Stuy Town’s Columbus: How a Lawyer Rediscovered an Arcane Rent Rule and Shook New York

len Stuy Towns Columbus: How a Lawyer Rediscovered an Arcane Rent Rule and Shook New YorkIt didn’t take long after New York’s top court issued its major Stuyvesant Town–Peter Cooper Village ruling last week for celebrations at the East Side apartment complex to begin.

Just after 9 a.m. on Oct. 21, the Court of Appeals handed the complex’s owners a defeat with tremendous implications—ruling that they never had the right to take more than 4,000 apartments out of the rent stabilization program—and, by 2:30 p.m., a hastily organized press conference formed on a sidewalk next to the complex. With reporters circling, a gaggle of elected officials, tenants and lawyers cheered the ruling, grandstanded for the cameras and shook each other’s hands, offering congratulations all around on a job well done.

Nowhere in sight was Leonard Grunstein, the 57-year-old real estate attorney who, perhaps more than anyone else, can lay claim to conceiving the ultimately successful lawsuit that has rocked the real estate industry. Courtesy of the court decision, the owners of Stuy Town, a partnership led by the landlord giant Tishman Speyer, are sure to take a tremendous financial hit, making the 110-building complex worth but a fraction of the $5.4 billion that was paid for it (and Tishman Speyer had already overpaid, buying at the market’s peak in late 2006). An untold number of city landlords are now in the same boat.

“What a great decision!” Mr. Grunstein said Monday.

In an interview in his office in the Chrysler Building (which is, incidentally, controlled by Tishman Speyer), Mr. Grunstein, who wore a suit vest, baggy pants and round, horn-rimmed glasses, recounted his early role in what concluded as a landmark case, potentially costing landlords billions in value.

A partner at Troutman Sanders, Mr. Grunstein had been retained by the Stuyvesant Town–Peter Cooper Village Tenants Association three years earlier. Hardly thrilled about the prospect of a high-priced sale that would lead to more stabilized tenants being pushed out to make way for market-rate renters, the group was preparing its own bid for the property and brought in Mr. Grunstein to round up the particulars of the bid.

In the process, he went digging for potential legal problems with the complex and the sale, sending off memos to elected officials that highlighted some concerns. Among those issues: He felt the law did not allow an owner to take apartments out of rent stabilization at the same time that the owner received a tax break for renovations, called J-51, an action Stuyvesant Town’s owners had been taking for years.