New York Law Review

KSLM-Columbus Apartments, Inc. v. New York State Division of Housing, 5 N.Y.3d 303 (2005): Determining Rent Stabilization Law Applicability After Mitchell-Lama Withdrawal

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The New York Law Review

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5 N.Y.3d 303 (2005)

When a Mitchell-Lama building withdraws from the program, apartments continuously inhabited since before July 1, 1971 are subject to rent stabilization under the Rent Stabilization Law of 1969, while those with vacancies on or after July 1, 1971 are subject to the Emergency Tenant Protection Act of 1974.

Summary

This case addresses which rent stabilization law applies when a building withdraws from the Mitchell-Lama program. KSLM-Columbus Apartments withdrew its buildings from the Mitchell-Lama program in 1998, triggering rent stabilization. KSLM sought rent adjustments under the ETPA, arguing its rents were substantially different from comparable properties. The DHCR denied the application, stating the RSL, not the ETPA, applied. The Court of Appeals held that apartments continuously inhabited since before July 1, 1971 are subject to the RSL, while those with vacancies after that date are subject to the ETPA due to the Vacancy Decontrol Law as amended by the ETPA. This distinction affects the standards for rent adjustments available to the landlord.

Facts

Westgate Housing Corporation (later KSLM) constructed three buildings in Manhattan in 1967-1968 under the Mitchell-Lama Law, offering low- and middle-income housing with regulated rents. Westgate withdrew from the Mitchell-Lama program in March 1998. Rents under Mitchell-Lama were significantly lower than market rates in the area. After withdrawal, KSLM became subject to rent stabilization. KSLM applied for rent adjustments, claiming its rents were substantially lower than market rates.

Procedural History

KSLM applied to the DHCR for rent adjustments under the ETPA. The DHCR Rent Administrator denied KSLM’s applications, holding the RSL applied. The Deputy Commissioner denied KSLM’s petitions for administrative review. KSLM filed an Article 78 proceeding challenging DHCR’s determination. Supreme Court denied the petition; the Appellate Division reversed. The Court of Appeals granted leave to appeal to DHCR and the intervenors.

Issue(s)

1. Whether apartments in a building formerly under the Mitchell-Lama program become subject to rent stabilization under the RSL of 1969 or the ETPA of 1974 upon withdrawal from the Mitchell-Lama program?
2. Whether the Vacancy Decontrol Law, as amended by the ETPA, affects the applicability of rent stabilization laws to apartments vacated on or after July 1, 1971?

Holding

1. The apartments continuously inhabited since before July 1, 1971 are subject to the RSL of 1969 because they were originally intended to be regulated under that law, but for the Mitchell-Lama exemption.
2. Yes, because the ETPA amended the VDL to subject apartments vacated on or after July 1, 1971 to the ETPA; therefore, those apartments are subject to rent adjustments under the ETPA.

Court’s Reasoning

The Court reasoned that the 1969 RSL would have applied to these buildings but for the Mitchell-Lama exemption. The ETPA was designed to bring previously unregulated or decontrolled units under rent stabilization, not to supersede the RSL for buildings already within its intended scope. The Court rejected KSLM’s argument that the Mitchell-Lama units were never subject to the RSL. The Urstadt Law, enacted in 1971, prevented new tightening of rent regulation but did not prevent the RSL’s application once the Mitchell-Lama exemption ended. However, the Vacancy Decontrol Law (VDL), effective June 30, 1971, initially exempted vacant units from regulation. The ETPA amended the VDL, subjecting units vacated on or after July 1, 1971, to the ETPA’s provisions. Therefore, units vacated after that date fall under the ETPA, allowing KSLM to seek “unique or peculiar” rent adjustments under RSL § 26-513(a) for those specific units. The Court emphasized that it was interpreting the statute, rather than deferring to the DHCR’s interpretation, because this was a question of pure statutory interpretation dependent on legislative intent. The court stated, “[I]t was the intent of the Legislature that Mitchell-Lama buildings remain in the rent stabilization system after Private Housing Finance Law withdrawal.” The court found the Appellate Division’s holding that the KSLM buildings were not subject to the RSL for the purposes of vacancy deregulation, but were subject to RSL jurisdiction to the exclusion of ETPA jurisdiction, inherently contradictory. The application of this case means that landlords withdrawing from Mitchell-Lama programs may have different standards for rent adjustment depending on when units were vacated, requiring a careful analysis of tenant history.

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