2115 Wash. Realty, LLC v Hall

[*1] 2115 Wash. Realty, LLC v Hall 2017 NY Slip Op 50573(U) Decided on April 27, 2017 Civil Court Of The City Of New York, Bronx County Lutwak, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 April 27, 2017
Civil Court of the City of New York, Bronx County

2115 Washington Realty, LLC, Petitioner-Landlord,

against

Tekenya Hall, Respondent-Tenant.



1781/2017



Attorneys for Petitioner:

Novick, Edelstein, Lubell, Reisman, Wasserman & Leventhal, P.C.

733 Yonkers Avenue

Yonkers, New York 10704

(914) 375-0100

Attorney for Respondent:

Amy Delauter, Esq.

The Legal Aid Society

Civil Practice

1775 Grand Concourse, 8th floor

Bronx, New York 10453

(929) 285-3935
Diane E. Lutwak, J.

Recitation, as required by CPLR 2219(A), of the papers considered in the review of Respondent's Motion for Discovery:

Papers Numbered

Notice of Motion, Affirmation, Affidavit and Exhibits A-H 1

Affirmation in Opposition and Exhibits A-B 2

Affirmation in Reply and Exhibit A 3

Upon the foregoing papers, and for the following reasons, respondent's motion for discovery is decided as follows.

PROCEDURAL HISTORY AND BACKGROUND

This is a proceeding for Nonpayment of Rent in which petitioner 2115 Washington Realty LLC claims that respondent Tekenya Hall owes rent and additional rent of $6164.09, that the premises, Apartment 4G at 2115 Washington Avenue in the Bronx, are subject to the Rent Stabilization Law of 1969 and that the tenant's rent is $1375 per month.

Respondent pro se answered the Petition on January 19, 2017 and the case was calendared for January 26, 2017. In her answer, respondent raised a "general denial" and asserted that there were conditions in her apartment which need to be repaired. Respondent, now represented by counsel, moves for leave to amend her answer and for discovery. In her proposed Amended Answer, in addition to admissions and denials of the specific paragraphs of the Petition, Respondent raises one defense (retaliatory increase in preferential rent) and four counterclaims (rent overcharge, retaliatory increase in preferential rent, breach of the warranty of habitability and attorney's fees). Petitioner has accepted the proposed Amended Answer without objection, thereby resolving that branch of respondent's motion.

The discovery respondent seeks relates to her first defense and second counterclaim that petitioner raised her preferential rent in retaliation for her "successful defenses in prior nonpayment and holdover proceedings" and to her first counterclaim of rent overcharge based on petitioner having "increased the preferential rent by over $300, six times more than the usual increase." Although respondent has not provided a copy of her initial lease, and attached copies of only two of her three renewal leases, respondent did include as Exhibit A to her moving papers a copy of the New York State Division of Housing and Community Renewal's ("DHCR") rent registration history for her apartment, which reflects the following legal regulated rents and preferential rents registered in a series of four one-year leases since the commencement of her tenancy on November 1, 2012:

Reg Year Legal Regulated Rent Preferential Rent Lease Term 2013 $ 1505.80 $ 950.00 11/1/12-10/31/13 2014 $ 1564.99 $ 988.00 11/1/13-10/31/14 2015 $ 1580.64 $1013.03 11/1/14-10/31/15 2016 $ 1580.64 $1013.03 11/1/15-10/31/16

The most recent renewal lease, the one on which respondent bases her claims of rent overcharge and retaliatory preferential rent increase, reflects a 0% increase in the legal regulated rent and a preferential rent of $1375 for the one-year term of 11/1/16-10/31/17.

Respondent argues that she has demonstrated "ample need" for discovery under the criteria set forth in the case of New York University v Farkas (121 Misc 2d 643, 468 NYS2d 808 [Civ Ct NY Co 1983]), as she "has asserted facts to establish a cause of action by submitting the rent registration, leases and abatement decision to assert her defense of rent overcharge and retaliation." Affirmation in Support at ¶ 38. She also argues that the information sought "will determine whether petitioner is charging a proper preferential rent". Respondent seeks discovery dating back to January 1, 2000 in the form of "leases and other relevant documents to determine the terms and conditions of the preferential rent so as to determine if [respondent] is being charged the correct rent and if the renewal lease is proper." Affirmation in Support at ¶ 38. Respondent acknowledges the general rule limiting rent overcharge complaints to a period of four years prior to the interposition of the claim but cites to Rent Stabilization Code Sections 2521.2(c) and 2526.1(2)(viii) for the proposition that, under these provisions, "a landlord who has charged preferential rents is required to produce the entire rental history up to the lease before commencement of the preferential rent charges, even if more than four years old." Affirmation in Support at ¶ 36.

