Rent Stabilization at Issue in IPN Law Suit

By Ronald Drenger


As contentious as it was, the four-year battle between Independence Plaza's tenants and owner over the withdrawal of the complex from a government housing subsidy program, and over future rents at IPN, was fought outside the courtroom. A gaggle of lawyers, lobbyists, public relations consultants, real estate experts and city officials were involved, but not a judge.

Now, almost two years after it was seemingly settled, the issue of IPN rents has landed in court. And while the earlier struggle was led, on the tenant side, mostly by longtime IPN residents, it is a group of new, market-rate tenants who are at the legal forefront.

In December, seven tenants filed suit in State Supreme Court against the owner, WB/Stellar LLC, claiming that their apartments in the complex should be covered by rent stabilization regulations and that their rents should be drastically reduced. A win by them could deal a heavy financial blow to the owner, who might be forced to slash rents for all of IPN's market-rate tenants. And tenant leaders believe that it could also bring rent benefits and added protection for the rest of the development's residents. The tenant plaintiffs and their lawyer, Seth Miller, as well as representatives of IPN's

tenants association would not comment on the case. A spokeswoman for IPN's owner, whose principal is Laurence Gluck, also declined to comment.

Gluck acquired the three-building complex in June 2003 and one year later pulled it out of the state Mitchell-Lama program, which had imposed strict rent limits in exchange for low mortgage rates and tax breaks. In lengthy negotiations before the withdrawal, Gluck and the tenants association hammered out a deal to avoid steep rent hikes for existing tenants while allowing the owner to rent vacant apartments at market rates.

Then last spring, the tenants association discovered that the complex's previous owners had been granted a city tax abatement for renovation work. The abatement began in 1998 and will extend for three more years. Under city regulations, rents in buildings that receive this benefit, known as a "J-51" abatement, are regulated by the city's Rent Guidelines Board for the duration of the abatement.

In a meeting last August at P.S./I.S. 89, tenant leaders told an audience of about 250 IPN residents that they believed that, because of the tax abatement when IPN left Mitchell-Lama, all apartments should have been subject to J-51 rent stabilization regulations.

According to court documents, the seven tenant plaintiffs in the new lawsuit, who live at 80 North Moore St. and 310 Greenwich St., moved in between September 2004 and September 2005 and were offered only one-year leases. Their rents range from $1,830 per month for a studio to $3,570 for a two-bedroom, and their leases all contain a clause stating that the apartments are "not subject to any form of rent regulation."

The tenants claim that their apartments should be covered by rent stabilization, so their rents should have been set at the last amount that was charged under Mitchell-Lama.

Those rents ranged, depending on tenants' incomes, from $738 to $982 for a one-bedroom, and from $924 to $1,230 for a two-bedroom, according to the court documents.

In addition, the tenants assert that under city law, because the owner did not notify tenants in their leases of the tax abatement and its rent-regulation implications, the apartments remain stabilized until they or their successors move out.

The tenants are seeking reimbursement of the "overcharges"; triple damages; rent-stabilized, two-year leases at the reduced rent; and attorneys' fees.

The owners are scheduled to submit a response to the lawsuit this month.

In a letter to the tenants association last July, Gluck's attorney, Stephen Meister, wrote that the rent-stabilization requirement "has absolutely no bearing on buildings which obtain J-51 abatements while regulated under the Mitchell-Lama program." He also wrote that the owner "reserves the right to cancel the Settlement Agreement" that had been struck in 2004-for all IPN tenants-"if any proceeding is brought" seeking to block rent increases.

But Miller, the attorney for the plaintiffs and for the tenants association, said at the August tenant meeting that there is no Mitchell-Lama exception to the J-51 rent-stabilization rule, and that the owner has no legal right to cancel the 2004 deal.

A spokesman for the city's Department of Housing Preservation and Development, which administers the J-51 and Mitchell-Lama programs, said he would not comment about ongoing litigation. A spokesman for the state Department of Housing and Community Renewal, which manages the rent stabilization program, also declined to comment.

If the plaintiffs win, rent stabilization protection would likely be extended to all of IPN. When Gluck pulled the complex out of Mitchell-Lama, about two-thirds of the tenants qualified for federal vouchers that keep their rents at or close to their former rents. But the tenants association worries that the federal government may cut funding for the voucher program and believes that rent stabilization under the J-51 rules would give those tenants added security.

Under the 2004 agreement between the association and Gluck, tenants who didn't qualify for the low-income vouchers are getting rent increases that match those for rent-stabilized apartments for nine years. The following three years rents will increase by rent stabilization rates plus 3.3 percent.

Market-rate tenants would gain the greatest immediate financial benefit from rent stabilization. But Diane Lapson, the president of the tenants association, who declined to comment about the lawsuit, said that many tenants still feel insecure about the long-term affordability of their apartments. "Everyone would benefit from J-51 rent stabilization," she said.