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A coalition of tenants in New York City were handed a win Tuesday by the New York Court of Appeals when it ruled that a section of state law that previously ended rent stabilization at a certain rent or income threshold didn't apply to their apartments.

The decision by the Court of Appeals was nearly unanimous, save for one dissenting opinion penned by Chief Judge Janet DiFiore, who wrote that the landlords involved in the litigation should have been allowed to deregulate the units.

The decision is the result of two separate lawsuits from tenants of three residential buildings in lower Manhattan who were seeking reimbursement of alleged rent overcharges after they claimed their apartments were improperly removed from rent stabilization.

Those units were built under a program that traded tax abatements to developers for converting commercial space to residential use. The building owners had argued that the law creating that program, Real Property Tax Law § 421-g, still allowed them to remove units from rent control that were priced above a certain threshold.

That practice is more commonly known as luxury decontrol. It was repealed in recent weeks by a law enacted by the state Legislature and Gov. Andrew Cuomo. But that development doesn't apply to the case since the claims date back several years.

Associate Judge Leslie Stein wrote in the court's decision that a reading of the statute's plain language supported their interpretation that the units could not be removed from rent stabilization, and that those built through 421-g were not included in a list of exceptions spelled out by the Legislature.

“Defendants' contention, adopted by the dissent, that the notwithstanding clause was intended to import into RPTL 421-g (6) the entire [Rent Stabilization Law], including those provisions that would remove the units from control, cannot be squared with the statutory language,” Stein wrote. “If the legislature intended to import the deregulation provisions of the RSL, it easily could have so stated.”

The tenants were represented by Robert Smith, a former associate judge of the Court of Appeals who's now a partner at Friedman Kaplan Seiler & Adelman in Manhattan.

“We're delighted at the outcome and we think the court did the right thing,” Smith said Tuesday.

Smith had argued before the court earlier this month much of the same point that Stein made in the court's decision—that the plain language of the statute supported the tenants' position that their units should not have been deregulated. A subdivision of that law appears to allow rent control for units created under the statute, he said.

That part of the law reads that “the rents of each dwelling unit in an eligible multiple dwelling shall be fully subject to control under such local law,” notwithstanding the provisions of any local law for the stabilization of rent.

There are some types of units created through state tax abatement programs, like 421-a, that are exempt from luxury vacancy decontrol. But those are spelled out in state law. The building owners had argued before the court earlier this month that, because the Legislature didn't include units built under 421-g in that list of exceptions, they should have been eligible for deregulation. Stein, and five of the court's other judges, weren't convinced.

“Invoking the canon of statutory construction that enumerated exceptions are generally considered exclusive, they contend that the legislature's decision not to add section 421-g to the list of exceptions to luxury deregulation in the RSL is dispositive,” Stein wrote. “We disagree.”

The building owners were represented by James McGuire, a partner at Holwell Shuster & Goldberg, and Magda Cruz, a partner at Belkin Burden Wenig & Goldman. McGuire was not immediately available for comment. Cruz said they were still reviewing the decision and declined to comment further.

DiFiore wrote in her dissent that she would have affirmed a ruling in the case last year by the Appellate Division, First Department, which rejected the tenants' claims in a unanimous decision.

“Based on a purported plain text analysis of language that makes no mention of luxury decontrol—the majority retroactively confers this heightened form of rent stabilization on buildings receiving RPTL 421-g tax benefits,” DiFiore wrote. “Because I agree with the unanimous decision of the Appellate Division that this approach misinterprets the statutory text, disregarding the broader regulatory scheme and legislative purpose of the relevant statutes, I respectfully dissent.”

She flipped the majority's point about exceptions to deregulation on its head, making the same argument as the building owners. Because the Legislature didn't explicitly say units built under 421-g were exempt from luxury decontrol, DiFiore wrote, they should have been eligible for deregulation.

“The fact that the Legislature considered it necessary to create a statutory exemption to luxury decontrol for section 421-a apartments demonstrates that it understood that, absent such exemption, the entirety of the RSL—including luxury decontrol—would apply to them,' DiFiore wrote. “Its decision not to include section 421-g buildings in the exemption should be given that effect.”

The decision doesn't mean that the tenants who brought the litigation will automatically be granted reimbursement for alleged overcharges of rent. Now that the Court of Appeals has decided the question of whether the units were subject to luxury decontrol, the case will now head back to the trial court for further proceedings.

Associate Judges Jenny Rivera, Eugene Fahey, Michael Garcia, Rowan Wilson and Paul Feinman concurred with Stein's opinion. DiFiore was the lone dissent.

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