IPN Suit Gets Press (Two Days After Election Day)

In December, 2005 Collins, Dobkin & Miller, LLP brought a lawsuit to obtain rent stabilization protection for the more than 1,300 households at Independence Plaza North, in Tribeca. Independence Plaza is a former Mitchell Lama development that was privatized in June, 2004 while receiving J-51 benefits. Within months after our suit, the Bloomberg administration permitted the owner, Laurence Gluck, to repay the City for the tax benefits he received after the privatization. The City’s decision came about after months of private in-person meetings between Gluck’s lawyers, including a former HPD commissioner, and then-commissioner (now HUD Secretary) Shaun Donovan. The tenants were not invited to attend.

Our suit is still pending. The repayment of the tax benefits does not deregulate a rent stabilized building.

The Supreme Court sent the case to the New York State Division of Housing for decision, rejecting the landlord’s claim that he was obligated to pay back the benefits. A decision is expected in January, 2010.

The New York Times did not cover this story in 2006, when the City did this massive favor for Mr. Gluck. As a result, the Bloomberg administration was saved the embarrassment of having to explain its 2004 failure to enforce the law that required more than 1,300 apartments to become rent stabilized upon leaving Mitchell Lama, and then its private arrangement to allow Mr. Gluck to repay J-51 benefits. The Times first reported this story two days after Election Day, 2009:

http://www.nytimes.com/2009/11/05/nyregion/05independence.html

Another story came out shortly after that:

http://www.downtownexpress.com/de_340/stuycase.htm

In response to the Times article, Seth Miller submitted the following letter to the editor, which was never published:

To the Editor:

Thank you for your November 5, 2009 article covering the ongoing legal dispute about whether Independence Plaza North became rent stabilized when it left the Mitchell Lama program in 2004. As one of the attorneys for the tenants’ association, I am grateful that the issues raised by the Bloomberg administration’s 2006 decision to permit Mr. Gluck to repay tax benefits at IPN, as part of his attempt to avoid the requirements of rent stabilization, are receiving the attention they deserve.

Although the article endeavored to strike a balanced tone, it began with the claim that the tax abatements received at IPN after it left the Mitchell Lama program ($17,879.42, according to the article) are trivial in comparison with the “tens of millions of dollars” the development is supposedly worth today. The comparison obscures the role and purpose of the J-51 program in preserving affordable housing, the significance of the unlawful deregulation of more than 1,300 affordable apartments, and the consequences suffered by the public when developers break the law with the acquiescence of city agencies.

The tax abatements at IPN were not a trivial amount. The abatements began in 1998, when the development was a Mitchell Lama, and were for a twelve-year term. The quoted figure is a tiny fraction of the total abatements. They were for renovations, under a program — the J-51 program — designed to subsidize the renovation of affordable housing, in buildings sorely in need of renovations. Comparing the amount of the 1998 tax abatement for renovation of a subsidized affordable housing project with the 2004 “market” value of this (illegally) deregulated property is like comparing apples and caviar. A better comparison would be to note the significant proportion of the renovation costs that were shouldered by the taxpayer while the property was in the Mitchell Lama program.

The point of the J-51 program is to subidize the upkeep of affordable apartments, so long as they remain affordable. When someone agrees to be bound by an obligation to the public, such as by accepting J-51 benefits, the obligation does not disappear because the size later proves small, especially if the point of comparison is deregulated luxury housing. People are stuck with bad deals all the time. Millions of people are being foreclosed upon right now, and all of them can make arguments that are the same as Mr. Gluck’s argument, except that the same argument sometimes sounds different coming from plain folks.

The figure quoted in the first paragraph of the story is well in excess of one year’s rent for most people at IPN. Just imagine how it would sound if any of them claimed that it shouldn’t matter to Mr. Gluck if they didn’t pay rent for a year.

The article closes with the claim by Mr. Gluck’s lawyer’s that his client was not aware of the J-51 benefits in place at IPN. In court, Mr. Gluck and his lawyer told a very different story. Once we obtained proof that Mr. Gluck’s company was on notice of the benefits when he bought IPN, he admitted, in a brief, that he knew about the benefits, signing statements that said “Defendants are not claiming ignorance as to the circumstances of the project,” and that “Defendants’ knowledge of the J-51 benefits does not change the facts as they exist.”

In June, 2004 Mr. Gluck unlawfully deregulated more than 1,300 affordable apartments at IPN despite the fact that he was on notice of the significant J-51 benefits received there since 1998. As soon as the tenants merely asked him about the benefits, in 2005, his lawyers demanded and obtained numerous private meetings with the commissioner of HPD. The tenants were not invited. In April, 2006, HPD permitted him to repay the benefits received at IPN after June, 2004, leaving the tenants and the courts to spend more money and time than they can afford, enforcing the laws that require IPN to be rent stabilized. The point of the story is that, when he privatized this J-51 assisted development, it was Mr. Gluck’s responsibility to comply with the law, and HPD’s responsiblity to enforce it. This is what links the IPN story to the events at Stuyvesant Town, where thousands of apartments were illegally deregulated, helped in the process by dubious legal opinions from the New York State Division of Housing under the Pataki administration, and by HPD’s decision to accept the repayment of J-51 benefits in proportion to the number of deregulated apartments. The loss of affordable housing is the direct result of developers who, like Mr. Gluck and Mr. Speyer, skirt the law, and agencies who, like Bloomberg’s HPD and Pataki’s DHCR, accquiesce.

Seth A. Miller