Matter of London Terrace Gardens v New York State Div. of Hous. & Community Renewal
Annotate this CaseDecided on January 5, 2005
Supreme Court, New York County
In the Matter of London Terrace Gardens, Petitioner,
against
New York State Division of Housing and Community Renewal, Respondent.
111792/04
Emily Jane Goodman, J.
This is an Article 78 proceeding by petitioner London Terrace Gardens (London Terrace), the owner and landlord of the premises located at 425 West 23rd Street in New York City. London Terrace seeks to vacate a decision by respondent New York State Division of Housing and Community Renewal (DHCR) which denied its application for rent-deregulation of Apartment 5F. London Terrace seeks an order remanding the proceeding to the DHCR for discovery to determine the tenants' aggregate income for the years 2001 and 2002. For the reasons stated below, the petition is dismissed.
The Rent Stabilization Law (RSL) provides a means for owners to petition for deregulation of rent-stabilized apartments. See, RSL (Administrative Code) § 26-504.3; Classic Realty LLC v New York State Div of Housing and Community Renewal, 2 NY3d 142, 144 [2004]. A rent-stabilized apartment with a legal regulated rent of $2,000 per month or more may be deregulated if the occupants' combined threshold income exceeds $175,000 for each of the two years preceding the owner's petition. See, RSL § 26-504.3(b). An owner seeking deregulation must furnish the tenant with an Income Certification Form and the tenant is then required to certify whether the occupants' combined income exceeded $175,000. See, RSL § 26-504.3(b).
If the tenant certifies that the income was below the threshold amount, the owner may contest the certification and request that the DHCR verify the household income. See, RSL § 26-504.3(c)(1). The DHCR then requests that the tenant provide any necessary information to permit the New York State Department of Taxation and Finance (DTF) to verify the household income. See, RSL § 26-504.3(c)(1). Significantly, the "DTF may provide DHCR only a 'Yes' or [*2]'No' answer to the question whether tenant income exceeds the $175,000 threshold in two consecutive years." Giffuni Bros v New York State Div of Housing and Community Renewal, 293 AD2d 402 [1st Dept 2002], citing RSL § 26-504.3; Tax Law § 171-b.
If the DTF determines that the income surpasses the threshold amount for the relevant two year period, the DHCR must permit the parties thirty days to comment on the results. See, RSL § 26-504.3(c)(2). Thereafter, where appropriate, the DHCR must issue an order providing that the apartment will not be subject to the provisions of the RSL after the expiration of the existing lease, ie, that it will be deregulated. See, § 26-504.3(c)(2).
According to the Petition, on April 3, 2003, London Terrace served an Income Certification Form for the 2003 filing period on the tenants of Apartment 5F. The tenants returned the Form, dated April 8th, certifying an income of less than $175,000 for the relevant time period. On May 15, 2003, London Terrace served a Luxury Deregulation Petition on the DHCR seeking verification of the tenants' income.
On October 27, 2003, the DHCR served the parties with a Notice of Opportunity to Comment or Rebut for the 2003 Filing Period. London Terrace submitted a response which set forth its belief that the tenants' income exceeded $175,000. London Terrace noted that the tenants' had an approximate combined income of $141,000 when they took occupancy, which was apparently in 1998. It further noted that, to the best of its knowledge, both tenants remained employed in the same manner as when the application was completed. London Terrace surmised that, given the passage of several years, there was "no reason to believe" that the tenants did not earn more than $175,000 for 2001 and 2002. London Terrace stated its belief that the DHCR should conduct discovery to determine the tenants' income for the period at issue.
On March 24, 2004, the DHCR sent the parties a Notice of Verification of Income Tax Information by which the Rent Administrator notified the parties that the DTF had matched the tenants and their address with income tax returns for 2001 and 2002 and that the income reported was $175,000 or less in both years. The parties were given an opportunity to comment.
London Terrace responded in a March 31, 2004 letter asserting that it was "hard-pressed to believe these findings" and that discovery was needed to determine the tenants' actual incomes. London Terrace attached a copy of the tenants' 1997 rental application which showed an approximate joint income of $140,000. On April 23, 2004, the Rent Administrator issued an "Order Denying Petition for High Income Rent Deregulation", citing the DTF's determination that the household income did not exceed the statutory threshold. London Terrace filed a Petition for Administrative Review (PAR) challenging the RA's order. Again, London Terrace contended that discovery was needed to determine the tenants' income.
By Order and Opinion dated June 16, 2004, the Rent Commissioner denied the PAR based on the DTF's findings. The Commissioner noted that the DHCR was required to rely on the DTF's findings and was not entitled to conduct the type of investigation into the tenants' income sought by London Terrace. The order also noted that London Terrace's assertion about the tenants' combined income was "merely speculative in nature".
London Terrace then commenced the instant Article 78 proceeding seeking to overturn the DHCR's decision. In reviewing the DHCR's determination, the court must examine whether it "was made in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion..." CPLR § 7803(3); see, Classic Realty LLC v New York [*3]State Div of Housing and Community Renewal, 2 NY3d 142, 145 [2004]; Matter of Gilman v New York State Div of Hous & Community Renewal, 99 NY2d 144, 149 [2002]; 103 East 86th St Realty Corp v New York State Div of Housing and Community Renewal, ___ AD3d ___, 785 NYS2d 65 [1st Dept 2004].
London Terrace argues that the DHCR's determination is invalid because the agency took no steps to determine the tenants' income, beyond checking with the DTF. London Terrace argues that the DHCR's failure to conduct a further investigation violates the intent of the statute.
As set forth above, the statute requires each tenant to furnish the DTF with sufficient information to verify the household income. The tenants did so here. The DTF then notified the DHCR that the income threshold had not exceeded the threshold and the DHCR accordingly denied the application for deregulation. Nevertheless, London Terrace argues that the procedure followed by the DHCR, as set forth in the statute, fails to carry out the "true intent" of the statute and encourages tenants to deliberately fail to file tax returns or to be deceitful on those returns. However, the statute is clear as to the procedure that the DHCR is supposed to follow and it has indisputably done so here. Moreover, as the DHCR points out, it does not have the authority or the responsibility to investigate the veracity of the tenants' tax returns.
Despite this, London Terrace relies on a decision of this court, by Judge Nicholas Figueroa, which vacated a decision by the DHCR and remanded the matter for further proceedings. See, 190 Riverside Drive, LLC v New York State Division of Housing and Community Renewal, Sup Ct, NY County, September 13, 2000, Figueroa, J., Index No 103285/00. However, that case is clearly distinguishable because the tenant there failed to file an income tax return for the relevant period and the DTF was not able to match the tenant with a tax return. Here, it is undisputed that the DTF was able to match the tenants' with their relevant tax returns.
London Terrace further argues that the DHCR's determination here is invalid because London Terrace provided the DHCR with evidence suggesting that the tenants' income exceeded the threshold amount. However, London Terrace did not provide the DHCR with such evidence. London Terrace simply speculated that the income must exceed the threshold because the tenants reported an income of $140,000 several years earlier on their rental application and they maintained the same jobs at the time of the deregulation application. This is not sufficient to warrant further proceedings by the DHCR. Accordingly it is,
ADJUDGED that the petition is denied and the proceeding is dismissed.
This Constitutes the Decision and Judgment of the Court.
DATED: January 5, 2005
ENTER:
_______________
J.S.C.
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