The Roberts Case Has Retroactive Effect...Unless It Doesn't

The landlord-tenant bar was jolted by the Court of Appeals affirmance of the Appellate Division in the case of Roberts v. Tishman Speyer, 13 N.Y.3d 270 (2009). The holding in Roberts was that notwithstanding the DHCR's interpretation of the J-51 statute, those landlords who received J-51 tax benefits could not deregulate their rent stabilized apartments through luxury or vacancy decontrol. This holding continues to reverberate through the landlord-tenant community as trial courts apply the holding in Roberts (and its progeny) to the facts concerning any particular apartment.

ROBERTS ONLY RETROACTIVELY APPLIED WHEN TAKEN TO COURT

One of the issues with which courts first struggled was whether Roberts would be given retroactive effect. For many the Roberts decision seemed to be a change in the law. For years landlords, tenants and the DHCR had acted always believing that luxury and vacancy decontrol were permissible because of the DHCR's policy statement endorsing that concept. Upon the Court of Appeals explaining that the statutory interpretation had always been wrong, many believed that there had been a change in the law that should not be given retroactive effect.As courts struggled with the issue, one principle seemed to carry the day - there had been no change in the law with the Roberts decision - the Court of Appeals merely told us what the law had always been. See generally, Gersten v. 56 7th Ave. LLC, 88 A.D.3d 189 (1st Dept. 2011). It appears that courts when confronted with applying the effect of the Roberts decision to landlord-tenant cases that courts are uniformly giving the Roberts decision retroactive effect.

...AND ONLY IN LANDLORD-TENANT CASES

However, in a decision rendered by the Appellate Division, First Department the Court held that while Roberts would be given retroactive effect for landlord-tenant cases, it would not be given retroactive effect in others. The facts of Latipac Corp. v. BMH Realty LLC, 2012 NY Slip Op 00737 (1st Dept. 2012) are interesting and should put the bar on notice that Roberts will be given retroactive effect when the decision will be used as a sword by a tenant seeking to restore an apartment to rent stabilization but cannot be used as a shield by a buyer of an apartment building who saw his decision to purchase the building look less wise upon the release of the decision in Roberts.

BUT NOT WHEN IT BENEFITS LANDLORDS...

In Latipac a buyer sought to purchase an Upper East Side apartment building pursuant to a contract of sale. The contract contained a schedule of the rents and indicated that certain apartments were not subject to rent stabilization. The buyer and seller began squabbling over a number of issues but most importantly just prior to the expiration of a "law date" set by the seller the Appellate Division decided the Roberts case. Its effect would cause nine of the apartments in the apartment building to be rent stabilized and perhaps subject the owner to liability for a rent overcharge. The buyer sought to have its obligation to close rescinded by commencing a declaratory judgment action and seeking injunctions. The Supreme Court denied the buyer's requests for injunctions. On appeal the Appellate Division affirmed. The crux of the argument advanced by the buyer was that if the Roberts decision was given retroactive effect then the seller breached the contract by providing rent schedules that were drastically wrong. The argument made by the seller was that the contract contained the information as everyone understood it prior to the landmark decision in Roberts and that retroactive effect would be inappropriate. The Appellate Division ruled against the buyer holding that the Roberts decision would not be given retroactive effect for this purpose. The Court starts its analysis of the issue by acknowledging the need for retroactivity in landlord-tenant cases:

"We agree that the Tishman [Roberts] holding is entitled to retroactive effect in a proper case, for example, where a tenant, on an appropriate set of facts, invokes that holding in a timely-commenced proceeding seeking to restore an apartment to rent stabilization."

Latipac, supra. The Appellate Division then continues its analysis by explaining that the seller did not provide incorrect information such that a breach could be found because the seller was providing information as the seller understood it at the time that the information was provided. The Court held:

"Moreover, the truth of the representation should be determined from the point of view of the parties at the relevant time, not - as would be appropriate in a landlord-tenant dispute - viewed retrospectively from a later date following a judicial decision that overturned the understanding of the law that the parties (along with the responsible administrative agency and the entire real estate industry) reasonably shared at the time that they contracted. Given that the rent stabilization laws were enacted to protect tenants, not prospective landlords, there is no need to read back into a previous time a subsequent judicial decision that, although it construed unchanged statutory language, radically altered the legal landscape against which the parties contracted."

In other words, the Appellate Division agrees that the law has always been that luxury and vacancy decontrol could not be had in buildings where the landlord had received J-51 tax benefits. The Appellate Division further agrees that the Roberts decision changed everyone's understanding of the law though the law itself did not change. What we as people affected by such decisions should know is that if the interpretation of Roberts benefits tenants then a retroactive application should be expected - and if that retroactive interpretation would benefit a landlord.....well then it won't be retroactive at all.