212 W. 22 Realty, Llc v Fogarty

[*1] 212 W. 22 Realty, LLC v Fogarty 2003 NY Slip Op 51517(U) Decided on December 23, 2003 Civil Court Of The City Of New York, New York County 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 23, 2003
Civil Court Of The City Of New York, New York County

212 W. 22 REALTY, LLC, Petitioner-Landlord,

against

SUZANNE FOGARTY & DAYLE DINGER, 212 WEST 22ND STREET - APT. # 4-L NEW YORK, NEW YORK 10011, Respondents-Tenants, "JOHN & JANE DOE," Respondents-Undertenants.



INDEX NO. L & T 051384/03

SHLOMO S. HAGLER, J.H.C.

Pleadings

In or about January, 2003, petitioner 212 W. 22 Realty, LLC ("petitioner") commenced this nonpayment proceeding against Dayle Dinger and Suzanne Fogarty ("Dinger," "Fogarty," or "respondents") alleging that respondents owed rent for November and December 2002, at $1,705.60 per month totalling $3,411.20. Respondents interposed a written answer with counterclaims alleging, inter alia, that petitioner willfully overcharged them the sum of $69,350.12. Trial

This proceeding was referred to this Court for trial on September 15, 2003. The trial continued thereafter on September 19 & 25 and October 16 & 27, 2003. Both parties submitted memoranda of law on November 18, 2003. Witnesses

Petitioner called two (2) witnesses, Jack Atkin, its building manager, and Richard Mishkin, a contractor. Respondents called Michael Laurence as an expert witness and Dinger to testify on their behalf. [*2]Issue

The issue to be determined herein is whether or not petitioner is entitled to an individual apartment improvement ("IAI") rent increase pursuant to Rent Stabilization Code ("RSC") §2522.4(a)(1) for work allegedly completed during the vacancy immediately proceeding the commencement of respondents' tenancy in January, 2001. Burden of Proof for IAI Rent Increase

Petitioner has the burden of proof based on the preponderance of the credible

evidence to establish the existence of "improvements" justifying a 1/40th rent increase under RSC § 2522.4(a)(1).[FN1]

Specifically, petitioner must prove the following elements to establish the legal regulated rent for an IAI rent increase with respect to installation of "new equipment" and/or work completed where a vacancy occurs as follows:

1)there was a vacancy to a Rent Stabilized Apartment prior to the commencement of the new tenancy;

2)the petitioner installed "new equipment"and/or completed work which constituted "improvements" and it did not amount to normal maintenance, ordinary repair and decorating;

3)the petitioner specifically itemized the nature and scope of the "new equipment" installed and/or the work completed; and

4)the petitioner confirmed the costs by "adequate documentation." Findings of Fact & Conclusions of Law

Vacancy

The prior Rent Stabilized tenant of record was Corinne Fennell ("Fennell"). On January 1, 1980, Fennell entered into possession of apartment 4C located at 212 West 22nd Street, New York, New York ("subject premises") via a lease agreement dated October 18, 1979. (See, Petitioner's Trial Exhibit "5"). The lease was subsequently renewed for the last time for a term of one year commencing January 1, 2000 and ending December 31, 2001, at $482.80 per month. (See, Petitioner's Trial Exhibit "2"). Thereafter, Fennell vacated.

Petitioner and respondents subsequently entered into a vacancy lease agreement dated January 11, 2001 for a one (1) year period commencing January 15, 2001 and ending on January 31, 2002, at $1,640 per month. (See, Petitioner's Trial Exhibit "3"). Petitioner also registered the legal regulated rent at $1,640 with the New York State Division of Housing and Community Renewal ("DHCR"). (See, Petitioner's Trial Exhibit "2"). The parties then renewed the initial lease for one (1) year from February 1, 2002 through January 31, 2003, at $1,705.60 per month. (See, Petitioner's Trial Exhibit "4"). Neither party introduced an executed renewal lease nor a lease renewal offer after the expiration of the last renewal lease on January 31, 2003.

