Dimas Gardens Inc. v State of New York Div. of Hous. & Community Renewal, Off. of Rent Admin.
Annotate this CaseDecided on June 22, 2009
Supreme Court, Kings County
Dimas Gardens Inc., Petitioner,
against
State of New York Division of Housing and Community Renewal, Office of Rent Administration, Respondent.
29210/2008
ATTORNEY FOR PETITIONER
SPERBER DENENBERG & KAHAN, P.C.
48 WEST 37TH STREET
16TH FLOOR
NEW YORK, NEW YORK 10018
917-351-1335
ATTORNEY FOR RESPONDENT
GARY R. CONNOR, Counsel
NEW YORK STATE DIVISION OF HOUSING
AND COMMUNITY RENEWAL
25 BEAVER STREET, ROOM 707, 7TH FLOOR
NEW YORK, NEW YORK 10004
212-480-6725
Martin Schneier, J.
The primary issue presentedin this CPLR Article 78 rent overcharge proceeding is whether the court's obligation to "search for the truth" applies to [*2]Article 78 proceedings and requires the court to consider documentary evidence that was not before the Rent Administrator but is clearly dispositive of the issue resolved by the administrative agency, namely: whether the "subject apartment" was rent stabilized?
With due respect to the law, should this "search for the truth"obligation be deterred by legal technicalities that would prevent this?
This is an issue of first impression in this state.
In this CPLR Article 78 proceeding petitioner, Ditmas Gardens, Inc. (Ditmas) petitions the
court to annul an Order of the State of New York Division of Housing and Community Renewal
(DHCR) dated August 28, 2008, which confirmed a determination of the Rent Administrator
dated May 6, 2008, that the tenant was entitled to treble damages for a rent overcharge.
Background
This Article 78 petition stems from an overcharge complaint filed by a tenant named Helal Uddin (Uddin) with DHCR on September 6, 2007. Uddin states in her complaint that in May, 1994, she moved into Apartment 2A ("subject apartment"), in a building located at 314 Ditmas Avenue, Brooklyn, New York, a three story building containing only six apartments, two on each floor, at an agreed initial rent of $750.00 per month. Due to rental increases she was paying $900.00 per month at the time of her complaint. Uddin attached her initial one year lease for the period "beginning 5/1/94 ending 4/30/95" to her complaint.
The lease without any attached rider states, in pertinent part, that:
"APARTMENT LEASE"
"Attached rider sets forth rights and obligations of tenants and landlords under the Rent Stabilization Law".
"32. Rent regulations. This Section applies if the apartment is subject
to the N.Y.C. Rent Stabilization Law and Code....".
Ditmas failed to respond to any of the notices sent by DHCR. On the default of Ditmas the
DHCR Rent Administrator issued an Order on May 6, 2008 which states in pertinent part:
"ORDER FINDING RENT OVERCHARGE (RENT STABILIZED ACCOMMODATIONS IN NEW YORK CITY)"..."Pursuant to the Rent Stabilization Code, the Rent Administrator finds that subsequent to September 6, 2003, a rent overcharge occurred...The owner is responsible for: Treble damages on the overcharge beginning two years before the complaint because the owner has not established that [*3]the overcharge was not willful."..."Total amount due tenant: $8855.25"..."The rent is frozen at the lawful Stabilized Rent of $800.00."
On June 6, 2008, Ditmas, acting pro
se, filed a Petition for Administrative Review (PAR) and explained that he did not respond
because Uddin had told him the complaint was a mistake and that she would "remove" her
complaints with DHCR. Ditmas then states
in pertinent part:
"The building was bought in 1984 and was bought as an empty building due to a fire. We completely renovated it and put new tenants in the building. To the best of my knowledge the building is not rent stabilized."
The PAR was rejected on June 16, 2008, by the PAR Unit due to technical filing errors. Ditmas was told to re-file his PAR within 35 days. Ditmas complied and, now represented by counsel, filed a new PAR through his attorneys on July 21, 2008. In that PAR, Ditmas asserted that the building was exempt from rent stabilization laws because it was substantially rehabilitated after 974 and asserts, in pertinent part, that: "Prior to the work, the building was an empty shell with no tenants and no apartments. All that existed was the outside brick structure with nothing inside left. The owner installed all new building systems as none existed."