Respondent's proposed discovery request consists of a demand for production of thirty-[*2]one [FN1] items or categories of documents, all dating back to January 1, 2000. Respondent asserts that her demand is "narrowly tailored".

In opposition, petitioner argues that the motion for discovery should be denied as respondent already has a rent overcharge complaint pending at the DHCR; petitioner annexes copies of that complaint and its answer thereto, along with the respective supporting documentation, including copies of respondent's original lease, her original preferential rent rider and the three subsequent renewal leases. Alternatively, petitioner opposes respondent's discovery request, notwithstanding the pending DHCR proceeding, because any relevant material from the four years preceding the interposition of the claim was included in petitioner's answer at the DHCR and the request for documents dating back beyond those four years "should be denied because it violates the four year statute of limitations on residential rent overcharge complaints." Affirmation in Opposition at ¶ 11. Further, petitioner argues that the document demand — which, petitioner points out, seeks, inter alia, credit reports for each tenant who occupied the apartment from January 1, 2000 to the present; cancelled checks showing the return of security deposits to such tenants; every communication including e-mail and written correspondence, both sent and received, between petitioner, its members and agents and/or their brokers, or between or among any of them, concerning the apartment, from July 1, 2000 to the present - is overly broad rather than "narrowly tailored".

On reply, respondent asserts that she withdrew the rent overcharge complaint she previously filed at the DHCR, that the four-year statute of limitations does not apply and that the document demand is not overly broad.

DISCUSSION

In summary proceedings, a party requesting discovery must obtain leave of court (CPLR § 408) and, to obtain such leave, must demonstrate "ample need." Antillean Holding Co v Lindley (76 Misc 2d 1044, 1047, 352 NYS2d 557 [Civ Ct NY Co 1973]). In determining whether a party has established ample need, courts consider a number of factors, not all of which need be present in every case, including:

•whether the movant has asserted facts to establish a claim or defense;•whether there is a need to determine information directly related to the claim or defense;•whether the requested disclosure is carefully tailored and likely to clarify the disputed facts;•whether prejudice will result from granting leave to conduct discovery; and•whether any prejudice caused by granting a discovery request can be diminished by an order fashioned by the court for that purpose.

See New York University v Farkas (121 Misc 2d 643, 647, 468 NYS2d 808 [Civ Ct NY Co 1983]). Another factor courts consider in deciding whether to grant leave to conduct discovery is whether material evidence is in the sole possession of others. 217 E 82nd St Co v Perko (10 Misc 3d 146[A], 814 NYS3d 893 [App Term 1st Dep't 2006])(reversing lower court which had denied petitioner's motion for discovery in a holdover proceeding in which respondent raised a defense of succession rights to her mother's Rent Controlled apartment).

Courts have regularly granted disclosure in eviction proceedings when there are disputes [*3]as to whether an apartment is subject to Rent Stabilization and/or there is a rent overcharge. See, e.g., 2701 Grand Assn LLC v Morel (50 Misc 3d 139[A], 31 NYS3d 924 [App Term 1st Dep't 2016])(reversing lower court which had denied respondents' motion to vacate stipulation and to file an amended answer and finding that, "Tenants also demonstrated ample need for limited discovery relating to the apartment improvements that were the basis of the $891 rent increase"); Aimco 322 E 61st St LLC v Brosius (50 Misc 3d 10, 12, 21 NYS3d 803, 805 [App Term 1st Dep't 2015])(reversing lower court which had denied respondent's motion for discovery and finding that, "Tenant demonstrated ample need for limited discovery relating to the apartment improvements that were the basis for the purported deregulation"); 150 W 82nd St Realty Assoc v Linde (36 Misc 3d 155[A], 964 NYS2d 61 [App Term 1st Dep't 2012]) (affirming lower court's order granting discovery to tenant who had "demonstrated ample need for limited discovery relating to the apartment improvements that were the basis of the $1,061 rent increase"); IWC 879 Dekalb, LLC v Walsh (46 Misc 3d 1227[A], 13 NYS3d 850 [Civ Ct Kings Co 2015]) (granting discovery to tenants who "asserted facts to establish a defense that the Apartment was improperly deregulated and that they may have been overcharged; that they have a need to obtain information regarding all rents charged, and rent increases imposed, from 2004 to the present, as well as documentation regarding the tenancies during that period"); 480-486 Broadway, LLC v No Mystery Sound, Inc (11 Misc 3d 1056[A], 815 NYS2d 494 [Civ Ct NY Co 2006], aff'd on other grounds, 851 NYS2d 57, 16 Misc 3d 137[A][App Term 1st Dep't 2007])(permitting tenant to conduct discovery to support its claim that the subject premises may be entitled to Loft Law protection).