Improvements [*3]

Petitioner's witnesses credibly testified concerning the renovation of the kitchen and bathroom in the subject premises in the latter part of 2000. Petitioner's contractor, Richard Mishkin ("Mishkin"), testified to the total demolition and removal of all floorings, fixtures and equipment in the kitchen and bathroom, except for the bathtub. Mishkin also caused to be removed from the subject premises much "furniture and garbage" which was abandoned by the prior tenant of record.

In its place, Mishkin designed and installed a new kitchen and bathroom. The kitchen renovation included new wall and base cabinets; custom countertops; sink and faucet; plumbing (i.e., moving water and gas lines for the sink, stove and dishwasher); electrical (i.e., line for dishwasher and GFI outlet); ceramic tile floor; light fixture; and appliances (i.e., 20"

free standing gas stove, 18" porcelain tub dishwasher and 12 cubit foot frost free top freezer refrigerator). The bathroom installation included a new base cabinet; a one piece "cultured marble" integrated bowl and top sink; faucet; a 24 x 31 inch tri-view mirrored medicine cabinet with separate lightbar; shower body; wonder board and water proof sheet rock; new ceramic wall and floor tiles; electrical (i.e., GFI outlet); and light fixture. (See, Petitioner's Trial Exhibit "7" and Respondent's Trial Exhibit "H").

It is uncontroverted that all the above work was completed except that respondents challenged the installation and completion of a new bathroom ceramic tile floor

and a portion of the electrical work. This Court credits the testimony and documentary evidence which suggests that a new ceramic tile floor was installed in the bathroom and the disputed electrical work was also completed in the kitchen and bathroom.

Respondents opine that petitioner failed to establish that the actual renovation

of the kitchen and bathroom were "improvements," but it amounted to ordinary repair and maintenance which would not qualify for a rent increase pursuant to RSC §2522.4(a)(1). This

is not the case.

There is a plethora of case law defining what constitutes ordinary repair, maintenance and decoration as follows:

a)partial painting, plastering and skim coating;[FN2]

b)partial floor replacement;[FN3]

c)partial tile replacement;[FN4]

d)partial electrical re-wiring;[FN5] [*4]

e)refinishing of bathtubs;[FN6]

f)scraping and coating floors with polyurethane;[FN7]

g)repair of pipes, lights and stove;[FN8] and

h)removing wall paper and redecorating.[FN9]

On the other hand, a "gut renovation" of a Rent Stabilized Apartment has been characterized as an "improvement" under RSC §2522.4(a)(1).[FN10] The DHCR determined that

the renovation of a kitchen and/or bathroom constituted acceptable improvements for a rent increase where kitchen cabinets, countertops, refrigerator, stove, electrical fixtures, sink, faucet, medicine cabinet with lights, hamper and vanity were installed.[FN11] The significant difference between an improvement and an ordinary repair is that the work which was done in connection with an overall renovation of an apartment will normally constitute an improvement while an

ad hoc and partial rehabilitation may not be allowed as a mere ordinary repair and maintenance item.

For instance, the installation of ceramic tiles on the floors or walls of a bathroom was considered ordinary maintenance or repair unless it was done in connection with a renovation.[FN12] Moreover, the cost associated with the removal or demolition of items connected

to a renovation may be included for a rent increase when the removal or demolition is necessary and is performed contemporaneously with the completion of the work.[FN13]

Petitioner has established that the completed work and installation of new equipment in the kitchen and bathroom were part of an overall renovation of the subject premises which constituted improvements under RSC §2522.4(a)(1). The only exception was the refinishing of the hardwood floors and the removal of the prior tenant's belongings from the [*5]subject premises which must be disallowed as ordinary maintenance.

Specificity

In order to collect an IAI rent increase, petitioner must prove each specific item of improvement which was completed and/or installed. The documentation should be as specific as possible.[FN14] Petitioner has done so through both documentary and testimonial evidence. (See, Petitioner's Trial Exhibit "7"). For the most part, respondents have admitted that the petitioner completed the work and installed all new equipment in the subject premises, but they challenged the cost as excessive. (See, Respondent's Trial Exhibit "H"). The only area which this Court finds deficient is the earliest stage of demolition of the kitchen and bathroom.