The "City of New York Department of Buildings Certificate of Occupancy" dated September 11, 1986 was submitted for the first time at the PAR level. The Certificate of Occupancy states that it "supersedes Certificate of Occupancy No. 117" and that the "Permissible Use and Occupancy" was for a total of "Six (6) Apartments", and that the building was "3 stories" with "alteration" completed "9-6-86".
On August 28, 2008, the Deputy Commissioner issued an Order and Opinion denying Owner's PAR. In her decision, the Commissioner found that "no evidence of a substantial rehabilitation was submitted to the [DHCR]" and stated in pertinent part:
"Furthermore even if the Commissioner were now to accept as credible evidence, petitioner's brief statement in the rejected PAR (See the previous page) as to the condition of the building when bought (which statement has not been here resubmitted), and the Certificate of Occupancy mentioned in the footnote (impermissibly proffered for the first time on appeal), there would still be [*4]insufficient evidence that the premises were deregulated. Operational Bulletin 95-2 of this division requires inter alia that at least 75% of 17 enumerated systems must each have been replaced; the owner's rejected PAR is simply too vague to constitute such evidence.
In sum without a previous order exempting the subject building from rent regulation, or even a demonstrated basis for such an order, there appears no reason to grant this petition."
Petitioner then filed a request for reconsideration on October 8, 2008, and submitted additional documentation to support its claim that the building had been an "empty burnt out shell" prior to its complete rehabilitation. The documents included "the approved "certified" Department of Buildings Plans, the deed to the building and two "Bureau of Buildings Certificates of Occupancy".
The Certificate of Occupancy No. 117, dated September 23, 1919, states, in pertinent part, that in: "The EXISTING BUILDING...PERMISSION is hereby granted for its occupancy for the following purposes:
"Private garage one car".
The Certificate of Occupancy No. 118, dated September 2, 1919, states, in pertinent part,
that in: "the EXISTING BUILDING...PERMISSION
is hereby granted for its OCCUPANCY for the following purposes:
"Office, storage and garage for two cars".
The DHCR denied the request for reconsideration by letter dated October 24, 2008 reiterating that Ditmas "did not respond to the tenant's complaint" and that the new evidence now submitted by Ditmas was not submitted "During the proceeding before the Rent Administrator or before the Commissioner." And that the "scope of review therefore prohibits consideration of your newly submitted evidence at this stage of the proceeding".
This denial letter in addition states, in pertinent part:
"Further, the tenant submitted an executed rent-stabilized lease executed by the
current owner and tenant in 1994, and a copy of said lease was served upon the owner with the
tenant's complaint. Said Lease shows that the owner has, at sometime since the alleged
rehabilitation considered the apartment at issue to be subject to rent-stabilization. The owner did
not address this lease in the PAR."
[*5]Discussion
The Rent Stabilization Code Section 2520.11 states in pertinent part: "This code shall apply to all...housing accommodations made subject to regulation except the following housing accommodations.(3) housing accommodations in buildings completed or substantially rehabilitated as family units on or after January 2, 1974...."
The standard for review in any Article 78 proceeding is enunciated in CPLR Section 7803 which states, in pertinent part: "The only question that may be raised in a proceeding under this article are:3. Whether a determination... was arbitrary and capricious or an abuse of discretion.
In applying this "arbitrary and capricious" standard, "the
proper test is whether there is a rational basis for the administrative orders" (Matter of Pell v.
Board of Educ., 34 NY2d 222, 231 [1974], quoting, Matter of Colton v.
Berman, 21 NY2d 322, 329 [1967]). An agency's action is arbitrary when it "is without
sound basis in reason and is generally taken without regard to the facts." (Pell, supra, at
231).(508 Realty Associates, LLC v New York State Div. of Housing and Community Renewal
61 A.D.3d 753
(2d Dept. 2009)).
