TEDFORD TENANCY LLC v. CITY OF NEW YORK (2025)

Order, Supreme Court, New York County (Judy H. Kim, J.), entered November 15, 2023, which, to the extent appealed from, granted defendants' motions to dismiss the complaint pursuant to CPLR(a)(2) and (7), unanimously affirmed, with costs.

Generally, “a claim that the application of government regulations effects a taking of a property interest is not ripe until the government entity charged with implementing the regulations has reached a final decision regarding the application of the regulations to the property at issue” (Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172, 186, 105 S.Ct. 3108, 87 L.Ed.2d 126 [1985], overruled on other grounds Knick v. Township of Scott, 588 U.S. 180, 187–188, 139 S.Ct. 2162, 204 L.Ed.2d 558 [2019];  see also Matter of Gordon v. Rush, 100 N.Y.2d 236, 242, 762 N.Y.S.2d 18, 792 N.E.2d 168 [2003]).  Courts have held that as-applied regulatory takings challenges to the Rent Stabilization Law (RSL) are not yet ripe where the landlord failed to apply for a hardship exemption allowing it to charge rents above the ordinary regulated rates (see 74 Pinehurst LLC v. New York, 59 F.4th 557, 565 [2d Cir.2023], cert denied ––– U.S. ––––, ––– S.Ct. ––––, 218 L.Ed.2d 66 [2024]).

Here, plaintiff argues that it did not pursue a hardship exemption because to do so was futile, overly burdensome, and would offer de minimis relief.  However, this argument fails for an as-applied takings claim when the landlord has not personally experienced repetitive or unfair procedures (see Yee v. City of Escondido, 503 U.S. 519, 528, 112 S.Ct. 1522, 118 L.Ed.2d 153 [1992]).  “[A] claim that a regulation effects an as-applied taking cannot be properly adjudicated until there is no question ․ about how the regulations at issue apply to the particular [property] in question” (74 Pinehurst LLC v. New York, 59 F.4th 557, 565 [internal quotations marks omitted]).  Thus, plaintiff's takings claim is not yet ripe (see Church of St. Paul & St. Andrew v. Barwick, 67 N.Y.2d 510, 518, 505 N.Y.S.2d 24, 496 N.E.2d 183 [1986], cert denied 479 U.S. 985, 107 S.Ct. 574, 93 L.Ed.2d 578 [1986]).

In any event, the court also properly determined that plaintiff failed to state a claim for any regulatory taking.  The complaint does not allege facts to demonstrate that the RSL has deprived plaintiff of “all economically beneficial uses” of its property to sufficiently allege a categorical regulatory taking, as plaintiff still receives regulated residential and unregulated commercial rent, and it retains a reversionary interest in the property (see Rent Stabilization Assn. of N.Y. City v. Higgins, 83 N.Y.2d 156, 173–174, 608 N.Y.S.2d 930, 630 N.E.2d 626 [1993] [internal quotation marks omitted], cert denied 512 U.S. 1213, 114 S.Ct. 2693, 129 L.Ed.2d 823 [1994]).

Nor does plaintiff allege sufficient facts to assert a claim for a non-categorical regulatory taking (see Consumers Union of U.S., Inc. v. State of New York, 5 N.Y.3d 327, 357, 806 N.Y.S.2d 99, 840 N.E.2d 68 [2005], citing Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 [1978]).  Even though the property was purchased by the family of one of plaintiff's members in 1940, prior to the enactment of the RSL, plaintiff acquired the property in 2006, years after it became subject to the RSL. There is no allegation that plaintiff was unaware that the property was subject to the RSL so as to violate plaintiff's investment-backed expectations.  Finally, the RSL does not have the character of a taking because it is a regulatory regime that advances “broad public interests” and does not approximate a physical invasion of property (see Community Housing Improvement Program v. City of New York, 59 F.4th 540, 555 [2d Cir.2023], Community Housing Improvement Program v. City of New York, ––– U.S. ––––, 144 S. Ct. 264, 217 L.Ed.2d 113 [2023]).

We have considered plaintiff's remaining arguments and find them unavailing.