By Albert Amateau
The State Court of Appeals decision last week that Tishman Speyer had improperly raised rents to market rate on thousands of regulated Stuyvesant Town and Peter Cooper Village apartments while participating in the state J-51 tax-break program was hailed as a victory for tenants and denounced as a mortal blow to the owners.
The decision by the highest court in the state could mean that Tishman Speyer and its partners would have to pay an estimated $200 million in rent overcharges to tenants of about 4,000 of the total 11,000 apartments in the two complexes, which extend east from First Ave. to Avenue C between 14th and 23rd Sts.
It’s good news for residents in those apartments, but there is also uncertainty about when they might see any of the money and when their apartments, which were dropped from the rent-stabilization program when their rents were wrongfully raised, would again become stabilized.
The residents of the 7,000 apartments who are not directly affected by the Court of Appeals decision because they remain in the rent-stabilization program also feel uneasy on the grounds that Tishman Speyer might skimp on service and maintenance of the buildings because of the financial burden that the decision has put on them.
Tishman was already reeling because it paid a record $5.4 billion to Metropolitan Life in 2006 at the height of the real estate market, and saw the value of the investment crumble in the past year to about $2.1 billion. The ruling, in the view of many real estate officials, brings closer the possibility of a Tishman Speyer default.
City Councilmember Daniel Garodnick, who lives in a market-rate Stuyvesant Town apartment and grew up in the complex, where his parents have lived for more than 40 years in a rent-stabilized apartment, said this week that the ruling would make stabilized tenants feel more secure than they were before.
“Rent-stabilized tenants have been subject for years to pressure from the owners to get them out of their apartments,” he said. Among the tactics have been charges by management that a stabilized unit is not a tenant’s primary residence. “Tenants have been forced to go to court to defend themselves against false charges,” Garodnick said.
The ruling is likely to reduce the owners’ incentive to evict stabilized tenants, he said.
“There wouldn’t be much sense in evicting a stabilized tenant and getting another stabilized tenant,” he said.
Real estate developers and investors during the boom years bought rent-stabilized residential buildings in Manhattan with overt plans to get stabilized tenants out, raise the rents to above $2,000 per month so the apartments leave the stabilization program, and rent to market-rate tenants.
Garodnick, who tried but failed to organize tenants to buy the complex from Met Life before Tishman Speyer and its partner Black Rock Realty made their record offer, said that Stuyvesant Town residents have long been concerned about the level of maintenance.
Shortly after Tishman Speyer took over the complex, attorney Alexander R. Schmidt filed a lawsuit on behalf of nine residents of seven apartments in the two complexes, claiming that the owners, including Met Life, had improperly raised rents while receiving J-51 tax breaks. J-51 reduces taxes on the cost of major building improvements and renovations.
Real estate executives have estimated that the decision could affect the owners and residents of up to 80,000 New York City apartments, most of them in Manhattan.
At the Cooper Square Committee’s 50th anniversary celebration last Thursday, Assemblymember Deborah Glick, sparked applause when she exuberantly said the Stuyvesant Town and Peter Cooper tenants had “kicked Tishman’s tush!”
