As of this writing on Sept. 22, 2022, New York property owners and landlord advocacy organizations have five federal lawsuits awaiting decision before the U.S. Court of Appeals for the Second Circuit. These suits challenge 2019 state law changes that gave tenants in rent-stabilized units increased protections and rights to the detriment of property owners. Shortly after the new law – the HSTPA – took effect, the COVID-19 pandemic spurred the legislature to enact further tenant protections such as against eviction.
While prevention of homelessness during a public health emergency was important, it took a financial toll on many property owners and landlords, especially smaller ones, following so closely after the 2019 legislation that favored tenants.
Awaiting court decisions
The property-owner plaintiffs sued the state of New York and other governmental entities in U.S. District Courts in New York, alleging that parts of the 2019 Housing Stability and Tenant Protection Act (HSTPA) are unconstitutional. Some of the suits also argue that provisions in preexisting state rent-stabilization laws (RSL) violate constitutional requirements.
Both the Eastern District (EDNY) and the Southern District (SDNY) courts dismissed the landlords’ claims and the plaintiffs appealed to the Second Circuit.
Areas of concern
Property owners object to HSTPA provisions that:
- Make conversion and decontrol of rent-stabilized units more arduous
- Further limit property-owners’ ability to recover units for personal or family use
- Restrict eviction of tenants who breach their leases
- Place more controls over RSL rent increases
- Make it harder to sell rental properties
- And others
The property owners allege that RSL and HSTPA violate the Takings Clause and other constitutional provisions, with some variation of claims among the five complaints.
The Takings Clause prohibits the government from taking private property for public use without justly compensating the owners. Plaintiffs allege both unconstitutional physical takings and regulatory takings.
A physical taking occurs if the government or someone it authorized literally seizes or occupies property, such as through eminent domain. The owner loses their ability to use or control the property in a physical taking.
A regulatory taking is “constructive … which means that the government restricts the owner’s rights so much that the governmental action becomes the functional equivalent of a physical seizure,” explains Cornell Law School’s Legal Information Institute.
The district court opinions rejected the property owners’ takings assertions. As the opinion in Building and Realty Institute of Westchester and Putnam Counties, Inc. v. New York states, “[T]he case law is clear: property owners who offer their properties for rent do not suffer from a taking based on laws that regulate the rental of that property.”
In the meantime
This is a high-level snapshot of these important lawsuits that involve complex legal and constitutional questions. While awaiting the Second Circuit decisions, we are available to answer questions and address concerns a property owner or landlord may have about the status of the issues at stake.