Roberts V. Tishman Speyer Properties: Amicus Brief For The Mitchell Lama Residents Coalition

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, -againstTISH 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

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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

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

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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

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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.

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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 J51 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 J51 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 J51 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).

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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 J3

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

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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 26504.2 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 thenexisting 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 J51 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.

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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

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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 J51 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 §26504 (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 J51 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.

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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.

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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 J51 Program: Controversy and Revision, 12 Fordham Urban Law Journal 103 (19831984). 4

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

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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”).

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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 §11243(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.

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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 MitchellLama Residents Coalition 277 Broadway, Suite 1410 New York, New York 10007 Telephone: (212) 587-2400 ____________________________ By: Seth A. Miller

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