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J-51 Violators Get Hammered

A tax-abatement program, commonly known as “J-51,” requires that participating owners treat their buildings as rent-stabilized. But in Chester v. Cleo Realty Associates, L.P., the tenants alleged that their landlord deliberately violated the pertinent rules and marketed their units as “free market.”

After filing suit, the tenants asked the New York County Supreme Court for summary judgment -- (i.e., for relief in their favor, without a trial) -- contending that the evidence unequivocally established that the owner deliberately collected the wrong rent amounts, which resulted in the occupants being overcharged. And, because of that misconduct, the residents sought the application of a statutory “default formula” (to establish the correct legal regulated rents for the subject apartments), together with an award of treble damages.

The presiding Justice agreed with the tenants and was of the opinion that the landlord had acted wrongfully and was guilty of willful misconduct. The court was also of the view that there wasn’t a bonafide argument against affording the residents the protection of rent stabilization and directed that regulated leases be issued. (Interestingly, the owner’s property manager also worked with two other apartment buildings where tenants had filed overcharge litigation, reinforcing that the landlord and its agent were on notice of the pertinent legal requirements and that they knowingly skirted them; amounting to a “willful” and “fraudulent” scheme to deregulate the impacted units.)

Consequently, after application of the governing default formula, the tenants’ awards were in the millions of dollars and ranged (individually) from $321,921.26 to $1,031,699.20 -- yet another example of what can happen to miscreant property owners in these kinds of cases.

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Source: Chester v. Cleo Realty Associates, L.P., No. 151972/2017, 2022 WL 2473460, 2022 N.Y. Slip Op. 32108(U) (N.Y. Sup Ct, New York County July 06, 2022)

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If you believe you have been wrongfully overcharged, or have a real-estate dispute (including, but not limited to, a landlord-tenant matter), please do not hesitate to reach out to one of our attorneys at 212-619-5400.