The interconnected questions raised by respondent's motion for discovery are whether she has asserted sufficient facts to (1) raise a colorable defense of rent overcharge and (2) warrant the examination of documents dating back more than four years.

An impermissible rent overcharge arises where a landlord charges a rent regulated tenant more than what the applicable statutes, regulations and guidelines authorize. See, generally, Rent Stabilization Law ("RSL"), NYC Admin Code § 26-512; Rent Stabilization Code ("RSC"), 9 NYCRR § 2525.1. A landlord who collects a rent overcharge is liable to the tenant for treble damages, unless the landlord establishes that the overcharge was not willful. RSL § 26-516(a).

On the other hand, where a landlord charges a Rent Stabilized tenant less than what is legally permissible due to market conditions or other reasons, this is a "preferential rent". 9 NYCRR § 2521.2(a). While the Rent Stabilization Law and Code contain various limits on the types and amounts of increases permitted to legal regulated rents, this is not the case for preferential rents. Unless the parties "expressly agree that a preferential rent will last for the life of the tenancy", Colonnade Mgt, LLC v Warner (11 Misc 3d 52, 812 NYS2d 209 [App Term 1st Dep't 2006]); 448 W 54th St Corp v Doig-Marx (5 Misc 3d 405, 784 NYS2d 292 [Civ Ct NY Co 2004], aff'd, 11 Misc 3d 126[A], 815 NYS2d 494 [App Term 1st Dep't 2006]); Matter of Sugihara v State of New York DHCR ORA (13 Misc 3d 1239[A], 831 NYS2d 356 [Sup Ct NY Co 2006]), upon lease renewal or vacancy the owner has the option of either offering another preferential rent, at whatever rate it chooses, or charging the "previously established legal regulated rent", as adjusted by legal increases. Colonnade Mgt, LLC v Warner, supra. See also Missionary Sisters of the Sacred Heart, Ill v NY State Div of Hou & Cmty Renewal (283 AD2d 284, 724 NYS2d 742 [1st Dep't 2001]); Rent Stabilization Law § 26-511(c)(14).

Rent overcharge claims are generally subject to a four-year statute of limitations. Rent Stabilization Law § 26-516(a); CPLR 213-a; Rent Stabilization Code § 2526.1(a(2). However, [*4]events dating back beyond the four-year statute of limitations may be considered in various circumstances. For example, the four-year limit does not apply to determine whether the apartment is rent regulated, Gersten v 56 7th Ave LLC (88 AD3d 189, 928 NYS2d 515 [1st Dep't 2011]); Aimco 322 E 61st St, LLC v Brosius (50 Misc 3d 10, 21 NYS3d 803 [App Term 1st Dep't 2015]), or to determine "whether a fraudulent scheme to destabilize the apartment tainted the reliability of the rent on the base date," Matter of Grimm v State of New York Div of Hous & Community Renewal Office of Rent Admin (15 NY3d 358, 367, 938 NE2d 924, 929, 912 NYS2d 491, 496 [2010]); see also Conason v Megan Holding, LLC (25 NY3d 1, 29 NE3d 215, 6 NYS2d 206 [2015]); Thornton v Baron (5 NY3d 175, 181, 833 NE2d 261, 800 NYS2d 118, 122 [2005]); and compare Matter of Boyd v New York State Div of Hous & Community Renewal (23 NY3d 999, 16 NE3d 1243, 992 NYS2d 764 [2014])(DHCR's determination denying a tenant's administrative appeal based on a sizable increase in the legal regulated rent was not arbitrary and capricious "as tenant failed to set forth sufficient indicia of fraud to warrant consideration of the rental history beyond the four-year statutory period").