Confirmation of Costs

The DHCR has delineated its method for confirming costs of IAI applications as follows:

Any claimed MCI or individual apartment improvement cost

must be supported by adequate documentation which should

include at least one of the following:

1)Cancelled check(s) contemporaneous with the completion

of the work:

2)Invoice receipt marked paid in full contemporaneous with

the completion of the work:

3)Signed contract agreement:

4)Contractor's affidavit indicating that the installation was

completed and paid in full. Whenever it is found that a

claimed cost warrants further inquiry, the processor may

request that the owner provide additional documentation.....

Where proof is not adequately substantiated, the difference

between the claimed cost and the substantiated cost will

be disallowed.[FN15]

In this case, petitioner has submitted Mishkin's invoice and cancelled checks documenting the cost of the work completed totalling $27,230.81. (See, Petitioner's Trial Exhibits "7", "12", "13", "14" & "15"). As per the invoice, petitioner and Mishkin agreed [*6]

to installment payments of $10,000 in May 2001; $10,000 in September, 2001; and $6,000

in December, 2001. Petitioner paid Mishkin installment payments as per said agreement. Petitioner also established that it paid $1,230.81 for the purchase of a stove, refrigerator and dishwasher for the subject premises which was not contested. Indeed, respondents' expert estimated the cost of the same appliances at $1,320, approximately $100 more than petitioner's actual cost. (See, Respondents' Trial Exhibit "H").

Notwithstanding the above, respondents' expert concluded that the entire cost of the renovation including the above appliances should only have been "$7,110 plus tax on product and shipping." (See, Respondent's Trial Exhibit "H"). This is in stark contrast to petitioner's alleged total cost of $27,230.81. (See, Petitioner's Trial Exhibits "7" & "12-15"). While respondents' expert's estimate was clearly unreasonable under the circumstances, petitioner's costs were excessive for the reasons stated below.

Mishkin conceded that he did the "same" renovation in apartment 5D in the subject building during the same period of time as he did in the subject premises. (See, Respondents' Trial Exhibit "A"). The total cost for the renovation of apartment 5D was $22,000, four thousand dollars less for the "same" renovation of the subject premises. Thus, the cost of the renovation for the subject premises was clearly excessive compared to the costs for the same or similar work done in apartment 5D at approximately the same time. [FN16]

The labor and demolition cost of $3,300 was also excessive because it included removal and dumping of much of the prior tenant's belongings which must be disallowed as an

IAI rent increase. However, the credible testimony established there was a need for demolition and removal of the kitchen and bathroom fixtures into a dumpster in connection with the renovation of the subject premises. At the very least, petitioner could attribute 50% of the cost

for said permissible demolition. Therefore, $1,650 of the demolition cost was excessive.

In addition, the cost of $316.95 for sanding and coating the floors of the subject premises with polyurethane must be disallowed because it can not be counted as an IAI rent increase. (See, Respondent's Trial Exhibit "B").

Based on the preponderance of the credible evidence, petitioner has demonstrated the existence of $21,263.86 ($22,000 plus $1,230.81 [reasonable cost for renovation of kitchen and bathroom and installation of appliances] less $1,650 [partial demolition costs] and $316.95 [refinishing of floor costs] as improvements justifying an IAI rent increase pursuant to RSC

§2522.4(a)(1). Counterclaims

Rent Overcharge

Respondents contend that petitioner overcharged them $24,210.04 above the legal regulated rent and excess security of $1,021.82 from January 15, 2001 through November 30, 2002. (See, First and Second Counterclaims of Respondents' Answer). Respondents paid petitioner $1,640 each month from January 15, 2001 through January 31, 2002; and $1,705.60 [*7]each month from February 1, 2002 through November 30, 2002. Respondents failed to introduce any evidence that a security deposit was paid to petitioner. The prior tenant of record paid $482.80 per month.

