Rosenberg & Estis Secures ‘Mod Rehab’ Tax Benefits For Property Owner After HPD Denial

Firm Secures Important Real Estate Tax Benefit
Court Decision

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For Immediate Release

PRESS CONTACT:
Shea Communications, LLC
George Shea, Mark Faris (212) 627-5766

Justice Debra James of the Supreme Court, New York County issued an important real estate tax benefit law decision today granting a property owners’ Article 78 Petition challenging HPD orders to dismiss moderate rehabilitation tax benefit applications under the City’s “J-51” program. The judge ordered HPD to consider the Mod Rehab tax benefit applications on the merits and grant the appropriate tax benefits.

Nicholas Kamillatos, member, and Jeffrey Turkel, member, of Rosenberg & Estis, P.C. represented the property owner in the case, Ninth Avenue Realty LLC et al, v. The City of New York, New York City Department of Housing Preservation and Development (HPD), et al.

Rosenberg & Estis‘s client filed moderate rehabilitation (“Mod Rehab”) applications for tax benefits based on the installation of qualifying capital improvements to four of their Manhattan properties. HPD denied the Mod Rehab applications, despite the fact that for decades such applications had been considered on the merits and tax benefits granted by HPD, even where the average assessed valuation per apartment (“AAV”) exceeded a $40,000 cap. Rosenberg & Estis‘s client was surprised when HPD issued identical orders for each of the buildings denying the applications as being ineligible for any tax benefits based on the buildings’ AAV. The client directed Rosenberg & Estis to bring an Article 78 proceeding in Supreme Court, New York County, challenging HPD’s orders denying the applications, as being contrary to the controlling statutes.

After extensive briefing and oral argument, the Court granted R&E’s Article 78 petition and ordered HPD to consider the Mod Rehab tax benefit applications on the merits and grant the appropriate tax benefits. R&E’s memoranda of law explained to the Court why the controlling state and city statutes carved out Mod Rehab projects from the AAV cap, with the result that they were eligible to apply for Mod Rehab tax benefits, no matter what the AAV amount.

The City’s position was that, notwithstanding the explicit language of the statutes and the City’s own regulations, portions of the legislative history enacting the administrative code section in question indicated that the AAV cap should apply to Mod Rehab projects. The Court rejected the City’s contention and instead fully adopted R&E’s arguments concerning the proper application of this complex tax exemption statute. The Court’s decision states in relevant part: “This statutory language is dispositive in this proceeding as the administrative code explicitly states, as argued by the petitioners, that the AAV restriction is inapplicable to their applications and therefore HPD’s determinations were affected by an error of law and must be annulled.”

“We are gratified that our briefs to the court regarding the complexities of this statute proved that HPD erroneously denied our client’s Mod Rehab applications as ineligible,” Kamillatos said. “Real estate tax exemption statutes can be complex and difficult to decipher because they are enacted and amended over decades, and that evolution of the statute has to be traced and explained to the courts so our judges can understand the actual meaning of the statute. We were able to do that in this case and the Court correctly rejected the City’s attempt to rewrite the explicit words of the statute. We are confident that when HPD reviews the evidence, our client’s Mod Rehab applications will be granted in full and the tax exemption and abatement benefits to which they are entitled will be applied to their properties. Additionally, as required by the Mod Rehab statute, as a result of receiving these tax benefits, all of the apartments in these buildings will be subject to the rent stabilization rules for the duration of the 35-year tax benefit.”