The lawsuit, filed by the Small Property Owners of New York and a few individual landlords, takes aim at how state law applies to vacant apartments. The complaint alleges that capping rents on vacant units violates the revenue clause in the Fifth Amendment of the U.S. Constitution because it “directly impairs the leasehold value of the apartment.”
That, the court case claims, results “either in a complete takeover (by making it economically impossible to rent the leasehold) or a partial takeover of the value of the leasehold.”
Lawyers for the landlord said that unlike previous lawsuits challenging the state’s rent law, this complaint would not disrupt existing tenants. They hope this will help the business succeed where its predecessors failed.
“We do not dispute the government’s ability to protect existing tenants,” said Robert Johnson, an attorney with the libertarian oriented nonprofit Institute for Justice, which represents plaintiffs pro bono. “If an apartment is vacant, there is no tenant to protect, and it helps no one if these apartments disappear from the market.”
The lawsuit, filed this week in federal court in Manhattan, seeks to halt the application of rent stabilization rules to vacant apartments and calls for damages equal to the loss of income due to rent restrictions on such apartments. The case names the city, the Rent Guidelines Board, the state and the Division of Homes and Community Renewal as defendants.
The complaint follows several other legal challenges to the state’s rental law in recent years, including one filed by the Rent Stabilization Association and the Community Housing Improvement Program, two groups that have since merged into the New York Apartment Association. These groups, as well as plaintiffs in at least four other lawsuits targeting the law, attempted to take their case to the U.S. Supreme Court, which repeatedly declined to hear the issue.
“For more than 50 years, rent stabilization laws have kept rents affordable for millions of New York families, and state and federal courts have repeatedly upheld these laws, including as recently as last year,” a City Hall spokesperson said in a statement.
Ellen Davidson, an attorney with the Legal Aid Society, who intervened on behalf of tenants in the previous rental lawsuits and plans to do so in this lawsuit, said the latest case repeats the arguments of the previous lawsuits, albeit with a focus on a subset of apartments.
“It’s the same with new wrapping paper,” she said.
Similar to SPONY’s lawsuit, previous cases also alleged violations of both the revenue and due process clauses of the 14th Amendment. The latest case also alleges that the law violates the Privileges and Immunities Clause, which “protects their right to seize, hold, and dispose of property,” and the Equal Protection Clause, “because the owners of some vacant apartments are free to rent at market rates, while others are subject to crushing restrictions.”
“Keeping apartments empty is not the business model of small property owners,” SPONY CEO Ann Korchak said in a statement. She said owners who cannot raise rents to a level that would help pay for necessary renovations are effectively forced to keep the apartments off the market.
The lawsuit describes several vacant apartments at 81 Cabrini Boulevard, a 30-unit building in Hudson Heights owned by brothers Pashko and Tony Lulgjuraj, who are plaintiffs in the case through an operating entity, RPN Management.
The brothers are keeping two apartments in the building vacant “because the regulated rent is so low that it makes no sense to put the apartments on the market,” according to the lawsuit. The legal rent for one of these units is $710 per month, while an identical apartment on the floor below (also stabilized) rents for $2,595.
The second vacant unit has a statutory rent of $860 per month, while a similarly regulated apartment on the floor above rents for $3,000. The owners estimate that bringing the vacant units up to code would cost more than $100,000 per unit.
An entity tied to Bipin Mathew, who owns a six-unit building at 1819 Cornelia Street in Ridgewood, Queens, and an LLC tied to Ilan Rabinovitch, who owns a four-unit building at 135 West 78th Street, are also listed as plaintiffs in the lawsuit.
Before the passage of the Housing Stability and Tenant Protection Act of 2019, landlords had more ways to raise rents on stabilized apartments. They could also deregulate apartments as they become vacant, if rents reach a certain threshold. Davidson of the Legal Aid Society said returning landlords’ ability to deregulate vacant apartments would encourage owners to push tenants out of stabilized apartments.
“Our experience with the pre-2019 rules is that anyone who lived in their apartment for more than a decade had a target on their back,” she said.
Landlord groups have also tried to convince the state legislature to allow one-time rent reviews for apartments left vacant after a long lease, but lawmakers have shown little interest in such changes. However, the state budget last year increased the amount by which owners can increase rent after renovating stabilized apartments, but landlord groups argue the change barely makes a dent in capital needs for these buildings.
In an interview, plaintiff Pashko Lulgjuraj said he is hopeful that the approach to the SPONY lawsuit will be successful.
“It is not our intention to undermine rent stabilization as we know it,” he said. “This is very limited, very focused.”
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