Owner claimed that federal law pre-empted Central Park West building from rent stabilization. In 1969, Jacob Haberman purchased nine separate tenement buildings at 431–439 Central Park West in Manhattan. Haberman took out a loan from the Federal Housing Administration in order to rehabilitate and combine the tenements into a single apartment building containing 120 units. In 1980, Haberman received a subsidy grant from the U.S. Department of Housing and Urban Development, and contracted with HUD to continue renting to low- and moderate-income tenants until the loan matured in 2011.
In 2000, Park Front Apartments, LLC, purchased the building from Haberman and sought to prepay the remainder of the federal loan. Park Front entered into a Use Agreement contract with HUD that stipulated what regulations would apply to the property after the loan was prepaid. The Use Agreement included an agreement that federal housing laws preempted state and local rent regulations until 2011.
Shortly after signing the contract Park Front Apartments paid the loan in full, and began to raise the annual rents by 7.5 percent in accordance with the use agreement. In 2016, eighteen tenants sued Park Front Apartments. The tenants claimed that Park Front Apartments had been overcharging tenants for sixteen years. The tenants argued that, because the owner enjoyed a State J-51 tax abatement, the State and City’s rent stabilization laws still applied and could not be preempted by the use agreement contract with HUD.
New York County Supreme Court Judge Carol Edmead agreed with the tenants, and held that the State’s rent regulation law applied to the apartment building from the time the loan was paid in full in 2000. Judge Edmead ruled that federal preemption ended when the loan was paid regardless of language included in the use agreement. Whether Park Front Apartments actually overcharged the tenants willfully, however, was an issue and had to be resolved at trial.
435 Central Park West Tenant Assoc. v. Park Front Apartments, LLC, 2017 N.Y. Slip Op. 27248 (N.Y.Cty.Sup.Ct. 2017) Attorneys: Seymour W. James, Jason Wu, for Association; Jeffrey Turkel, for Park Front).