Luxury decontrol survives challenge.

New York's new luxury decontrol law has survived its first direct constitutional challenge.

A Manhattan Supreme court judge has found that the law, which was passed by the legislature as part of the Rent Regulation Act of 1993, does not violate the Equal Protection clause even though it uses a tenant's adjustable gross income rather than actual realized income to trigger its procedure.

That was the key aspect of the argument offered by an Upper East Side couple in the recently concluded case, Leepson vs. Holland. They claimed that the luxury decontrol law created unfair classifications since tenants whose incomes are derived from tax-free sources, such as securities, would not be subject to its terms.

But Supreme Court Justice Herinan Cahn rejected that constitutional analysis and instead sided with the landlord, Westminster Properties, Ltd., represented by Jeffrey R. Metz and Robert H. Berman of Borah, Goldstein, Altschuler & Schwartz.

"This was an important victory for landlords because an unfavorable ruling could have jeopardized the entire high income decontrol movement," asserted Metz. "This ruling should serve to stanch other tenant-inspired constitutional challenges to the luxury decontrol law."

In explaining his decision, Judge Cahn noted that the "equal protection law does not bar the Legislature from creating classifications which result in some inequality as long as there exists some reasonable basis." He ruled that the Legislature's decision to accept a "definition of income as adjusted gross income does not violate the Equal Protection clause since it is reasonably related to the legislative scheme as well as the intent of the Reform Act."

Emil and Lenore Leepson brought their luxury decontrol challenge after the DCHR granted their landlord's application to deregulate the rent on their residence at East 56th Street due to their refusal to provide income information. Contending that the DCHR did not have the power to determine the constitutionality of the law, the Leepsons, who were represented by attorney David A. Balinsky, filed an Article 78 proceeding seeking an order striking it down.

Justice Cahn resisted, however, noting that the "original purpose" for rent control laws "was to ensure affordable housing." He asserted that the Legislature "in enacting the Reform Act made a finding that wealthy tenants should no longer have the subsidies of stabilized rents while continuing the protection for other tenants."

Although the Legislature "could have adopted a different measure to define high income tenants," he concluded, "petitioners failed to meet their burden of establishing that the decision to adopt adjusted gross income as the measure in defining 'high income' was arbitrary or capricious.

Under the luxury decontrol law, landlords can apply to remove units from rent control if the rent is $2,000 a month and the tenants have had an adjustable gross income of more than $250,000 in each of the two previous years, or if the unit has been vacated. Over 2,600 New York City apartments have been deregulated since the law was enacted.