going down

Downtown Tenants and Landlords Skirmish Over Rent Reset

Photo: Jason Scott Jones/THE CITY

After 12 years in the same building, Bruce Hackney and Tim Smith thought it was finally time to move on.

Steep rent increases in the years after a 2011 ownership change at their downtown complex, 10 Hanover Square, made the writing on the wall clear: Their $4,700 one-bedroom that had always cost the art industry professionals dearly would soon be entirely unaffordable, they said.

Then, as they started searching for a new place last week, a letter arrived: This year, the couple would be eligible for a rent-stabilized lease.

And in a New York miracle, their rent was actually going down — by about $500 a month.

“I thought, that can’t possibly be correct,” Smith said.

The couple’s landlord, UDR, did not respond to a request for comment. But given a recent court ruling affecting thousands of units in Lower Manhattan, the new stabilized lease offer makes sense.

Hackney and Smith’s building is one of dozens of properties that received a tax break known as 421-g, a 1990s-era abatement and exemption lasting up to 14 years and created to spur the conversion of downtown office buildings into residential apartments. The 493-unit Hanover Square building was once home to Goldman Sachs.

And because the 21-story property received the 421-g break, its tenants are legally owed rent-stabilized leases — and possibly back rent, under a six-to-one ruling in June from New York’s highest court.

‘Living in the Carrot’

To Hackney, who found out about the ruling through THE CITY’s reporting, the news came as a shock after 33 years living in New York.

“From the time I moved here, I always thought, wow, I’d love to get into a rent-stabilized lease, and always felt like I was chasing this carrot that was never there,” he said. “Now I know I was living in the carrot.”

In the buildings affected by the ruling, Hackney and Smith’s experience may be the exception, not the rule.

10 Hanover Square in the Financial District.
10 Hanover Square in the Financial District. Photo: Jason Scott Jones/THE CITY

Since the Court of Appeals decision, some tenants have heard nothing from their landlords, while others are fighting building by building to get what they’re owed.

One resident at a five-unit building at 16 Maiden Lane reached out to THE CITY after learning his building received the 421-g tax break. He said his Long Island-based management company has been completely mum about the ruling, and tenants are still operating on market-rate leases. That company, Malachite Group, did not return a request for comment.

At other buildings, owners are acknowledging the court decision — but not complying with it fully, according to Serge Joseph, the attorney representing the tenants at 90 West St. and 50 Murray St. whose cases precipitated the key ruling.

Surprise Rent Hikes

In one of those buildings, 90 West St., landlord Kibel Company is offering rent-stabilized leases that cite the ruling — while jacking up rent prices, Joseph said.

One tenant there who pays $3,591 currently was offered a stabilized lease that listed the new rent at $6,291 based on the “owner’s analysis,” said Joseph, quoting from a letter sent to the client from Kibel.

A representative of Kibel, Lee Rosen, said the company is setting rent equal to the rent tenants were paying from their expiring lease, plus “the rates set forth for renewals under rent stabilization.”

“This preserves both the owner’s and the tenants’ rights,” he said in an email. “Further, we made it clear that the setting of the legal rent is subject to review by the court.”

However, Joseph’s take is that no rent level can be determined based on existing rent — which the court deemed impermissible, and to tack on anything additional is not complying with the ruling.

“There are multiple levels of illegality,” he said. “It’s a degree of chutzpah that is simply astounding.”

Is your Lower Manhattan building on the map of addresses likely affected by the 421-g ruling? Check below.

To determine what they are owed, tenants at 90 West St. will meet with a court-appointed referee in late September to hash out their legal rent and what they may have been overcharged through the years. The same process will begin in October for tenants of 50 Murray St.

The tenants may be entitled to up to six years of back rent, plus interest, according to the statute of limitations on such cases — recently extended by Albany from four years to six.

That procedure may have to be repeated with not only every building affected by the ruling, but every individual apartment, as well, Joseph said, because a unit’s size will affect its rent.

The city Department of Housing Preservation and Development certifies apartments’ eligibility for the tax program, while the Department of Finance administers the benefit, according to the Department of Finance.

At 10 Hanover Square, Hackney and Smith are still determining exactly what their next step is.

The couple — who have carefully curated their compact apartment over the years with artwork, a collection of vintage glass bottles and mid-20th century modern antiques — say they’ve spent between 40% and 50% of their income per year to be able to stay there, and can’t help but think of what else they could have done with a lower monthly housing bill all these years.

“We made a choice to stay in Manhattan, to live in a modern, full-service building with a washer and dryer and a dishwasher and a doorman,” Smith said. “And we’ve given up a lot of other things.”

“It affects all of the choices for the past 12 years, financially, that we’ve made,” Hackney added. “That is significant.”

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