The legal rent is established by considering the previous tenant's legal regulated rent, vacancy and rent guidelines board ("RGB") increases, long-term occupancy increases and individual apartment increases, if any, pursuant to RSC §2522.8 as follows:

Prior Legal Regulated Rent $ 482.80

Vacancy Lease Increase $ 86.90

(20% - 2% = 18%, i.e., the difference between an

RGB percentage increase for a two-year and one

year renewal lease for the applicable period)

Long - Term Occupancy Increase $ 60.83

(.6% x 21 years = 12.6 %, i.e., the number of

years since imposition of the last vacancy allowance)

Individual Apartment Increases$ 531.59

(1/40th x $21,263.86)________

Legal Regulated Rent$1,162.12

Respondents have established a rent overcharge as follows:

Period of Time Rent Paid Legal RegulatedRent Overcharge

Rent 1)

1/22/01-1/31/01$ 461.10 [FN17]$ 337.32$ 123.78

($1,162.12 ÷ 31 days($37.48 x 9 days)

= $37.48 per day)

2)2/1/01-1/31/02$1,640.00$1,162.12$ 5,734.56

($477.88 x 12 months)

3)2/1/02-11/30/02$1,705.60$1,208.60$ 4,970.00 [*8]

($1,162.12 x .4%($497 x 10 months)

RGB Increase)

4)12/1/02-1/31/03 0$1,208.60 0

($1,162.12 x .4%

RGB Increase)

5)2/1/03-10/31/03 0$1,208.60 [FN18] 0

Total Rent Overcharge$10,828.34

Treble Damages

It is well settled that unless the petitioner can rebut the presumption that the rent overcharge was willful, the imposition of treble damages is mandatory.[FN19]

Petitioner claims that a treble damages penalty is not warranted because it provided respondents with an "Offer to Compromise pursuant to CPLR §3221" dated May 6, 2003 and in conformance with DHCR Policy Statement 89-2 which states as follows:

2.Where an owner adjusts the rent on his or her own within the time afforded to interpose an answer to the proceedings and submits proof to the DHCR [or other concurrent jurisdiction] that he or she has tendered, in good faith, to the tenant a full refund of all excess rent collected, plus interest.

In this case, petitioner only offered to refund $7,198.98 to respondent which is $3,629.36 less than the actual overcharge of $10,828.34. Moreover, petitioner's offer came

more than three (3) months after respondents interposed an answer alleging rent overcharge counterclaims and only in response to respondents' hotly contested motion for summary judgment. Petitioner's offer was insufficient for it to satisfy the above exception.

Other than general references in the post-trial memoranda and in opposition to respondents' motion for summary judgment that petitioner made a mistake in registering the rent with increases based on alleged improvements of approximately $40,000, petitioner failed to [*9]present any competent evidence whatsoever at trial of such a "mistake" to rebut the presumption

that the rent overcharge was willful. Therefore, the $10,828.34 actual overcharge shall be trebled to $32,485.02. Petitioner is entitled to a set-off of rent owed from December, 2002 through October, 2003 in the sum of $13,294.60 ($1,208.60 x 11 months). Attorneys' Fees

As respondents are clearly the prevailing parties in this proceeding pursuant to an extant lease agreement containing an attorneys' fees provision, they are entitled to an award of attorneys' fees pursuant to Real Property Law §234. Conclusion

The petition is dismissed. The clerk shall enter a money judgment in favor of respondents and against petitioner in the sum of $19,190.42 on their counterclaims.

This matter is restored to the Part Q calendar on January 13, 2004, at 9:30 A.M.

for a hearing to determine the amount of reasonable attorneys' fees to be awarded to respondents.

The foregoing constitutes the decision and order of this Court. Courtesy copies of this decision and order have been mailed to counsel for both parties.

December 23, 2003J. H. C.

