An investigation by the housing watchdog group, Housing Rights Initiative, has led to two more class-action lawsuits over landlords allegedly abusing the J-51 tax abatement program. Last year, another investigation by the group led to the filing of four class-action lawsuits against three NYC landlords who were allegedly violating the same program.
The J-51 tax break program gives landlords tax exemptions for carrying out rehabs and renovations of older, multi-dwelling buildings. Renovation work could include installing hot water, repairing the roof, installing an elevator, etc. As part of the deal, landlords must ensure that all the units within the building are rent-regulated for the duration of the tax break, which typically lasts between 14 to 34 years.
In many cases throughout the city, landlords had been flouting the rules dictated by the J-51 program, and charging significantly higher rents to tenants. As a result, Governor Andrew Cuomo launched the J-51 initiative, in 2016, to return 50,000 apartments back to rent regulation. However, HRI’s investigations over the past couple of years has revealed that many NYC landlords continue to receive (or did in the past) benefits of the tax break without maintaining rent-regulated apartments, even as the city is in the midst of a growing affordable housing crisis. The program costs taxpayers about $250 million per year.
“New York State is standing idly by as taxpayers are being robbed in broad daylight,” said Aaron Carr, the founder and executive director of HRI. “It is time for our government to step up to the plate with a shovel in hand and uproot this culture of real estate corruption.”
The latest class-action lawsuits stemming from an HRI investigation were filed by the Law Offices of Grimble & LoGuidice and the the Law Offices of Jack Lester, in the New York State Supreme Court. They were filed on behalf of the tenants at 230 West 147th Street, a six-story building in Central Harlem, with 100 apartments; and 42-72 80th Street, a six-story building in Elmhurst, Queens with 103 apartments.
The Harlem building, which is owned by Remik Holdings LLC, is still receiving the tax break, but only had 8 units registered as rent stabilized in 2017. Between 2014-2016, none of the apartments were registered, and in the five years prior to that, only 12 apartments or fewer were registered.
The management at Remik Holdings LLC first told Curbed, on the phone, that they weren’t receiving any J-51 benefits at their Harlem building. When pressed on the matter, the manager declined to comment.
At the Queens building, which is owned by a variety of LLCs, the J-51 benefits expired in 2012. However at the time of expiration, only 10 apartments were registered as rent stabilized. HRI contends that any tenant who moved in prior to the expiration is entitled to a rent stabilized lease, a rent refund, and a rent reduction. In the few years before the tax benefit expired, the number of rent stabilized units registered were 14 or under. Curbed was unable to contact the management at the Queens building as the LLCs associated with it, had no listed phone numbers or contact information.
“In all five boroughs of New York City, landlords continue to reap the tax benefits of the J-51 program, without passing the rent stabilization benefits on to tenants as the program requires,” said Shaina Weissman, an attorney at Grimble & LoGuidice. “We will pursue these actions as long as the City fails to enforce affordable housing laws.”
The agency in charge of keeping landlords in check, on this program, is the state’s Division of Housing and Community Renewal (DHCR). At the time of publication, the agency had not returned Curbed’s request for comment. In May this year, HRI worked with the same law firms listed above to sue the DHCR for allegedly refusing to provide the group with the list of landlords who had failed to maintain rent-regulated apartments while still reaping the dividends of the tax break.
Just last month, the Village Voice reported that landlords looking to circumvent the J-51 laws were allegedly engaging in a scheme-swapping mechanism that gave the impression that they were maintaining rent-regulated units as per the tax break guidelines, but were in fact charging much higher rents.
Since Governor Cuomo’s initiative launched in 2016, HRI’s research research has led to the filing of over 40 class-action lawsuits against landlords who are allegedly flouting the laws. Simultaneously, HRI is also working with City Council member Ritchie Torres, who heads the Council’s Oversight and Investigations Committee, to introduce legislation to root out NYC landlords who fail to mention that they have rent-regulated apartments in their buildings.