Overruling a decision by the state housing agency, State Supreme Court Justice Marcy Friedman on Aug. 30 ruled that it was illegal for Independence Plaza North owner Laurence Gluck to deregulate rents at the complex while taking city tax breaks intended for rent-stabilized buildings.
The ruling means that tenants who moved into the 1,331-unit Tribeca complex before March 2006 are rent-stabilized. It nullified an opinion issued by the state Division of Housing and Community Renewal in March. The DHCR had said it would not challenge the city Department of Housing Preservation and Development’s decision in 2006 to let Gluck deregulate rents if he paid back about $18,000 in J-51 tax breaks he had received for Independence Plaza North after taking it out of the Mitchell-Lama program in 2004.
IPN tenants sued Gluck in 2005, charging that it was illegal for him to raise rents to market rates while taking J-51 benefits, which are meant to aid landlords who renovate rent-stabilized buildings. The lawsuit paralleled one filed on similar grounds in Stuyvesant Town/Peter Cooper Village.
“We’re ecstatic,” John Scott, 59, who has lived in Independence Plaza since 1975, told the DNAInfo Web site Aug. 31, at a rally and press conference where tenants celebrated. “There was a lot of anxiety and a lot of frustration, but the tenant association stayed the course. We fought a hard fight.”
“I am happy about the decision, but it is tempered by the fact it took this long,” lawyer Seth Miller, who represented the tenants, told Crain’s. “We shouldn’t have had to sue in the first place.”
Gluck and his firm Stellar Management plan to appeal. “The fact remains that both the State’s Division of Housing and Community Renewal and the City’s Department of Housing Preservation and Development have already concluded that Independence Plaza North is not covered by rent stabilization,” said a statement issued by Stephen Meister, Gluck’s attorney.
Yet many tenants have already left the buildings, unable or unwilling to pay the increased rents. IPN tenant leader Ed Rosner, a plaintiff in the suit, told DNAInfo that he was paying more than $1,500 a month rent. He believes his legal rent would be about $925.
The federal government is also suing Gluck. The 2006 deal in which HPD let Stellar deregulate rents in IPN attempted to alleviate the effect on tenants by giving more than 500 of them “enhanced” Section 8 vouchers. The “enhanced” vouchers meant that Stellar could charge more than the program’s usual maximum rents, and the Department of Housing and Urban Development would pay the difference between the actual rent and 30 percent of the tenant’s income. Now, the government is charging that it was subsidizing illegally high rents.
Last year, US Attorney Preet Bharara sued Gluck, demanding that he return all the money he has received from the federal government, plus interest and fees. Meister told DNAInfo earlier this year that Gluck has gotten at least $60 million in federal housing subsidies since 2004. Under the Section 8 program, many IPN tenants were paying less than $1,000—when the official rent on their apartment was between $3,000 and $5,000.
“By overcharging the tenants, you’ve indirectly overcharged Uncle Sam,” Timothy McInnis, a lawyer who represents Rosner, told DNAInfo. “This decision by Judge Friedman is very good news.”