Decision Date: December 23, 2003 Footnotes

Footnote 1:See, 985 Fifth Avenue v. DHCR, 171 A.D.2d 572, 567 N.Y.S.2d 657 (1st Dep't) appeal denied 78 N.Y.2d 861, 576 N.Y.S.2d 219 (1991); Matter of Sohn v. DHCR, 258 A.D.2d 384, 685 N.Y.S.2d 697 (1st Dep't 1999); and Matter of Charles Birdoff & Co. v DHCR, 204 A.D.2d 630, 612 N.Y.S.2d 418 (2d Dep't 1994).

Footnote 2:See, Mayfair York Company v. DHCR, 240 A.D.2d 158, 658 N.Y.S.2d 270 (1st Dep't 1997); 300 West 49th Street Associates v. DHCR, 212 A.D.2d 250, 629 N.Y.S.2d 194 (1st Dep't 1995); 201 East 81st Street Assocs. v. DHCR, 288 A.D.2d 89, 733 N.Y.S.2d 23 (1st Dep't 2001).

Footnote 3:See, Mayfair York Company v. DHCR, supra

Footnote 4:See, Matter of 1070 Madison Avenue, DHCR Admin. Rev. Dckt. Nos. HA410055-RO & H410079-RT, February 25, 1994.

Footnote 5:See, Mayfair York Company v. DHCR; 201 East 81st Street Assocs. v. DHCR, supra.

Footnote 6:See, Matter of 1070 Madison Avenue, supra.

Footnote 7:See, 300 West 49th Street Assocs. v. DHCR, supra; Matter of Fans Assocs. DHCR Admin. Rev. Dckt No. CA11072-RO, March 3, 1995.

Footnote 8:See, Matter of Residential Management, DHCR Admin. Rev. Dckt Nos. I 161004-RP & HC610014-RO, January 11, 1995.

Footnote 9:See, Matter of Fans Assocs., supra

Footnote 10:See, 30 West 70th Street Corp. v. Sylvor, N.Y.L.J., March 12, 1999, p. 26, col. 1 (App Term 1st Dep't).

Footnote 11:See, In the Matter of 2058 Crospey Avenue, DHCR Admin. Rev. Dckt No.CI 210196-RO, January 28, 1993; In the Matter of 169-171 Silverlake Road, DHCR Admin. Rev. Dckt No. ED 310001-RO, November 20, 1992.

Footnote 12:See, In the Matter of 1070 Madison Avenue, supra.

Footnote 13:See, DHCR Policy Statement 91-1 (January 23, 1991).

Footnote 14:See, Matter of Charles Birdoff & Co. v. DHCR, 204 A.D.2d 630, 612 N.Y.S.2d 418 (2d Dep't 1994).

Footnote 15:See, DHCR Policy Statement 90-10 (June 26, 1990); 12 E. 86th St. Assocs. v. Goldberg, N.Y.L.J., November 17, 1997, page 28, col. 5 (App Term 1st Dep't).

Footnote 16:See, 201 East 81st Street v. DHCR, supra. (... the charges for other work were excessive, both when compared to the costs for similar work done by the contractor on a similar apartment in the building a year before, and to what the tenant's witnesses would have charged.")

Footnote 17: Petitioner demonstrated that respondents moved into the subject premises on January 22, 2001 and only paid rent for nine days of that month at $52.90 per day totalling $461.10. (See, Petitioner's Trial Exhibit "10").

Footnote 18: Petitioner failed to establish that it either offered respondents a second renewal lease after the expiration of the first one-year renewal lease on January 31, 2003 or the same was executed by the parties. As such, petitioner is not entitled to an applicable RGB rent increase.

Footnote 19:See, Rent Stabilization Law § 26-516(a); DHCR Policy Statement 89-2 (February 27, 1989); Herman v. DHCR, 239 A.D.2d 305, 658 N.Y.S.2d 856 (1st Dep't 1997) leave denied, 91 N.Y.2d 807, 669 N.Y.S.2d 260 (1998); Century Tower Assocs. v. DHCR, 83 N.Y.2d 819, 611 N.Y.S.2d 491 (1994), Sohn v. DHCR, supra; 201 East 81st Street Assocs. v. DHCR, supra.