On May 15, 2020 an important decision was released by Justice Robert Reed of New York State Supreme Court involving the 421-g tax abatement program and rent stabilization. The decision in West, et al. v. BCRE 90 West Street, LLC represents a major victory for the real estate industry, as it is the first 421-g decision to apply last month’s game changing ruling from the Court of Appeals’ decision Matter of Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal. In Regina, the state’s highest court held that a strict four-year statute of limitations was to be applied to rent overcharge cases involving J51 benefits. For more information the Regina ruling and its impact disputes relating to alleged rent overcharges that occurred prior to the HSTPA please visit this page on the BBG web site.
The 421-g program was enacted in 1995 as part of the Lower Manhattan Redevelopment Program. It provided tax benefits to owners who converted outdated commercial buildings to residential use. For decades, owners, with the imprimatur of governmental agencies, treated units in buildings receiving such benefits as exempt from regulation. On June 25, 2019, the Court of Appeals declared that practice unlawful.
The ruling in the West case is significant in that Justice Reed acknowledged that Regina directed that “in order to determine rent overcharges, if any, the base date is the rent in effect four years prior to the filing of this action, plus any increases legally available under the formulas established by the Rent Stabilization Law and regulations. This formula must apply, even if the base date rent was a market rent.”
Justice Reed withdrew his prior decision which mandated that the punitive default formula be applied to calculating legal rents in 421-g cases. After Regina, the four-year rule and entitlement to all rent increases, even in the absence of rent registration, applies in 421-g disputes. We anticipate that the scope of Regina will continue to expand as more decisions are issued. The decision can be found on this page on the NY Courts web site.
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