It is well settled that the review of an administrative determination is limited to the "facts and record adduced before the agency "(Matter of Kelly v Safir, 96 NY 2d32 (2001); Matter of Featherstane v Franco, 95 NY 2d550 (2002).
"[U]pon a PAR submission the agency need not consider new material or facts for the first time"(60 Gramercy Park Co. v. State Div. of Housing and Community Renewal, 188 AD2d 371, 373 [1st Dept 1992]). It is, however, within the discretion of the DHCR to do so. Rent Stabilization Code Section 2527.5 states, in pertinent part, that: "At any stage of a proceeding the DHCR may...(b) make investigations of the facts, conduct inspections, hold conferences, and require the filing of reports, evidence, affidavits, or other material relevant to the proceeding;"
Thus, DHCR may at any stage of this proceeding consider new evidence not previously submitted to the Rent Administrator. The State of New York Division of Housing and Community Renewal and the Court should both be concerned with [*6]the search for TRUTH because justice, indeed law itself, not based on TRUTH will not endure. It is often said that TRUTH is the handmaiden of justice.
In the instant case, there are three TRUTHS:
TRUTH ONE: The New York City Certificates of Occupancy which indicates that in 1919 the building was occupied only for the permissible use of an "Office, storage and garage for two cars" and that for the first time the September 11, 1986 Certificate of Occupancy, which superceded the 1919 one, indicates that the building was now completely altered to contain six new apartments.
TRUTH TWO: The uncontroverted assertion by the landlord and its attorney that when the building was bought in 1984 it was an empty shell due to a fire and that "all that existed was the outside brick structure with nothing inside left."
TRUTH THREE: The deed to the building and the approved "certified" Department of Buildings Plans for the total rehabilitation of the building.
The DHCR Deputy Commissioner in her Order and Opinion of August 28, 2008 had found that "no evidence of substantial rehabilitation was submitted to the DHCR" and in determining whether the building was exempt from rent regulation she had considered only Operational Bulletin 95-2 Section I(A). The Deputy Commissioner should also have considered Operational Bulletin 95-2 Section 1(B) which in pertinent part states:
"The rehabilitation was commenced in a building that was in a substandard or seriously
deteriorated condition. The extent to which the building was vacant of residential tenants when
the rehabilitation was commenced shall, in addition to the items described in III
"Documentation," constitute evidence of whether the building was in fact in such condition.
Where the rehabilitation was commenced in a building that was at least 80% vacant of
residential tenants, there shall be a presumption that the building was substandard or seriously
deteriorated at that time. Space converted from nonresidential use to residential use need not
meet this standard"
(emphasis added). Had the proffered evidence been weighed against this rule, it
would have resulted in a presumption that the building was not subject to rent stabilization.
It is apparent from the uncontroverted documentry evidence the landlord submitted to the PAR and to DCHR in its request for reconsideration, but had never previously submitted to the Rent Administrator, that the subject apartment was never rent stabilized. [*7]
The reference continually by DCHR to "an executed rent stabilized lease executed by the current owner and tenant in 1994" is a misstatement and a totally false description of the parties' lease. A plain reading of this lease shows that nowhere in the lease do the parties acknowledge that the subject apartment is rent stabilized, in fact the contrary is true.
In addition, the lease is completely irrelevant as the Appellate Division succinctly stated in its recent decision in 546 West 156th Street v Smalls, (43 AD 3d7 [1st Dept. 2007]), in pertinent part that, "In determining whether a dwelling is subject to rent regulation, what the parties think might be its status or even what they agree to be its status is not dispositive; what is controlling is whether the premises meet the statutory criteria for protection under the applicable regulatory statute".
Accordingly, based on all of the foregoing, the Court finds that the Order of the respondent, State of New York Division of Housing and Community Renewal, dated August 28, 2008, and the determination of the Rent Administrator dated May 6, 2008 was arbitrary and capricious without any regard to the "true"facts.
In sum, the petition is granted, the respondent's Order dated August 28, 2008 is annulled and this matter is remanded to the respondent for a new determination.
This constitutes the Decision and Order of the Court.
_____________________
J.S.C.
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