Manhattan Landlords Lose Bid to Deregulate Richer Renters’ Units

New York City building owners can’t deregulate the apartments of higher-income tenants who had leases in effect when New York’s “luxury deregulation” law was repealed, the state’s top court said Thursday.

Because of the repeal, there’s no authority to turn rent-stabilized units with unexpired leases into market-rate ones based on a tenant’s income, the New York Court of Appeals said. That’s the case even for units that the state, prior to the repeal, had ordered deregulated once their leases were up, the court said.

The suit was brought by a group of Manhattan landlords that had obtained luxury deregulation orders prior to the June 14, 2019 passage of a new housing law. The Housing Stability and Tenant Protection Act of 2019 repealed provisions of New York law that deregulated rent-stabilized units for tenants above an income threshold. After the law took effect, New York’s Division of Housing and Community Renewal denied the landlords’ move to deregulate units with leases that expired after June 14.

The language of the housing law, prospectively repealing high-income deregulation, supports the agency’s finding that an apartment couldn’t become deregulated if the existing lease expired after June 14, Judge Shirley Troutman said for the Court of Appeals. The sole statutory authority for luxury deregulation was “‘repealed’” and that repeal “‘shall take effect immediately,’'' Troutman said, quoting the 2019 law. “Since luxury deregulation became unavailable upon the HSTPA’s passage, there is now no statute authorizing DHCR to exempt previously qualifying apartments from rent stabilization if they were not luxury deregulated as of June 14.”

Troutman rejected the landlords’ argument that the state was improperly applying the law retroactively when it declined to deregulate units that previously had deregulation orders. Those orders only authorized the units to deregulate once their leases expired and the intervening repeal of luxury deregulation meant the orders no longer had effect, the judge said.

“The conditions for luxury deregulation had not been fully satisfied because the tenant’s lease had not yet expired and the enactment of the HSTPA prevented that deregulation from coming into effect,” the judge wrote.

Judges Rowan D. Wilson, Jenny Rivera, Michael J. Garcia, Madeline Singas, Anthony Cannataro, and Caitlin J. Halligan joined the opinion.

Horing Welikson Rosen & Digrugilliers PC represented the landlords.

The case is Matter of 160 E. 84th St. Assoc. LLC v N.Y. State Div. of Hous. & Cmty. Renewal, N.Y., 157557/20, 12/19/24.