Landlords challenging rent law take another crack at Supreme Court

When the U.S. Supreme Court declined in February to hear two more challenges to New York’s rent stabilization law, Justice Clarence Thomas gave landlords a sliver of hope, saying the right case just needed to come along.

A group of landlords believes they have just the one.

Led by city property owner G-Max Management and represented by prominent attorney Randy Mastro, the owners filed a petition this month asking the Supreme Court to consider their case against New York’s Housing Stability and Tenant Protection Act of 2019.

The court has already rejected three similar petitions, but attorneys for the property owners say their case takes a narrower approach. It argues that two aspects of the 2019 law violate the U.S. Constitution’s Takings Clause and have directly affected the property owners who filed the case.

Two of the plaintiffs, Jane Ordway and Dexter Guerrieri, moved into the Brooklyn Heights building they owned at 12 Remsen Street in 2016, aiming to combine their unit with the rent-stabilized, garden apartment below it. But the tenant — described in a 2020 lawsuit as a “successful businessman and professional athlete” — did not want to leave.

The couple allege that they cannot recover the apartment because the 2019 rent law only allows owners to occupy one rent-stabilized apartment for personal or family use. Rent-stabilized tenants are entitled to lease renewals, but owners can refuse if they can prove an “immediate and compelling need” to occupy the apartment as their primary residence.

Ordway and Guerrieri co-founded a boutique brokerage specializing in townhouses that was acquired by Douglas Elliman in 2018. Thomas wrote in his ruling that the high court needed a case that allowed it to examine “whether specific … regulations prevent petitioners from evicting actual tenants for particular reasons.”

Attorney Sherwin Belkin, whose firm represented Orway and Guerrieri in the lower courts, said he is hopeful the high court will hear the case. He thinks the couple’s plight provides a clear example of how owners were damaged by the rent law.

“There’s no hypothetical aspect to that case,” he said. “They had a right on June 13, 2019, and on June 14, 2019, they no longer had that right.”

Should that provision be found unconstitutional, it would affect a small number of the approximately 1 million rent-stabilized units in New York state, as most are part of large or mid size portfolios.

But the petition also takes aim at the revised rules for converting rental buildings into condos or co-ops.

Previously, conversions required tenants in only 15 percent of a building’s apartments to agree to buy their units. The 2019 law bumped that threshold up to 51 percent, which the real estate industry has said makes conversions all but impossible.

Before the law changed, some of the plaintiffs “believed their buildings were suitable for conversion into co-ops or condominiums and had anticipated carrying out such conversions,” their lawsuit says.

Legal Aid Society’s Ellen Davidson, a leading defender of the rent stabilization law, said the petition repeats a number of arguments made in the cases rejected by the court, and disagreed that it takes a narrower approach.

The case is seeking to overrule or clarify a 1978 case that established a four-pronged test for what constitutes a regulatory physical taking. It also asks the court to determine whether the state’s rent law, on the whole, is unconstitutional.

“It’s hard to see this as a limited case,” Davidson said.

She noted that Ordway and Guerrieri previously argued in state Supreme Court that a series of higher court decisions — in favor of landlords pertaining to how the 2019 law’s provisions applied retroactively —  permitted them to take back the garden apartment because they had initiated eviction proceedings prior to the passage of the 2019 law.

Davidson questioned if they were the best example for the landlords’ case, and said the owners contemplating converting their rental buildings merely added to the “generalized allegations” of previous cases and do not meet Thomas’ call for specificity.

The Second Circuit dismissed G-Max’s case in March, finding that the case failed for similar reasons as its predecessors, including that landlords had not exhausted all of their options under the law to take back or convert their units.

Mastro, a candidate to be the Adams administration’s top lawyer, declined to discuss the case, saying the petition “speaks for itself.” Mastro is Mayor Eric Adams’ pick to serve as the city’s corporation counsel, but the nomination may be blocked by the City Council, which has ideological differences with the lawyer.

His challenge of rent stabilization will only make that road harder. If appointed, Mastro would leave his firm and presumably no longer work on the case.

The landlords’ petition comes after the state budget increased how much owners can raise rents of renovated, rent-stabilized apartments. It also enacted a form of good cause eviction, which permits tenants facing eviction from non-regulated apartments to challenge rent increases of 5 percent plus inflation or 10 percent, whichever is less.

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