By: Rusty Brooks
More than 70 class action lawsuits against landlords in New York City are making their way through courts.
According to the N.Y Post: “ class action lawsuits are targeting landlords who received a city property tax benefit known as J-51 to revamp residential buildings throughout the five boroughs, but then destabilized the units and began to charge market rates, says a housing rights nonprofit that has spearheaded some of the court actions”
The Real Deal previously reported on a major class action lawsuit in Harlem last fall.
The Real Deal reported : “In a 4-3 decision, the state’s Court of Appeals ruled that a trial court shouldn’t have dismissed a 2016 lawsuit filed against Big City Realty, which accused the landlord of misrepresenting the costs of individual apartment improvements, inflating preferential rents and falsely certifying that apartments were rent stabilized under the J-51 tax break program.”.
The J-51 Tax break is defined by New York City as: “The J-51 Tax Incentive program is an as-of-right tax exemption and abatement for residential rehabilitation or conversion to multi-family housing. Eligible projects for this program include New York City Department of Housing Preservation and Development (HPD)- or privately financed moderate and gut rehabilitation, privately financed and governmentally-assisted major capital improvements to multiple dwellings, and conversions of lofts and other non-residential buildings into multiple dwellings.
The tax benefit is a 34-year (30 years full tax benefit and then an additional four-year phasing out of the program) or 14-year (10 years tax benefit and then an additional four-year phasing out of the program) exemption from the increase in real estate taxes resulting from the work. Affordable housing projects generally get the 34-year exemption, while other projects receive the 14-year exemption. In addition, existing real estate taxes receive an abatement of up to 8.3 percent or 12.5 percent of the cost of the work each year for up to 20 years. Privately financed projects in Manhattan south of 110th Street and co-ops and condominiums generally receive some limited benefits.’
These class action lawsuits hinge on this provision of the tax break: “All rental units become subject to rent stabilization for the duration of the benefits. In rental buildings, the landlord must also reduce the Major Capital Improvement (MCI) rent increase allowed under rent stabilization as a result of the work, by a portion of the value of the tax abatement”
“Tenants are shocked that landlords are receiving benefits and not giving back affordable housing,” said Aaron Carr, founder and executive director of the Housing Rights Initiative, The Post quoted.
Carr said his group has helped launch 55 J-51-related lawsuits since 2016, most of them benefiting low income and working-class families.
According to the Post tenants in these lawsuits can see up a $200 Million windfall in back rent.
Landlords are not thrilled. The Post reported Mitchell Posilkin, chief counsel at the Rent Stabilization Association which represents thousands of property owners in New York, stating: “ “What’s important to understand is that tenants who are bringing these cases entered voluntarily into their leases and are now looking for a windfall”.
