28 Bedford Street and Fred Rudd

In June, a small group of tenants at 28 Bedford Street decided to sue their landlord, Rudd Realty Management. They claimed the rents they were paying were illegally inflated and that Rudd had quietly removed them from rent stabilization while cashing in on a city tax break for owners of rent-stabilized properties. Now the landlord has agreed to re-regulate 32 apartments in the building and pay out the money it overcharged residents.

Late last month, Frederick Rudd filed a sworn affidavit in Manhattan’s State Supreme Court, stating he would refund improperly charged rents, plus interest, to all the affected tenants. He assured the court that none of the building’s residents currently faced eviction.

“This is a great outcome for these residents, and we are certainly pleased that this landlord quickly came to its senses,” said Lucas Ferrara, the tenants’ attorney. The case is not quite over, however, Ferrara said, as the correct legal rent and appropriate monetary damages have yet to be formally determined. Rudd did not immediately return a request for comment.

The Rudd suit was organized by the Village Independent Democrats and the Housing Rights Initiative, the nonprofit group that along with law firm Newman Ferrara has put together numerous legal complaints against landlords across New York City. To date, 28 Bedford is the first such Housing Rights Initiative-organized case to reach an official resolution.

For years, multifamily landlords have enjoyed J-51 tax exemptions and abatements, a program that costs the city more than $260 million in tax revenue annually. But the rules require the beneficiaries to keep their apartments — all of them — within the confines of the rent stabilization system. Many landlords have not done that.

The rise of J-51 litigation has seemingly piqued the interests of local lawmakers. Just last week, State Sen. Brad Hoylman of Manhattan sent a letter to the commissioner of the state’s Homes and Community Renewal office, calling on the agency, which regulates rent-stabilization compliance, to notify tenants it suspects may be the victims of J-51 rent fraud. Previously, Gov. Andrew Cuomo issued a letter to landlords asking them to re-register destabilized J-51 apartments, though a ProPublica analysis of rent stabilization figures a year after showed that the measure was largely inadequate.

“What this result shows is that a letter about the law is no substitute for enforcement of the law,” said Aaron Carr, founder of the Housing Rights Initiative.

Outstanding J-51 suits that materialized from the efforts of Carr and his group include rent fraud claims against A&E Real Estate, Bronstein Properties, Stellar Management and a company owned by Barbara Pyle, the co-creator of the “Captain Planet” television show who owns property in the West Village.

J-51 is not the only city tax break getting landlords into trouble this summer. Two recent rulings regarding the rent stabilization requirements of the 421g tax exemption went the way of tenant plaintiffs in recent months. As a result, landlords Clipper Equity and Kibel Companies were ordered by a court to re-regulate dozens of lower Manhattan apartments. They plan to appeal.