Matter of Rodriguez v New York State Div. of Hous. & Community Renewal

[*1] Matter of Rodriguez v New York State Div. of Hous. & Community Renewal 2009 NY Slip Op 50714(U) [23 Misc 3d 1112(A)] Decided on March 25, 2009 Supreme Court, New York County Yates, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 25, 2009
Supreme Court, New York County

In the Matter of the Application of Mary Rodriguez, Petitioner,

against

New York State Division of Housing and Community Renewal, Respondent.



402869/08



Mary Rodriguez, petitioner pro se.

Carl Foster, New York State Division of Housing and Community Renewal, respondent.

James A. Yates, J.

Petitioner seeks to annul Respondent's September 29, 2008 determination upholding the rent administrator's decision that the monthly legal regulated rent for the July 1, 2007 to June 30, 2008 lease was $1174.53, and the monthly preferential rent was $1081.00. Applicable guidelines govern rent increases in rent stabilized apartments, which are then subject to lower collectible (preferential) rents set by the New York City Housing Development Corporation (HDC).

Background

On June 17, 2003, Mary Rodriguez rented apartment 5L at 400 West 37th Street, New York, New York 10018, pursuant to a written lease agreement (Return, exhibit C-1, June 25, 2008, ¶ 3). By an HDC Regulatory Agreement, the apartment is part of an 80/20 building, i.e., one that is 80% percent market rate and 20% affordable housing, defined as housing for families earning 50% [*2]or less of the adjusted median income. The building is also subject to § 421-a of the New York State Real Property Tax Law. (See Pet. Verified Petition, Nov. 24, 2008, exhibit B, Regulatory Agreement Rider; see also Return, exhibit C-1, June 25, 2008, exhibit C.) Ms. Rodriguez qualifies as a low income tenant and may pay an adjusted rent.

Ms. Rodriguez's first lease was from July 1, 2003 to June 30, 2004 (Pet. Verified Petition, Nov. 24, 2008, exhibit B, Tenant's Answer to Landlord's PAR). Under that lease, the building owner claimed that the monthly legal regulated rent was $4000.00 for Ms. Rodriguez's apartment, with a monthly preferential rent of $1020.00 (Return, exhibit A-11, received Sept. 4, 2007). Then, under a two year lease from July 1, 2004 to June 30, 2006, Ms. Rodriguez "was charged $1096.50/mo." (Pet. Verified Petition, Nov. 24, 2008, exhibit B, Tenant's Answer to Landlord's PAR). Following that, under a one year lease renewal from July 1, 2006 to June 30, 2007, Ms. Rodriguez "paid $1005/mo." (id.). "The final lease that [Ms. Rodriguez] complained about was for [a] 1 y[ea]r renewal from [July 1, 2007 to June 30, 2008] where [Ms. Rodriguez is] being charge[d] $1081/mo [sic]" (id.).

On May 1, 2007, Ms. Rodriguez filed a Complaint of Owner's Failure to Renew a Lease with the New York State Division of Housing and Community Renewal (DHCR) (see Return, exhibit A-1, May 1, 2007). The building owner responded on June 15, 2008, stating that a renewal lease was not offered because a holdover proceeding was pending. In the response, the building owner also explained that the proceeding was settled by a Court Stipulation, L & T Index No. 60426, dated May, 16, 2007, and Ms. Rodriguez was offered a renewal lease on May 21, 2007. (See id., exhibit A-6, June 15, 2007.)

In a letter dated August 7, 2007, Ms. Rodriguez acknowledged that she received a new lease, but felt the amount charged was incorrect (see id., exhibit A-9, Aug. 7, 2007). In response to DHCR's request for additional information, the building owner stated that "[a]lthough the initial legal registered rent for the apartment was $4000.00, [t]enants paid $1020.00 per month during the term of their initial lease (July 1, 2003 through June 30, 2004). This rent was established by [HDC] as part of its New York City Tax-Exempt Bond, Low Income Housing Tax Credit, and Taxable 80/20 Maximum Rent Levels." (See id., exhibit A-11, Aug. 30, 2007.)

