In a noteworthy appeal that justifies landlords’ right to bring rent stabilized apartments to market levels, Belkin Burden Wenig & Goldman just won an appeal that distinguishes Altman v 258 W. Fourth, LLC which had questioned the owners’ legal basis for prior deregulations.

Since 1993, thousands of apartments have left the rent stabilization system and become free market when they were vacated and the rent was raised upon a certain legal threshold. For example, when the threshold was $2000.00 (it was since raised to $2500 and then to $2700), if a rent stabilized tenant was paying $1500 per month and vacated, and permitted rent increases put the rent above $2000, that apartment would be deregulated and the owner could charge whatever the market would bear. In 2015, the Appellate Division in Altman v 285 W. Fourth, LLC, held that the above apartment would remain rent stabilized because the rent to be looked to was what had been charged to the outgoing tenant, not what could be charged to the new tenant.

Industry estimates are that the Altman decision could, if upheld, re-regulate more than 100,000 deregulated units throughout New York City. The potential for rent overcharges being imposed upon owners who simply followed the perceived rules is enormous.

In an appeal handled by Belkin Burden Wenig & Goldman, LLP (brief written by SHERWIN BELKIN, MAGDA CRUZ, MATTHEW BRETT and SCOTT LOFFREDO; argued by MAGDA CRUZ), the Appellate Term, First Department in 233 E. 5th St. LLC v. Smith unanimously held that:

…when subsequent to a vacancy, the legal rent, as increased by the vacancy allowance, as well as any increases permitted for post vacancy improvements, is [at the deregulation threshold], the apartment is deregulated.”

The court addressed Altman by stating that it did not view:

“the contents of a single sentence … so broadly as to effectuate a sea change in nearly two decades of settled statutory and decision law – that allowed an owner to deregulate an apartment after a vacancy, if the legal rent plus any lawful increases and adjustments to the rent, such as the vacancy allowance, exceeded the [deregulation threshold].”

This decision helps to solidify decades of long standing precedent. However, Altman does remain extant; although the owner in Altman is seeking to obtain leave to the Court of Appeals for final clarification. Accordingly, issues still remain. But certainly, this unanimous and unequivocal ruling by the Appellate Term in 233 E. 5th St. LLC v. Smith provides owners with a confirmed legal basis for prior deregulations.