NEW YORK CITY-In reporting Thursday’s state Supreme Court rulingthat former owner MetLife may beheld liable for rent overcharges to thousands of tenants at themassive Peter Cooper Village/Stuyvesant Town multifamily complex,the New York Law Journal quoted attorney Mitchell Posilkinas saying the decision’s impact was “potentially devastating.”Posilkin is general counsel for the Rent Stabilization Associationof New York, which was involved in the case as an amicus. He toldthe NYLJ, sister publication to GlobeSt.com, “There hasbeen wholesale reliance” over the years by the real estatecommunity on city and state housing authorities’ interpretations ofthe laws governing luxury deregulation of rent-stabilizedapartments.

|

Whether that devastation will come to pass is unclear, althoughattorney Kevin Smith sees dwindling interest in filing similarclass-action suits against owners of multifamily complexes. “It’sbecoming clear that this may not be the cash cow that everybodythought,” Smith tells GlobeSt.com.

|

The lack of clarity in the issues surrounding the Stuy-Towncase, which has been active since 2007, works against a clear-cutvictory for either side. For litigious tenants inspired by theStuy-Town case, as well as for attorneys working on the contingencyof winning a big judgment against owners, a payday could be a longtime coming if it arrives at all.

|

However, Smith adds that with about half a dozen lawsuits filedsince the state’s highest court ruled against Stuy-Town’s currentowners this past October, “there is a fair amount oflitigation out there.” That includes a suit in which he won ajudgment this past Tuesday for the owners of the 415-unit Clermontbuilding on Manhattan’s Upper East Side.

|

Yet Thursday’s Stuy-Town ruling “may well not be the last word”on MetLife’s obligations, points out Jeff Turkel, an attorney atRosenberg & Estis who is not involved with the case. He adds,“Just as it’s possible that the New York Court of Appeals mayoverturn what just happened, so it’s also possible that thelegislature may change the rules, limiting liability or at leastclarifying what liability is.”

|

That said, Turkel tells GlobeSt.com, Thursday’s ruling is“certainly not helpful for the real estate industry.” Had the courtinstead ruled that last year’s Court of Appeals decision—whichfound that Stuy-Town’s current ownership improperly deregulatedthousands of units while receiving J-51 tax benefits—didn’t applyretroactively, “it would’ve eliminated or at least limited a lot ofpeople’s liability. That did not come to pass.”

|

Nor did a cut-and-dried victory for the tenants. Turkel pointsout that while pending cases could be affected by the ruling thatthe liability was retroactive, “there is a four-year statute oflimitations on rent overcharges. And when anybody talks aboutsomething being retroactive or not retroactive, you then have tofigure out ‘from what date to what date?’ A lot of those issueshave not yet been decided.”

To Smith, a partner at Stroock & Stroock & Lavan, it’s theresponsibility of the state’s Division of Housing and CommunityRenewal to decide many of these kinds of issues. “The averageSupreme Court justice has 900 cases” on his or her docket, he says.“Why should he or she have to deal with these rent claims when youhave an agency whose sole purpose is to deal with them?”

In defending Clermont York Associates, the Clermont’s ownership,Smith successfully argued that tenants should not bypass the DHCRon their way to filing claims in court. It’s a strategy that otherattorneys could use, Smith says, although he adds that on anotherrecent case in which the defense made a similar argument, Nezryv. Haven Avenue Owner LLC, Supreme Court Justice Carol Edmeadruled in July that the tenants’ case could go forward.

“Where we are procedurally is that one judge isn’t bound by anotherjudge’s decision, because they’re not precedential yet,” Smithsays. “You could have five judges of equal status render fivedifferent decisions. You have to wait for the appellate court tosay who’s right and who’s wrong.” The final word on that question,Smith and Turkel agree, is years away.

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.