On May 21, 2008, the rent administrator issued an order determining that the building owner failed to timely offer a [*3]renewal lease under Rent Stabilization Code (RSC) § 2523.5 (c) (1). The rent administrator found that "[s]ince the renewal lease offer was made on May 21, 2007, the tenant should not have paid a rent increase until September 1, 2007, the first rent payment date occurring no less than ninety (90) days after the date that the owner offered the renewal lease." Additionally, the rent administrator ruled that the monthly legal regulated rent for the July 1, 2007 to June 30, 2008 lease was $1174.53, and the monthly preferential rent was $1081.00. Finally, the rent administrator directed the owner "to immediately refund the excess rent collected for the months of July and August 2007, to the tenant . . . [s]ince the owner has collected the increased rent before September 1, 2007." (Id., exhibit A-37, May 21, 2008.)

On June 3, 2008, Ms. Rodriguez filed a Petition for Administrative Review (PAR). She disputed the monthly legal regulated rent of $1174.53. (See id., exhibit B-1, June 3, 2008.) The building owner also filed a PAR on June 25, 2008, arguing that the rent administrator "erroneously addressed the rent issue in this failure to renew lease case; . . . made an incorrect finding concerning the amount of the legal regulated rent; . . . there was no rent overcharge; and . . . the [l]andlord had a reasonable excuse for not offering the [t]enants a renewal lease" (id., exhibit C-1, June 25, 2008, ¶ 14).

On September 29, 2008, the Deputy Commissioner denied both PARs and affirmed the rent administrator's order (see Pet. Verified Petition, Nov. 24, 2008, exhibit A). The Deputy Commissioner found:

"In this case, the initial rent charged was $1020.00 on July 1, 2003 . . . and not $4000.00 . . . The initial rent was lawfully increased to $1096.50 pursuant to Guideline No. 37 [sic] effective July 1, 2004. Commencing July 1, 2006, the legal rent could lawfully be increased to $1126.65 pursuant to Guideline 37 although the tenants were charged only $1005.00, the amount set by HDC. Thus, commencing July 1, 2007, Guideline 38 permitted an increase to $1174.53 subject to a collectible rent of $1081.00, the amount set by HDC.

The Commissioner also finds that it was appropriate and necessary for the Rent Administrator to establish the legal and collectible rents in this proceeding in order to resolve the issues raised in the tenants' lease violation complaint. However, since this was not an overcharge complaint, no overcharges were awarded. The owner was properly directed to refund to the tenant any rent collected in excess of $1081.00 for [*4]July and August 2007. The tenants are advised to file an overcharge complaint if this refund is not made."

(Pet. Verified Petition, Nov. 24, 2008, exhibit A.)

Thereafter, on November 24, 2008, only Ms. Rodriguez brought this Article 78 proceeding seeking to annul the Deputy Commissioner's decision (see id.). The Court, therefore, is only addressing whether the Deputy Commissioner properly affirmed the rent administrator's decision that the monthly legal regulated rent was $1174.53, and the monthly preferential rent was $1081.00, for the July 1, 2007 to June 30, 2008 lease.

Discussion

Ms. Rodriguez's apartment is governed by the Rent Stabilization Law (RSL) of 1969 (Administrative Code of City of NY § 26-501 et seq.) and the Rent Stabilization Code (RSC) (9 NYCRR § 2520.1 et seq.). Under RSL § 26-517 (a) (4), a landlord must register the legal regulated rent with the DHCR. RSC § 2520.6 (e) defines legal regulated rent as "[t]he rent charged on the base date set forth in subdivision (f) of this section, plus any subsequent lawful increases and adjustments." RSC § 2520.6 (f) states, in relevant part, that the "base date shall mean the date which is the most recent of: (1) the date four years prior to the date of the filing of such appeal or complaint; [or] (2) [t]he date on which the housing accommodation first became subject to the RSL."

RSC § 2521.1 (g) further states that "[t]he initial legal regulated rent for a housing accommodation constructed pursuant to section 421-a of the Real Property Tax Law shall be the initial adjusted monthly rent charged and paid but not higher than the rent approved by [the New York City Department of Housing and Preservation] pursuant to such section for the housing accommodation or the lawful rent charged and paid on April 1, 1984, whichever is later."

Additionally, § 2521.2 (a) "gives a landlord the option, once a preferential rent is charged, to renew based on either the preferential rent or the legal regulated rent" (In re Pastreich v NY State Div. of Hous. & Community Renewal, 50 AD3d 384, 386 [1st Dept 2008]). RSC [9 NYCRR] § 2521.2 (a) defines preferential rent as "the amount of rent charged to and paid by the tenant [that] is less than the legal regulated rent."

