Tenant Groups Sue to Block MBR Increase
by Jenny Laurie

On November 12, a group of eight tenant associations filed suits against the state Division of Housing & Community Renewal (DHCR) to challenge it setting the 1996/97 Maximum Base Rent factor at 32.4%.

In three separate lawsuits, the tenant groups are claiming that the DHCR violated both the original MBR law and the May 1997 decision by the state Appellate Court, Third Department, when it set the MBR factor, used to determine rent increases for rent-controlled apartments, at 32.4%. These three lawsuits are separate from the ones filed in October by the City of New York (in which Met Council and other groups have intervened) which support the city’s new law limiting the factor to 3%.

The City Council passed Local Law 73 in September in reaction to the outcry of distressed, mostly elderly, rent-controlled tenants who were suddenly threatened with 32.4% MBR increases after landlords won a lawsuit reversing the original factor of 3%. The 32.4% MBR increase would force most rent-controlled tenants—whose median income is $12,000 a year—to pay a 15% rent increase over two years. Local Law 73 clarified the original MBR law, passed by the Council in 1970, and requires the DHCR to return to the 3% factor.

The landlords immediately sued in State Supreme Court in Albany to stop the implementation of the new city law, which blocked them from collecting increases based on the 32.4% factor. The November lawsuits were filed in order to protect tenants in the event the court strikes down Local Law 73 and allows DHCR to return to the 32.4% factor.

According to Stanley Panesoff, program associate of the Community Training and Resource Center, no matter what happens to Local Law 73, the DHCR used incorrect calculations to set the 32.4% figure. “The lawsuits essentially allege that in recomputing the 1996-97 MBR increase of 32.4% for 70,000 rent-controlled apartments, the DHCR misapplied sections of the Real Property Tax Law.” he says. “This resulted in an artificial inflation of building values to more than double the values published by the New York City Department of Finance. The resulting values are in contradiction to the values determined by the New York State Board of Real Property Services, the state agency which has the final, legal word on determining the market value of all taxable property. This faulty and, we think, unlawful procedure rewards landlords with an 19% return on their property, clearly violating the intent of the 8.5% return on property as specified in the rent-control laws of 1970.”

The tenant groups participating in the legal action are: 246 West End Avenue Tenants Association, 100 Riverside Drive Tenants Association, 124 East 85th Street Tenants Association, Roxborough Tenants Association, London Terrace Tenants Association, Park Gardens Tenants Association, the Four Corners Tenant Association, and The Belnord Landmark Conservancy.