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In appellate court, AY renters' case finds little sympathy

Can the Empire State Development Corporation (ESDC), pursuing "friendly condemnations," override the New York State Division of Housing and Community Renewal (DHCR), which typically must grant permission to a landlord who wishes to demolish a building housing residential tenants with rent-stabilized leases?

The answer, not previously decided by the courts, appears more likely to be yes, allowing such "friendly condemnations," in which Forest City Ratner-owned buildings are transferred to ESDC ownership, thus ending the leases far more speedily than the process would occur under DHCR.

In May, State Supreme Court Justice Walter Tolub dismissed a challenge from 13 tenants (all but one rent-stabilized) in the Atlantic Yards footprint, saying that the case belonged instead in the appellate court designated to hear eminent domain determinations, but without the advantages to the plaintiffs of a trial.

Appealing Tolub's ruling to a different appellate court, the tenants, represented by attorney George Locker, found it tough going yesterday. A five-judge panel of Appellate Division, First Department was steadily skeptical of his argument that the tenants are not actually condemnees, with an ownership interest in their leases.

(Four of the justices were appointed by former Gov. George Pataki. More on the First Department from Tom Robbins in the Village Voice.)

Looking at the law

The ESDC points out that the issue seems simple; state law defines a condemnee as “the holder of any right, title, interest, lien, charge or encumbrance in real property subject to an acquisition or proposed acquisition.” Tolub relied on a string of cases that showed the commercial tenants threatened with condemnation had an ownership interest via their leases.

Locker cites another case in which the courts have “clearly held that under the EDPL, a Rent Stabilized, month-to-month residential rental tenant has no compensable property interest in his/her lease." But that was not in the context of condemnation.

Locker's clients, who live at 624 Pacific Street and 473 Dean Street, have filed a second lawsuit in the Second Department of the Appellate Division, where eminent domain claims are heard, challenging the ESDC's relocation offer, arguing that the offer of relocation assistance does not constitute a "feasible" method for getting the tenants affordable accommodation.

Two cases, two courts?

"Can you be in two places?" asked Presiding Justice Jonathan Lippman yesterday.

Locker said a similar case on relocation had been heard in the Second Department--it went against the tenants, but they argued without a lawyer--and said that court only concerned condemnees.

You don't have an ownership interest? Lippman asked.

No case until Tolub's decision established that, Locker responded.

"It says right in the statute" that a condemnee has "any interest," a perturbed Associate Justice George D. Marlow followed up. "How plain could it be?"

Locker pointed to another case that suggested such rental tenants are non-condemnees.

"The cases that say a leaseholder has an interest in real property are legion," Associate Justice James M. Catterson responded.

Locker again noted Tolub's decision broke new ground.

Lippman pointed to the language of the statute.

Locker responded, "It would appear that residential rent-regulated tenants don't present these cases."

Catterson said the tenants should be in the other appellate court. Locker pointed to ambiguous language in one case and suggested that commercial tenants have different potential losses than residential ones.

ESDC defense

Arguing only briefly, ESDC attorney Charles Webb urged that Tolub's decision be upheld and said "he certainly can raise the case" in the Second Department.

Locker argued for a distinction, that the tenants are beneficiaries of relocation assistance, hence have standing to go to the Second Department on that issue, but maintained they should go to trial on the broader issue of the ESDC's jurisdiction over rent-regulated tenants.

"I would assert the time is long past to go to the Second Department" on this issue, he said in closing.

Afterward in the hall, as Webb and a dozen attorneys and officials, representing the state and Forest City Ratner, gathered in a spirit of good cheer, Locker, one of his clients, and this reporter spoke a few feet away.

ESDC vs. DHCR

"It's very easy for him to say go to another court after the time has passed to go there," Locker said of Webb. "ESDC is trying to have it both ways. If they're condemnees, the ESDC should recognize their rights, which are spelled out by DHCR."

Based on the comments from the panel, the court seems unwilling to do so.

In court in March, Locker had pointed to a case which said DHCR had “exclusive and original jurisdiction over demolition of a rent-regulated building.” The ESDC, in legal papers, however, said the case applies to a private landlord, not a public one, and it will become the landlord of the tenants in the two buildings at issue.

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