Moreover, RSC § 2522.6 guides "[o]rders where the legal regulated rent or other facts are in dispute, in doubt, or not [*5]known, or where the legal regulated rent must be fixed," providing:

"(a) Where the legal regulated rent or any fact necessary to the determination of the legal regulated rent, or the dwelling space, . . . is in dispute between the owner and the tenant, or is in doubt, or is not known, the DHCR at any time upon written request of either party, or on its own initiative, may issue an order in accordance with the applicable provisions of this Code determining the facts, including the legal regulated rent . . .

(b) Such order shall determine such facts or establish the legal regulated rent in accordance with the provisions of this Code. Where such order establishes the legal regulated rent, it shall contain a directive that all rent collected by the owner in excess of the legal regulated rent established under this section for such period as is provided in section 2526.1 (a) of this Title, or the date of the commencement of the tenancy, if later, either be refunded to the tenant, or be enforced in the same manner as prescribed in section 2526.1 (e) and (f) of this Title."

A.Legal Regulated Rent

Pursuant to RSC § 2521 (g), the Deputy Commissioner properly found that the initial legal regulated rent for the July 1, 2003 to June 30, 2004 lease was $1020.00 per month, and not $4000.00, since the $1020.00 was the rent "charged and paid" (see Pet. Verified Petition, Nov. 24, 2008, exhibit B, Tenant's Answer to Landlord's PAR; Return, exhibit A-11, Aug. 30, 2007, exhibit B; see also Return, exhibit C-1, exhibit C, Regulatory Agreement, Schedule B ("Based on above, initial rents were as follows . . . 2BR - $1020")). The base date is April 1, 2003, the "[d]ate [the] apartment became subject to the Omnibus Housing Act of 1983" (Return, exhibit A-11, Aug. 30, 2007, exhibit B; cf. id., exhibit A-1, Apr. 25, 2007 (showing Ms. Rodriguez signed her Complaint of Owner's Failure to Renew Lease on April 25, 2007)).

Under the Rent Guidelines Board adjustments, the following are the proper legal regulated rent increases for this apartment. From July 1, 2004 to June 30, 2006, the monthly rent was properly increased to $1096.50, as Order 35 [FN1] allowed a 7.5% increase [*6]($1020.00 x 7.5% + $1020.00). From July 1, 2006 to June 30, 2007, the monthly rent could have been increased to $1126.65, as Order 37 [FN2] allowed a 2.75% increase ($1096.50 x 2.75% + 1096.50), although Ms. Rodriguez was only charged $1005.00. Thus, from July 1, 2007 to June 30, 2008, the monthly legal regulated rent could be increased to $1174.53, as Order 38 [FN3] allowed a 4.25% increase ($1126.65 x 4.25% + $1126.65), and the owner may offer a renewal lease based on this amount (see RSC § 2521.2 [a]).

B.Preferential Rent

The HDCRegulatory Agreement states that the initial rent "may be adjusted from time to time at the time of lease renewal . . . but [is] in no event to exceed" the rent as increased by rent stabilization or the maximum gross rent (Return, exhibit C-1, exhibit C, "Adjusted Rent" definition). " Gross Rent' shall mean and include . . . the actual rent payable by the tenant" (see id., exhibit C-1, exhibit C, "Gross Rent" definition). The Regulatory Agreement further defines maximum gross rent as an amount equal to 30% of 80% of area median gross income as adjusted by unit size (see id., exhibit C-1, exhibit C).

When calculating the maximum gross rent, a two-bedroom unit assumes a three-person household (see 26 USC § 42 [g] [2] [C] [ii] ("[T]he imputed income limitation applicable to . . . a unit which has 1 or more separate bedrooms[] [is] 1.5 individuals for each separate bedroom.")). Accordingly, the rent calculation here assumes the three-person income limit for low income families.

Each year, the United States Department of Housing and Development (HUD) publishes these income standards. The four-person income limit is used as the base, and the other family size income limits are calculated from that base using different multipliers. For the three-person income limit, that multiplier [*7]is 90% (or 0.90).[FN4]

Here, the preferential rent of $1081.00 is proper because it is less than the maximum gross rent and the monthly legal regulated rent. The 2006 area median income of $70,900 is used [FN5] (see HUD User, 1999 & Estimated 2006 Decile Distributions of Family Income by Metropolitan Statistical Areas and Nonmetropolitan Counties [Feb. 27, 2006], available at http://www.huduser.org/datasets/il/ il06/Medians_2006.pdf [accessed Mar. 24, 2009]), resulting in the following calculation: $70,900 x 80% x 30% x 90% divided by 12, which equals $1276.20, the maximum gross rent. Since the owner is charging less than it could have under the HDC formula, the owner [*8]may charge a monthly preferential rent of $1081.00.

