A state housing agency has dealt an apparent blow to a group of tenants of Tribeca's Independence Plaza who hope to prove that their landlord illegally deregulated rents in their apartment complex.

Seven tenants at Independence Plaza North, a 1,339-unit development along Greenwich Street, sued landlord Laurence Gluck in 2005 when the buildings' tenant association discovered he was still receiving J-51 tax abatement associated with the Mitchell-Lama affordable housing program, more than a year after removing the apartment complex from the program. The tenant association claims that because Gluck continued to receive the tax breaks—which carry a requirement for rent stabilization—city housing laws should have protected the hundreds of tenants whose rents were increased after the complex was removed from Mitchell-Lama.

Tenant association leaders had hoped that a ruling in their favor that they say would mean a rollback in rents for many residents in the complex.

Gluck, who maintains that he was given the breaks purely by accident, has argued that stabilization laws should not apply. After he stopped accepting the tax breaks in 2006 and repaid the money he owed—about $17,900—the city's Department of Housing Preservation and Development retroactively fixed the apartment complex's tax record to indicate that the breaks stopped on the same day as the termination of its Mitchell-Lama rent regulations. Gluck's attorneys say that the city's action frees the landlord from any obligation to stabilize rents at IPN.

Earlier this month—at the request of the Supreme Court judge presiding over the lawsuit, Marcy Freidman—the state’s Division of Housing and Community Renewal issued an advisory ruling supporting Gluck’s argument. The agency declared that rent stabilization laws never attached to the apartment complex because, as far as city and state housing authorities are concerned, Gluck never received the tax breaks in the first place. 

“A lot of people were surprised by the decision, but I wasn’t,” Stephen Meister, Gluck’s attorney, said in a phone interview with the Trib. He added that many of the residents in the complex are already living with “simulated rent stabilization” by way of an agreement the Tenants Association signed with Gluck in 2004. That agreement would have been seriously jeopardized had the DHCR ruled against the landlord, according to Meister.

“I really do believe it’s a win for both sides, and it’s the best thing for the tenants,” Meister said.

(Based on the 2004 agreement, rent increases for one group of tenants in the building are keyed to state-approved increases for rent-stabilized tenants in other housing developments. There are two other groups of tenants at IPN: those with low incomes who receive federal subsidies and those who moved to the complex after it left the Mitchell-Lama program and pay market-rate rents.)

With the DHCR's ruling in, the suit will now revert back to Freidman's court, where she can affirm or reject the agency's decision. There is no indication as to when she will reconsider the case.

Though perhaps a symbolic win for Gluck, the DHCR decision seems to have done little to deter the tenants association from continuing its pursuit of victory.

“We just have to dust ourselves off and keep the fight up,” said Diane Lapson, president of the IPN Tenants Association. “No matter what happens, win or lose, we’re not going to give up.”

The DHCR's advisory ruling did not address what could be a core issue in the case: whether HPD had a legal right to change the apartment complex's record after Gluck repaid the taxes. In her summary of the agency's findings, DHCR Deputy Commissioner Leslie Torres wrote that it was "not within the purview of DHCR to second-guess or overrule [HPD's] decision." There is no law expressly prohibiting a retroactive termination, but there is no legal precedent to support it either.

Regardless of the legality of HPD's decision, Seth Miller, the tenants association's attorney, argues that the complex should be rent stabilized. A clause in the state's housing laws exempts developments in the Mitchell-Lama program receiving J-51 benefits from other rent stabilization requirements. But it is Miller's contention that the governing laws, in this case, are the ones that attach rent stabilization to the receipt of J-51 abatement and protect stabilized tenants even after J-51 benefits are terminated.

“It just doesn’t make any sense,” Miller said. “The issue is simple: are we going to follow the only law that applies to the termination of benefits and how that effects stabilization? Or, are we going to pretend that the benefits were never given and that the law doesn’t apply?”

In a 2006 letter to Borough President Scott Stringer, then-HPD Commissioner Shaun Donovan explained that "after reviewing the facts as well as equitable public policy considerations, [HPD] determined that the J-51 Abatement should have been terminated [in 2004]." In April 2009, based on the contents of Donovan's letter to Stringer, Judge Friedman wrote that there was considerable evidence that HPD had made a discretionary decision—as opposed to a strictly clerical correction—when it retroactively terminated Gluck's tax breaks, thus casting doubt over whether the development should have been protected under rent stabilization. However, Friedman deferred to the DHCR, which administers application rent stabilization laws statewide, for a decision on the legitimacy of HPD's action, a responsibility the agency has now passed back to the court.

If Judge Freidman ultimately rules for the tenants, it could result in a substantial reduction in rent for hundreds of residents at IPN, according to Lapson, many of whom have lived in the building since it opened in the mid-1970s. Even tenants who moved into the complex after 2006—when Gluck stopped receiving the tax breaks—could see their rents affected in some way as a result of a favorable ruling from the court, according to Miller.

However the case is decided, both sides have made it clear that Freidman's ruling will not be the final word.

"It's no secret," Miller said. "Whoever loses this case will most likely be filing an appeal the next day."

Editor's Note: The Trib had originally reported that Mr. Miller's contention in the case against Lawrence Gluck was that HPD's decision to retroactivly terminate Independence Plaza North's J-51 tax abatement was improper, and as such does not protect Gluck from the application of rent stabilization laws. According to Miller, Independence Plaza should be rent stabilized regardless of the legality of HPD's action.