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, P.C. secured “Mod Rehab” tax benefits for a property owner after HPD denial.

R&E’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. R&E’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 R&E to bring an Article 78 proceeding in Supreme Court, New York County, challenging HPD’s orders denying the applications under the City’s “J-51” program as being contrary to the controlling statutes.

After extensive briefing and oral argument, the Court (Justice Debra James) 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.”