Consideration of the rental history prior to the four-year statutory period is also permissible to determine the existence of a preferential rent and whether it was a "term and condition" of the original lease, RSC § 2522.5(g), that continues until the tenancy ends. Matter of 218 East 85th St LLC v Division of Hous & Community Renewal (23 Misc 3d 557, 872 NYS2d 640 (Sup Ct NY Co 2009); Matter of Sugihara v State of New York Div of Hous & Community Renewal Off of Rent Admin (13 Misc 3d 1239[A], 831 NYS2d 356 [Sup Ct NY Co 2006])(finding that the DHCR's consideration of the 1991 lease and lease rider would not violate the four-year rule); 560-568 Audubon Realty Inc v Rodriguez (54 Misc 3d 1226[A], 2017 NY Misc LEXIS 879 [Civ Ct NY Co 2017])(in granting tenant's motion to vacate a stipulation of settlement and the judgment and warrant contained therein, finding it appropriate to consider rent increases more than four years prior to the interposition of the rent overcharge defense where the use of unregistered preferential rents, along with other factors, supported an "arguably meritorious" rent overcharge cause of action). See also Matter of Coffina v NYS Div of Hous & Comm Renewal (61 AD3d 404, 877 NYS2d 249 [1st Dep't 2009])(finding that the language of the original lease from 1994 supported the tenant's argument that "the parties intended the legal rent for the subject apartment to be the rent stated in that lease, plus any statutory guideline increases, for the duration of the tenancy'). The DHCR codified this exception to the four-year rule in RSC § 2526.1(a)(2) (viii), and where such a claim is raised the landlord may be "required to maintain, and submit where required to by DHCR, the rental history of the housing accommodation immediately preceding such preferential rent to the present which may be prior to the four-year period preceding the filing of a complaint." RSC § 2521.2(c).

Here, the existence and terms of respondent's original preferential rent rider are known.[FN2] That rider clearly states that the preferential rent was being offered "for the initial term of the lease only," and that, upon renewal, the landlord was entitled to charge the maximum legal rent plus all allowable increases. Respondent does not claim to have contracted for a preferential rent in her initial lease that "unequivocally and explicitly provides for a rent concession for the duration of the tenancy." Colonnade Mgt, LLC v Warner, supra. Absent such a rider, the Rent [*5]Stabilization Law and Code place no limits on the amount petitioner can increase respondent's preferential rent from one lease to the next so long as it is below the legal regulated rent.

Respondent's conclusory argument based on RSC § 2521.2(c) that "a landlord who has charged preferential rents is required to produce the entire rental history up to the lease before commencement of the preferential rent charges, even if more than four years old," Affirmation in Support at ¶ 36, is misplaced. This section of the Code must be read together with § 2526.1(a)(2)(viii), which makes it clear that the exception allowing review of the rental history prior to the four-year period preceding the filing of a rent overcharge complaint in the preferential rent context is "for the purposes of establishing the existence or terms and conditions of a preferential rent under Section 2521.2(c)". Here, the existence and the terms and conditions of respondent's preferential rent are known, and no other reason — no evidence of any unreliability in the rent history whatsoever — has been presented to warrant an examination of "the entire rental history up to the lease before commencement of the preferential rent charges."

While no justification has been provided for looking back more than four years, even if one were to look back to 1999, the year "immediately preceding" the first year in which petitioner began registering preferential rents, RSC § 2521.2(c), the DHCR's rent registration history shows that there have never been any unexplained or illegal increases in the legal regulated rent. In the year 2000, the first year in which the rent registration history reflects a preferential rent (of $550 per month), petitioner registered a legal registered rent for a new tenant under a two-year lease commencing February 1, 2000 of $698.88, an amount that is calculated by simply adding a permissible 20% vacancy increase to the prior tenant's last legal registered rent of $582.40. Thereafter, the only increases in the legal regulated rent were for either vacancy leases or lease renewals, each correctly calculated based on the Rent Guidelines Board Order ("RGBO") in effect at the time, as follows:

Reg'n Year

Lease Term

LRR

$ Increase

% Increase

Increase Type

1999

2-yr (1/1/98-12/31/99)

$ 582.40

$ 22.40 [FN3]

4.0%

Renewal [FN4]

2000

2-yr (2/1/00-1/31/02)

$ 698.88

$ 116.48

20%

Vacancy

2001

2-yr (5/1/01-4/30/03)

$ 837.94

$ 139.66

20%

Vacancy

2002

2-yr (5/1/01-4/30/03)

$ 837.94

0

0

N/A

2003

2-yr (5/1/01-4/30/03)

$ 837.94

0

0

N/A

2004

2-yr (5/1/03-4/30/05)

$ 871.46

$33.52

4.0%

Renewal [FN5]

