« The Unwinnable War II: Didn't We Know All This Already? | Main | Here I Stand »

Stuy-Town tenants take home big win

corporatepigs.jpg

Judge rules that they are entitled to be reimbursed for years of rent overcharges on apartments whose rents were unlawfully de-regulated; decision's impact on other properties is unclear.

Crain's New York
Theresa Agovino

Tenants of market-rate apartments at Stuyvesant Town/Peter Cooper Village won a significant victory on Thursday when a judge ruled that they are entitled to rebates for rent overcharges.

The ruling stems from a court decision last October, which said that the owners of the sprawling Manhattan residential complex were not entitled to deregulate rents while they were receiving a particular type of tax abatement. The court didn't rule on the issue of retroactive payments at the time.

After the October ruling, former owner MetLife said the ruling should not apply to it because the decision came several years after the company sold the property to a partnership led by Tishman Speyer. That partnership paid an eye-popping $5.4 billion in 2006 and has since defaulted on its loans. However, the special servicer representing the lenders has yet to foreclose on the property. Sources expect the foreclosure in the next few months.

MetLife had been trying to get the case against it dismissed but New York Supreme Court Justice Richard Lowe declined to do that and said the tenants are entitled to be reimbursed for rent overcharges.

Tenant lawyer Alex Schmidt estimated that tenants could be due a total of $200 million. However, he isn't sure whether MetLife will try to appeal the ruling. Mr. Schmidt says negotiations with Tishman Speyer over settling the rebate issue are ongoing.

MetLife didn't return a call and a spokesman for Tishman Speyer said the company had no comment.

“MetLife should not fight this any further. Residents were illegally overcharged for years, and we expect them to get the recovery they deserve.” said Dan Garodnick, a member of the City Council and lifelong resident of the complex.

It is unclear what the ruling means for the larger landlord community. Initially, experts expected a rush of tenant lawsuits to be filed to capitalize on the Tishman Speyer ruling. But only a handful have been filed so far.

However, says the ruling is likely to spur landlords receiving the abatement to start rolling back rents in rent stabilized units, according to one lawyer.

“The impact of this ruling will not be favorable to the real estate community because it will transfer wealth from landlords to tenants,” said Jeff Turkel, a partner in the real estate law firm of Rosenberg & Estis.

He said the ruling is unfair to landlords because in most cases the tenants agreed to pay the market rate rents. He added that rent-regulated tenants will also be hurt by the ruling because rent paid by market rate tenants was subsidizing their lower rates and building maintenance.

However, the ruling could make it easy to sell Stuyvesant Town/Peter Cooper Village because it clears up one outstanding issue in the litigation.

TrackBack

TrackBack URL for this entry:
http://www.sherefkin.com/cgi-bin/mt/mt-tb.cgi/47

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)