By Sabina Mollot
Stuyvesant Town tenants last week won a $69 million settlement against the owners and former owners of the giant East Side apartment complex for illegally raising rents after collecting tax relief.
However, rents for some of the 11,000 residents may still go up under a rent formual approved as part of the deal.
The so-called Roberts v. Tishman Speyerclass action will compensate the involved tenants and former tenants for rent overcharges from January 22, 2003 through December 31, 2011.
“Once finally approved, today’s $68.75 million settlement agreement, when combined with past refunds and rent savings the tenants have already received, will bring the total recovery in the lawsuit to at least $146.85 million,” said Alexander Schmidt of Wolf Haldenstein, the plaintiffs’ lead attorney, in a written statement. “There will also be future benefits,” he added.
The settlement was approved by Justice Richard B. Lowe, III, the chief Justice of the Appellate Term, First Department. The agreement requires final court approval. A hearing on final approval is scheduled for April 9, 2013.
Ronald Aranoff, of Bernstein Liebhard, another tenant attorneys, said that the settlement includes a “generous legal rent formula” for the past rent overcharge claims, which yields damages of almost $10,000 per leasehold and average damage awards of $3,200 for the 21,250 class members.
As for the nine named plaintiffs in the suit, they will each receive at least $25,000, a New York Times report noted. Four of the nine plaintiffs still live in Stuyvesant Town. Aranoff added, “We believe this settlement provides an extraordinary recovery for our clients, and we couldn’t be happier for them.”
The current owners of ST/PCV (senior lenders represented by CWCapital, who in court papers are referred to as “PCV ST Owner LP” and “ST Owner LP”) contributed $58.25 million of the $68.75 million settlement. Metropolitan Life, the owner until November 2006, contributed $10.5 million.
The settlement also continues rent stabilization through June, 2020 for each of the 4,311 formerly decontrolled Stuyvesant Town and Peter Cooper Village apartments the suit represents. June, 2020 is when the residential complexes’ New York City “J-51” tax benefits expire.
Along with the protections rent stabilization offers, such as automatic lease renewal and succession rights, the court decision is also a win for tenants who hoped to eventually buy their units. CWCapital, which initially supported the idea of a conversion to co-ops or condos, had refused to even discuss a possible deal with the Tenants Association until the case was settled.
However, despite the court win, rents at the complex may still go up after the settlement is finally approved, subject to the preferential rent formula caps.
Schmidt called that a tradeoff. “We don’t have a duty to future tenants,” he said. “We only have an obligation to members of the class.”
Council Member Dan Garodnick, a Peter Cooper resident who is affected by the class action since he is a former market rater, also held off on cheering the settlement.
“We will reserve judgment on the fairness of this agreement until we have had a chance to consider the aggregate impacts on current and former tenants,” he said.
“Tenants had overpaid for years as a result of illegal rent deregulation, and they have been waiting a long time for relief. I am concerned that a significant number of tenants may be subject to rent increases under this agreement, and that will be a point of interest to members of the class who will have an opportunity to object.
“In the bigger picture, the Roberts settlement has been hanging over our heads for a long time as a barrier to tenant ownership of the property, and that barrier is now removed.”
Meanwhile, class members (current and former leaseholders who paid market rate rents between January 22, 2003 and December 31, 2011), shouldn’t expect checks to come in the mail any time soon. Along with the final court approval needed, there is also a period through February 18 in which class members will have the opportunity to appeal or opt out. This, said Schmidt, could delay the process indefinitely.
If things go as scheduled though, after the hearing on final approval is held in April, class members will have until May 1 to file their claims and get their money in a period of around 30-60 days. Class members will be receiving a mailing on their options by January 3.
The past rent savings and refunds resulted from an interim agreement that was reached in 2009. Under that interim agreement $2.4 million in rent was refunded to tenants in 2010, and the tenants saved an additional $75.7 million in rent over the past three years.
Additionally, according to Schmidt, the $146.85 million amount could increase in the future because the settlement sets future rents based on a “preferential rent” formula that will save tenants at least another $10-20 million dollars, and potentially more than a $100 million, over the next eight years. The exact amount of future rent savings under the formula will depend on future rental market conditions and tenant turnover rates.
Also part of the settlement is that the total number of vacancy increases between the date of deregulation and December 15, 2010 the owner can charge for has been capped at three, even if the apartment turned over every year.
In a statement on the settlement from CWCapital, the company said it has agreed that any additional vacancy increases beyond three within that time period will be treated as renewal increases.
CWCapital also said all tenants who lived in their apartments before the Appellate Division decision on “Roberts” was made, in March 2009, and any tenant who signed a market rate lease during the escrow period will be offered the lesser of modified legal rent or their original contract rent with all applicable Rent Guidelines Board increases.
“We are committed to improving one of our city’s most unique properties,” Andrew MacArthur, managing director of CWCapital, said in the statement, “and that includes making sure Peter Cooper Village Stuyvesant Town remains attractive for individuals and families who see it as a long-term community.”
MacArthur noted that when the special servicer took over operations in ST/PCV from Tishman Speyer, it was nearly four years after “Roberts” was filed.
“Since then, we have worked hard to try to balance the interests of residents and bondholders, recognizing that our fiduciary responsibility to investors must respect the concerns of tenants who call Peter Cooper Village Stuyvesant Town home,” he said.
The New York Court of Appeals found in October, 2009 that the apartments had been removed improperly from rent stabilization while the complexes were receiving J-51 tax benefits, which are available only for rent stabilized buildings.
