code § 11-243 (m). However, while HPD administers the J-51 program, "[i]n 1983, the Legislature, by the Omnibus Housing Act (L 1983, ch 403), transferred responsibility for administering the New York City Rent Stabilization and Rent Control Laws to DHCR," New York State's Division of Housing and Community Renewal. Festa v Leshen, 145 AD2d 49, 53-54 (1^st Dept 1989); KSLM-Columbus Apts., Inc., 5 NY3d at 310 ("[r]ent stabilization is now administered by DHCR, which has promulgated the Rent Stabilization Code [RSC]").

In 1985, the Legislature amended the RSL by rewriting section 26-504 (c). Under the 1985 amendment, the RSL applied to "[d]welling units in a building or structure receiving [J-51 tax benefits] until the occurrence of the first vacancy of such unit after such benefits are no longer being received," or if tenants received proper notice in their leases, upon expiration of the J-51 benefits. The amendment did not change the status of buildings already subject to rent stabilization, incorporating in the amendment the proviso that, if the apartment was already subject to rent regulation prior to receiving J-51 benefits, the apartment "shall, upon the expiration of [J-51] benefits, continue to be subject to this title or the [ETPA of 1974] to the same extent and in the same manner as if this subdivision had never applied thereto." RSL § 26-504 (c).

In 1993, the Legislature enacted statutes under the Rent Regulation Reform Act (RRRA) to exclude "high income renters" and "high rent accommodations" from rent stabilization, referred to as the luxury decontrol statutes. RSL §§ 26-504.1 and 26-504.2 (a). RSL section 26-504.1 (as originally drafted) excluded apartments occupied by persons whose annual income exceeded $250,000 for each of the two preceding years and whose monthly rent equaled $2,000 or more. Section 26-504.2 (a) excluded apartments with monthly rent upon vacancy of $2,000 or more. Both of these provisions contained the following limiting language: "[p]rovided, however, 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 eighty-nine of the real property tax law ... ."

At some point after the RRRA was enacted, the law firm Belkin Burden Wenig & Goldman, LLP (Belkin Burden), now Tishman's attorneys, requested an Advisory Opinion from DHCR concerning the interpretation of the "by virtue of' language of the statutes. DHCR responded on October 19, 2005. Belkin Burden submitted a follow-up letter dated December 14, 2005. The parties do not submit DHCR's October 19^th response, but defendants do submit DHCR's letter dated January 16, 1996, responding to...