In a decision that could have major repercussions for landlords of rent-controlled buildings citywide, the state’s highest court has ruled this morning that owners of the sprawling Stuyvesant Town and Peter Cooper Village complexes in Manhattan improperly charged market-rate rents on thousands of apartments. In what is probably the final deathblow for Tishman Speyer's ownership of Stuy Town, the Court of Appeals ruled that the owners should not have raised rents beyond certain set levels while also receiving tax breaks from the city for major renovations.
When Tishman Speyer purchased the property from MetLife in late 2006 for $5.4 billion, they anticipated turning thousands of rent-regulated units to luxury rentals. But the market for luxury rentals tanked with the economy, and the property is worth only $2.1 billion now, less than half of the purchase price. Tishman Speyer is at high risk of default on some $4.4 billion in loans, and today's ruling means they may have to pay an estimated $200 million in rent overcharges and damages to tenants of some 4,000 apartments.
Lawyers for Tishman Speyer had argued that landlords citywide could have to repay “tens, if not hundreds, of millions of dollars” to tenants who were overcharged if the court ruled for the tenants, because landlords at as many as 80,000 apartments may have improperly raised rents and deregulated apartments while receiving special tax breaks. In its decision, the court acknowledged the "dire circumstances" predicted by Tishman Speyer as a result of such a ruling, but said that that "if the statute imposes unacceptable burdens, defendants’ remedy is to seek legislative relief."