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City Didn't Police Tax Breaks Landlord Got for Deregulating Apts.: Lawsuit

By  Gustavo Solis and Danielle Barnes | October 20, 2017 9:23am | Updated on October 23, 2017 7:55am

 Tenants of this building are suing their landlord, claiming that the landlord illegally deregulated rent-stabilized units while receiving tax abatements form the city.
Tenants of this building are suing their landlord, claiming that the landlord illegally deregulated rent-stabilized units while receiving tax abatements form the city.
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DNAinfo/Danielle Barnes

MANHATTAN — A Harlem landlord enjoyed nearly $100,000 in tax breaks under a city housing program despite illegally deregulating the majority of rent-stabilized apartments in his building, according to a class action lawsuit filed by tenants Wednesday.

The building, 746 St. Nicholas Ave., is part of the city’s J-51 program, which gives landlords tax breaks for renovating buildings as long as all residential units on the property are rent stabilized.

Since 2007, the city has given the landlord, 746 Realty Corporation, $94,984 in J-51 tax breaks, records show. However, 59 of the units have been deregulated, making the property ineligible for the subsidy, according to the lawsuit.

“I’m sure it happens all over New York but I’m surprised that they were able to get away with it for so long because it was so obvious,” said Max Mulready, who has lived in the building for four years.

It wasn’t a city or state agency that uncovered the alleged fraud. An investigation by the nonprofit, the Housing Rights Initiative found that the majority of the building’s 91 units was not rent stabilized, said the nonprofit’s director Aaron Carr.

HRI used public records to discover that the building was getting J-51 tax breaks but was not 100 percent rent stabilized. Property tax records filed with the city showed the owner considered only 32 units to be stabilized, he compared that with the number of units in the building.

"It's frustrating. No one was doing it. Some people say it's because they lack resources, but it's because they lack political will," Carr said.

“It took us a matter of a few seconds,” he added. “It’s one of the easiest programs to enforce. All you have to do is look.”

Residents who claim they have been overcharged for years, want a rent reduction, new rent-stabilized leases and refunds for years of paying more than they should have, according to the lawsuit filed in Manhattan Supreme Court.

Tenants claim that the landlord created a catch-22 situation to get an apartment in the building. To move in, tenants had to sign a lease rider saying that the unit was not rent stabilized and the owner could charge any amount for the rent.

Those lease riders are not legally binding, but tenants don’t know that and therefore never challenged the landlord when they illegally raise the rents.

“I feel stupid now for signing that,” Mulready said.  

The landlord did not immediately respond to an email asking questions about the lawsuit and their participation in the J-51 program.

The tenants’ lawyer, Jack Lester, has filed multiple lawsuits against J-51 violators. He hopes this case sheds more light on the prevalence of fraud and pressures authorities to increase enforcement.

“There’s no enforcement,” he said. “I’ve been involved in a number of these cases and the problem is that tenants are left to their own devices because the agencies don’t put any resources into enforcing the law. It’s the wild west.”