KSLM-Columbus Apartments, Inc. v. New York State Division of Housing and Community Renewal, 5 N.Y.3d 303 (2005)

When a building exits the Mitchell-Lama program, apartments continuously inhabited since before July 1, 1971, are subject to rent stabilization under the Rent Stabilization Law of 1969 (RSL), while apartments that had a vacancy on or after July 1, 1971, are subject to stabilization under the Emergency Tenant Protection Act of 1974 (ETPA).

Summary

KSLM-Columbus Apartments withdrew its buildings from the Mitchell-Lama program and sought “unique or peculiar” rent adjustments under the ETPA. The DHCR denied the application, stating the buildings became subject to the RSL, not the ETPA, upon exiting Mitchell-Lama. The court addressed whether apartments continuously inhabited since before July 1, 1971 are subject to stabilization under the RSL, and apartments with a vacancy on or after July 1, 1971 are subject to the ETPA. The Court of Appeals held that apartments continuously inhabited since before July 1, 1971 are indeed subject to rent stabilization under the RSL of 1969. However, apartments that experienced a vacancy on or after July 1, 1971 are governed by the ETPA.

Facts

Westgate Housing Corporation (predecessor to KSLM) constructed three buildings in Manhattan in 1967-1968 under the Mitchell-Lama Law, offering financial incentives for low- and middle-income housing development in exchange for rent and profit regulations. Tenants began occupying the buildings in 1968. Westgate restructured into KSLM in 1979. In March 1998, KSLM withdrew the buildings from the Mitchell-Lama program, making them subject to rent stabilization. The existing rents became the “initial regulated rent.” KSLM began paying full real estate taxes and market-rate interest.

Procedural History

KSLM applied to DHCR for rent adjustments under the ETPA. The DHCR Rent Administrator denied KSLM’s applications, stating eligibility required subjection to the RSL via the ETPA, not directly. The Deputy Commissioner denied KSLM’s petitions for administrative review. KSLM filed a CPLR article 78 proceeding. Supreme Court denied the petition; the Appellate Division reversed, stating the ETPA covered properties exempted from the Rent Stabilization Law. The Court of Appeals granted DHCR and intervenors leave to appeal.

Issue(s)

1. Whether buildings previously constructed and operated pursuant to the Mitchell-Lama program are made subject to the Rent Stabilization Law of 1969 by the RSL itself after withdrawal from the Mitchell-Lama program.
2. Whether buildings previously constructed and operated pursuant to the Mitchell-Lama program are made subject to rent stabilization by the Emergency Tenant Protection Act of 1974 after withdrawal from the Mitchell-Lama program.

Holding

1. Yes, because the Rent Stabilization Law of 1969 (RSL) applies to buildings that were previously exempt from rent regulation under the Private Housing Finance Law (Mitchell-Lama) once that exemption ends, for apartments continuously inhabited since before July 1, 1971.
2. Yes, because the Emergency Tenant Protection Act of 1974 (ETPA) applies to apartments that had a vacancy on or after July 1, 1971, in buildings that were previously under the Mitchell-Lama program.

Court’s Reasoning

The court determined the issue was one of statutory construction, not deference to DHCR, as it involved legislative intent. The court rejected KSLM’s argument that the 1969 RSL wouldn’t apply without the 1974 ETPA. The 1969 RSL regulated Class A multiple dwellings, except those under the Private Housing Finance Law. Once the Mitchell-Lama exemption ended, the buildings became subject to the RSL. The court stated, “It is clear that it was the intent of the Legislature that Mitchell-Lama buildings remain in the rent stabilization system after Private Housing Finance Law withdrawal.” The ETPA was enacted to include housing that had never been rent-regulated or had been decontrolled, while these buildings were already under the RSL system when the ETPA was enacted. The court also rejected KSLM’s argument that the Urstadt Law prevented former Mitchell-Lama apartments from reverting to rent stabilization, finding the Urstadt Law intended to prevent new tightening of rent regulation after 1971, not to prevent the expiration of an existing exemption from rent stabilization. The court found that because of the Vacancy Decontrol Law (VDL), apartments vacant on or after July 1, 1971, are subject to the ETPA, as amended in 1974, which states that “housing accommodations which became vacant on or after July first, nineteen hundred seventy-one or which hereafter become vacant shall be subject to the provisions of the emergency tenant protection act of nineteen [hundred] seventy-four.” The court distinguished Matter of Zeitlin v New York City Conciliation & Appeals Bd., stating that the choice in this case was between the RSL and the ETPA, while in Zeitlin, the choice was between no regulation and the ETPA. The DHCR’s argument that the RSL was suspended due to the Private Housing Finance Law was deemed inconsistent. Therefore, the court concluded that the KSLM apartments vacated on or after July 1, 1971, are subject to the ETPA, and KSLM may apply for rent adjustments under RSL § 26-513(a).