Conclusion

In an Article 78 petition, a reviewing court is limited to determining whether the agency determination is arbitrary and capricious or an abuse of discretion (see e.g. Matter of Pell v Bd. of Educ., 34 NY2d 222, 230-231 [1974]). Judicial reversal of an administrative order pursuant to CPLR Article 78 is for instances in which the agency acted arbitrarily or capriciously (see Fiore v O'Connell, 297 NY 260, 262 [1948]). A determination is arbitrary and capricious if it is untenable as a matter of law (see Siegel, New York Practice, § 561, at 967 [4th ed 2005]). If a rational basis supports an administrative order, judicial review is narrow, and the court must uphold the agency's finding (see Pell, 34 NY2d at 231).

Pursuant to RSC § 2521.2 (a) and (g), the Rent Guidelines Board adjustments, and the HDC Regulatory Agreement, the Deputy Commissioner properly affirmed the rent administrator's determination of a monthly legal regulated rent of $1174.53, and a monthly preferential rent of $1081.00, for the July 1, 2007 to June 30, 2008 renewal lease. Accordingly, Ms. Rodriguez's application is denied, and the petition is dismissed.

This constitutes the Decision, Judgment, and Order of the Court.

Dated: March 25, 2009

ENTER:

James A. Yates, J.S.C. Footnotes

Footnote 1:(See New York City Rent Guidelines Board, 2003 Apartment & Loft Order #35 [June 19, 2003], available at http://www.housingnyc.com/html/guidelines/orders/order35.html [accessed Mar. 24, 2009].)

Footnote 2:(See New York City Rent Guidelines Board, 2005 Apartment & Loft Order #37 [June 21, 2005], available at http://www.housingnyc.com/html/guidelines/orders/order37.html [accessed Mar. 24, 2009].)

Footnote 3:(See New York City Rent Guidelines Board, 2006 Apartment & Loft Order #38 [June 27, 2006], available at http://www.housingnyc.com/html/guidelines/orders/order38.html [accessed Mar. 24, 2009].)

Footnote 4:"Low-Income Limits are calculated for each person size family between 1 and 8 persons. As is done with the Very Low-Income Limits, the 1 Person Limit is calculated by multiplying the 4-Person limit by 70%, the 2 person is obtained by multiplying the 4-Person limit by 80%, the 3 person by multiplying the 4-Person by 90%, the 5 Person by multiplying the 4-Person by 108%, the 6 Person by multiplying the 4-Person limit by 116%, the 7 Person by multiplying the 4-Person limit by 124%, and the 8-person by multiplying the 4-Person limit by 132%" (HUD User, FY 2008 Income Limits Documentation System, http://www.huduser.org/datasets/il/il2008/2008ILCalc3080.odb?inputname=Chemung%20Count y & area_id=METRO21300M21300 & fips=3601599999 & type=county & year=2008 & yy=08 & stname=New%20York & stusps=NY & statefp=36 & ACS_Survey=Yes & State_Count=1.0 & areaname=Elmira,%20NY%20MSA & level=80 [accessed Mar. 24, 2009] [emphasis added]).

Footnote 5:HUD has established a "hold harmless" policy where subsidized housing programs may freeze the area median income and not decrease it. HUD recognizes that "[i]ncome limit decreases are disruptive to certain HUD and other federal housing subsidy programs where unit rents are tied to current income limits. HUD, therefore, generally does not allow income limits to fall - a hold harmless' policy." (See 71 Fed Reg 34727 [2006].) The City of New York has recognized this "hold harmless" policy and maintained its area median income at the 2006 level of $70,900 for calculation purposes (see e.g., City of New York Department of Housing Preservation and Development, Office of Development, Departmental Memorandum [Feb. 27, 2007], available at http://www.nyc.gov/html/hpd/downloads/pdf/HUD-Income-Limits-detailed.pdf [accessed Mar. 24, 2009] ("The FY 2008 MFI [median family income] was calculated at $59,700, so the MFI was held constant at the 2006 level ($70,900).")).