Matter of DG 1096 Broadway, LLC v New York City Department of Housing Preservation & Development
Attorneys and Parties
Brief Summary
Eligibility for J-51 tax benefits under Real Property Tax Law § 489 [program authorizing tax exemptions/abatements for eligible housing improvement and conversion projects] when a building had pre-certificate-of-occupancy (CO) occupancy that was later cured by issuance of a final CO before the J-51 application.
Issuance of a certificate of occupancy did not cure the earlier illegal occupancy; the denial of J-51 benefits stood.
The Supreme Court’s judgment denying the CPLR article 78 petition [special proceeding to review administrative action] and HPD’s November 16, 2022 determination denying J-51 benefits.
Real Property Tax Law § 489(4) [permits local law to condition availability of benefits on compliance with applicable law] contemplates cure; HPD identified no statute or standard authorizing it to deem certain violations categorically disqualifying despite cure. Absent an illegality at the time of application, the application should have proceeded; agency deference was unwarranted on this pure statutory question.
Background
The owner converted a two-story mixed-use building into a six-story condominium. Construction ran from February 2018 to February 2020. A temporary certificate of occupancy issued on September 26, 2019, and a final residential certificate of occupancy issued on February 26, 2020. The owner applied for J-51 benefits around March 3, 2020. The rent roll showed occupancy permitted as of August 1, 2019, i.e., before any CO. On November 16, 2022, HPD denied the application, citing illegal pre-CO occupancy. The owner commenced a CPLR article 78 proceeding [special proceeding to review administrative action], arguing that the later-issued CO cured the prior illegality and restored eligibility under Real Property Tax Law § 489 [program authorizing tax exemptions/abatements for eligible housing improvement and conversion projects], including § 489(4) [permits local law to condition availability of benefits on compliance with applicable law].
Lower Court Decision
The Supreme Court, Kings County, denied the petition and dismissed the proceeding, holding that issuance of a CO did not cure the defect of permitting occupancy prior to issuance of a CO.
Appellate Division Reversal
Reversed. The Appellate Division granted the petition, annulled HPD’s denial, and remitted for further review of the J-51 application. The court held that this was a matter of pure statutory interpretation warranting little deference to HPD, and that Real Property Tax Law § 489(4) allows for benefits once compliance is achieved. HPD cited no legislative authority to treat certain violations as incurable or to deny benefits based on safety-related concerns after compliance was achieved. Without evidence of illegality at the time of the application, HPD should have allowed the application to proceed.
Legal Significance
Clarifies that, for J-51 eligibility under Real Property Tax Law § 489, prior violations (including pre-CO occupancy) do not per se disqualify an owner once cured before the application. Agencies cannot impose extra-statutory, discretionary disqualifications without legislative authorization, and courts will not defer to such interpretations on pure questions of statutory meaning.
Where a building achieves compliance before filing for J-51, earlier noncompliance—such as pre-CO occupancy—does not bar benefits absent statutory authority to treat the violation as incurable; HPD must evaluate eligibility based on conditions at the time of application.