In 2000, Park Front Apartments, LLC, purchased the building from Haberman and sought to prepay the remainder of the federal loan. Park Front entered into a Use Agreement contract with HUD that stipulated what regulations would apply to the property after the loan was prepaid. The Use Agreement included an agreement that federal housing laws preempted state and local rent regulations until 2011.
Shortly after signing the contract Park Front Apartments paid the loan in full, and began to raise the annual rents by 7.5 percent in accordance with the use agreement. In 2016, eighteen tenants sued Park Front Apartments. The tenants claimed that Park Front Apartments had been overcharging tenants for sixteen years. The tenants argued that, because the owner enjoyed a State J-51 tax abatement, the State and City’s rent stabilization laws still applied and could not be preempted by the use agreement contract with HUD.
New York County Supreme Court Judge Carol Edmead agreed with the tenants, and held that the State’s rent regulation law applied to the apartment building from the time the loan was paid in full in 2000. Judge Edmead ruled that federal preemption ended when the loan was paid regardless of language included in the use agreement. Whether Park Front Apartments actually overcharged the tenants willfully, however, was an issue and had to be resolved at trial.
435 Central Park West Tenant Assoc. v. Park Front Apartments, LLC, 2017 N.Y. Slip Op. 27248 (N.Y.Cty.Sup.Ct. 2017) Attorneys: Seymour W. James, Jason Wu, for Association; Jeffrey Turkel, for Park Front).