Four Lawsuits Target Owners Abusing J-51 Tax Program

Four class action lawsuits were filed recently against three owners believed to be among the biggest abusers of the J-51 tax program in the city. The suits were filed in New York County Supreme Court after an investigation by the non-profit watchdog group, Housing Rights Initiative (HRI).

The J-51 tax program offers developers an as-of-right tax exemption and abatement for rehabs or conversions of multifamily dwellings. Upon completion, the owner has to rent stabilize all of the units for at least the duration of the tax benefit, and can increase the rents only in accordance with the Rent Guidelines Board. Owners get up to a 34-year exemption from increases in real estate taxes resulting from the work. In addition, existing real estate taxes receive an abatement of up to 12.5 percent.

J-51 was in the spotlight in 2009, when Tishman Speyer was held responsible for not keeping all the apartments in Stuyvesant Town rent regulated, despite utilizing the tax exemption. Tens of thousands of units illegally destabilized under J-51 were never placed back on rent stabilization by owners. In response, Governor Cuomo launched an initiative at the beginning of 2016 that sought to re-stabilize 50,000 illegally deregulated units by sending owners voluntary compliance letters.

This leads us to the current lawsuits, which are targeting owners who are still allegedly abusing the J-51 tax exemption. According to HRI, these firms have disregarded Cuomo’s voluntary compliance letter and failed to re-stabilize illegally deregulated units, or have “created the illusion of compliance” by re-stabilizing illegally deregulated units at illegal amounts. The lawsuits have been filed on behalf of hundreds of former and current tenants in over 200 units across all the buildings.