[*6]2005

2-yr (2/1/05-1/31/07)

$1045.75

$ 174.29

20%

Vacancy

2006

2-yr (2/1/05-1/31/07)

$1045.75

0

0

N/A

2007

2-yr (2/1/07-1/31/09)

$1131.22

$76.47

7.25%

Renewal [FN6]

2008

2-yr (2/1/07-1/31/09)

$1131.22

0

0

N/A

2009

1-yr (2/1/09-1/31/10)

$1182.12

$50.90

4.5%

Renewal [FN7]

2010

1-yr (2/1/10-1/31/11)

$1217.58

$ 35.46

3.0%

Renewal [FN8]

2011

1-yr (2/1/11-1/31/12)

$1244.98

$ 27.40

2.25%

Renewal [FN9]

2012

1-yr (2/1/12-1/31/13)

$1291.67

$ 46.69

3.75%

Renewal [FN10]

2013

1-yr (11/1/12-10/31/13)

$1504.80

$ 213.13

16.5%

Vacancy [FN11]

2014

1-yr (11/1/13-10/31/14)

$1564.99

$ 60.19

4.0%

Renewal [FN12]

2015

1-yr (11/1/14-10/31/15)

$1580.64

$15.65

1.0%

Renewal [FN13]

[*7]2016

1-yr (11/1/15-10/31/16)

$1580.64

0

0.0%

Renewal [FN14]

CONCLUSION

Accordingly, respondent has not established ample need to obtain the requested information from petitioner and her motion for discovery is denied. This proceeding is restored to the court's calendar for settlement or trial on June 9, 2017. This constitutes the Decision and Order of this Court, copies of which will be provided to the respective parties' counsel in the courthouse.

Dated: April 27, 2017

Bronx, New York

Diane E. Lutwak, Hsg. Ct. J. Footnotes

Footnote 1:While the demand enumerates items from 1 to 24, one of the demands, item 5, has six subparts and another demand, item 19, has three subparts.

Footnote 2:While respondent does not include a copy of her initial lease and preferential rent rider with her moving papers, petitioner has provided it with its opposition papers.

Footnote 3:This increase is based on the prior registered rent of $560, charged to the same tenant under her initial 2-year lease which ran from January 1, 1996 through December 31, 1997.

Footnote 4:The applicable RGBO is #29, which permitted renewal lease increases of 2% for a 1-year term and 4% for a 2-year term.

Footnote 5:The applicable RGBO is #34, which permitted renewal lease increases of 2% for a 1-year term and 4% for a 2-year term.

Footnote 6:The applicable RGBO is #38, which permitted renewal lease increases of 4.25% for a 1-year term and 7.25% for a 2-year term where owner pays for heat; where tenant pays for heat, 3.75% for a 1-year term and 6.75% for a 2-year term.

Footnote 7:The applicable RGBO is #40, which permitted renewal lease increases of 4.5% for a 1-year term and 8.5% for a 2-year term where owner pays for heat; where tenant pays for heat, 4% for a 1-year term and 8% for a 2-year term.

Footnote 8:The applicable RGBO is #41, which permitted renewal lease increases of 3% for a 1-year term and 6% for a 2-year term where owner pays for heat; where tenant pays for heat, 2.5% for a 1-year term and 5% for a 2-year term.

Footnote 9:The applicable RGBO is #42, which permitted renewal lease increases of 2.25% for a 1-year term and 4.5% for a 2-year term.

Footnote 10:The applicable RGBO is #43, which permitted renewal lease increases of 3.75% for a 1-year term and 7.25% for a 2-year term.

Footnote 11:The applicable RGBO is #44, which permitted renewal lease increases of 2% for a 1-year term and 4% for a 2-year term; as the difference between the 2-year and 1-year guideline increases is 2%, and the last vacancy increase commenced more than four years earlier, the permissible vacancy increase for a 1-year lease was 18% (20% minus 2%). See Rent Stabilization Law, Admin. Code of the City of New York § 26-511(c)(5-a); Rent Stabilization Code, 9 NYCRR § 2522.8(a)(2).

Footnote 12:The applicable RGBO is #45, which permitted renewal lease increases of 4% for a 1-year term and 7.75% for a 2-year term.

Footnote 13:The applicable RGBO is #46, which permitted renewal lease increases of 1% for a 1-year term and 2.75% for a 2-year term.

Footnote 14:The applicable RGBO is #47, which permitted renewal lease increases of 0% for a 1-year term and 2% for a 2-year term.