No Opting Out of J-51 Tax Benefits

The Appellate Division, First Department released a decision in the case of In re London Terrace Gardens v. City of New York, 2012 NY Slip Op 07078 (1st Dept. 2012) that resolved a question debated by landlords since the Court of Appeals released its landmark decision in the case of Roberts v. Tishman Speyer. That question is whether a landlord who had accepted J-51 benefits (thereby causing all of its apartments to be rent stabilized and losing the ability to remove those apartments from rent stabilization through high rent vacancy or luxury decontrol) could opt out of the J-51 program by simply returning to the City those benefits already received. The theory being that by removing itself from the J-51 program the landlord could deregulate its apartments. The Appellate Division affirmed the decision of the trial court and held that landlords could not rid themselves of the burdens of rent stabilization and the J51 program simply by returning the money already received.

What attorneys representing landlords have been doing in cases involving rent overcharge and/or a determination of regulatory status in cases involving apartments now (really always) subject to rent stabilization because of J-51 was to assert as a defense that the landlord was going to return the money received through the J-51 program so as to rid itself of its obligations. The Appellate Division has held that this is not a defense and cannot be done.

Claims in respect of rent overcharge and status will continue for newly (again always) rent stabilized apartments because of the J-51 program.