Sheridan Props., L.L.C. v Liefshitz

[*1] Sheridan Props., L.L.C. v Liefshitz 2007 NY Slip Op 52316(U) [17 Misc 3d 1137(A)] Decided on November 27, 2007 Civil Court Of The City Of New York, Bronx County Madhavan, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 27, 2007
Civil Court of the City of New York, Bronx County

Sheridan Properties, L.L.C., Petitioner,

against

Ana Liefshitz, Respondent.



L & T 71423/06



John Pizzano, Esq.

Rappaport, Hertz, Cherson & Rosenthal, P.C.

118 - 35 Queens Boulevard, 9th Floor

Forest Hills, NY 11375

Attorneys for Petitioner

Gabriel Benitez, Esq.

LSNY Bronx

579 Courtlandt Avenue

Bronx, NY 10451

Attorneys for Respondent

Jaya K. Madhavan, J.

At issue in this nonpayment proceeding is whether petitioner was entitled to a rent increase for improvements it allegedly made to respondent's apartment ("Apartment") uring the vacancy immediately prior to the start of respondent's tenancy in April, 2003. As no settlement could be reached, the court held a trial in which both parties were represented by counsel.

Petitioner contends that respondent owes $8,717.80 in rental arrears through August 30, 2007. (Pet. Exh. 7.) Those arrears are based upon petitioner charging respondent a preferential rent of $850.00 per month (abated from an alleged legal rent of $967.58) for the period of April 1, 2003 through March 31, 2005. (Id.) The preferential rent was then revoked beginning with the first renewal lease which charged the full "legal registered rent" of $1001.45 for the period of April 1, 2005 through March 31, 2006. (Id.; Pet. Exh. 5.) Significantly however, petitioner's registration statement reveals that the rent for the Apartment has not been registered with DHCR since December 10, 2004. (Pet. Exh. 3.)

Respondent, in sharp contrast, maintains that her legal rent was $597.19 per month at the beginning of her tenancy and that she has been overcharged in the sum of $11,399.13. Respondent further contends that she is entitled to treble damages in the sum of $24,622.32.

In reply, petitioner asserts that respondent is collaterally estopped from litigating her overcharge claims. Petitioner argues that it maintained two prior nonpayment proceedings against respondent in 2003 and 2004 respectively, both of which were settled without reference to a rent overcharge and therefore respondent cannot raise such a claim here. (L & T Index Nos. 53817/03; and 24083/04.)

Petitioner's argument is without merit. To establish collateral estoppel, a party must prove that "the identical issue necessarily must have been decided in the prior action and be decisive of the present action, and second, the party to be precluded from relitigating the issue must have had a full and fair opportunity to contest the prior determination."(Juan C. v. Cortines, 89 NY2d 659, 667 [1997], [internal quotation marks and citations omitted].) There is nothing in the court files from the prior proceedings which indicates that the issue of rent overcharge was ever raised, let alone actually decided. As such, collateral estoppel does not lie. Nor can the court infer that respondent waived her right to maintain an overcharge claim from [*2]the stipulations of settlement in those proceedings as they are silent as to such a claim. (Hampares v. DHCR, 283 AD2d 311, 312 [1st Dept 2001] citing 4947 Associates v. DHCR, 199 AD2d 179 [1st Dept 1993].) In any event, a waiver, under these circumstances, would still be void as a matter of law. (RSC § 2520.13.)

At trial, the parties agreed that the tenant of record immediately prior to respondent was Anna Suave whose rent was registered with DHCR at the rate of $497.66 per month through the expiration of her lease on March 31, 2005. Petitioner's managing partner, Marc Fishman, testified that "at some point in 2002", Ms. Suave moved out. Respondent then entered into a two year lease for the premises commencing April 1, 2003. Undisputedly, petitioner was thus entitled to a 20% vacancy increase upon the last registered rent of $497.66 per month. (RSL § 26 511[c][5 a]; RSC § 2522.8[a]; Rent Guidelines Board Order 34.) Respondent's legal rent was therefore $597.16 without any improvements to the apartment.

Petitioner contends that it spent nearly $15,000.00 to improve the apartment prior to respondent's occupancy on April 1, 2003. Consequently, petitioner maintains that it is entitled to an Individual Apartment Improvement Increase (IAII) of $370.42 per month representing one fortieth of the cost of the alleged improvements made to the Apartment. (RSL § 26 511[c][13]; RSC §§ 2522.4[a][1]; 2522.4[a][4].) Respondent however counters that petitioner has failed to establish that any improvements were made to the Apartment.

RSL § 26 511[c][13] permits an IAII only where "there has been a substantial modification or increase...of dwelling space or an increase in the services, or installation of new equipment or improvements, or new furniture or furnishings, provided in or to the tenants housing accommodation." (See also RSC § 2522.4[a][1].) Thus, it is well settled that ordinary maintenance and repair does not constitute an improvement qualifying for an IAII. (In re 425 3rd Avenue Realty Co., ex rel Mayerhauser Realty, Inc. v. NYS DHCR, 29 AD2d 332, 333 [1st Dep't 2006]; Yorkroad Associates v. DHCR, 19 AD3d 217, 218 [1st Dept 2005]; Linden v. DHCR, 217 AD2d 407 [1st Dep't 1995].)

Petitioner's proof at trial failed to establish the existence of any work to the Apartment beyond routine maintenance. As its principal witness in support of its IAII claim, petitioner called Gerald Caporale. Mr. Caporale testified that he was the president of CAP Restoration, an unlicensed general contracting firm which was hired by petitioner to "renovate" the apartment. Notably, Mr. Caporale himself did not perform or even see any of the work allegedly done in the Apartment but, at best, testified that he "had gone to the building." Thus, he lacked any personal knowledge of the actual work done, seriously undermining petitioner's claim. (See PWV Acquisition, LLC v. Toscano, 2003 NY Slip Op 51048[U], *1, [App Term 1st Dept], testimony from witness with personal knowledge of work performed can be crucial to an IAII claim.) When asked what work CAP Restoration had performed in the apartment, Mr. Caporale testified that, "in February or March [of] 2003", his firm had performed a "typical renovation" to the apartment. He testified that his firm installed new sheetrock, floors, doors, sinks, cabinets, faucets, tile, trim and painted the Apartment. Petitioner's property manager, Efrim Cohen, echoed Mr. Caporale's claims.

Preliminarily, the court finds neither Mr. Caporale nor Mr. Cohen credible. Their claims of purported improvements such as painting the Apartment in 2003 are belied by HPD's finding of lead paint in four different areas within the apartment in January 2006. (Resp. Exhs. A and B.) An apartment that was properly painted in 2003 as part of a "typical renovation" should not [*3]test positive for lead paint in 2006. Indeed, the record reveals that when HPD placed lead paint violations upon the Apartment on January 30, 2006, petitioner did not challenge those findings. (Resp. Exhs. A and B.) Even worse, petitioner then failed to take any steps to abate the lead paint, forcing HPD to effect correction instead. (Id.)

Assuming however that CAP Restoration did in fact paint the apartment and perform the other work as testified to by Mr. Caporale and Mr. Cohen, it still does not constitute an improvement. Significantly, both Mr. Caporale and Mr. Cohen conceded that everything that was installed in the Apartment was a replacement of existing fixtures or services. Moreover, there was no testimony or other evidence as to the condition of the Apartment prior to respondent's occupancy such that the court could distinguish mere repairs from genuine improvements. For example, petitioner offered no proof of the condition of the floors, doors, stove, refrigerator, et al., prior to its alleged renovation such that a IAII lies. This omission is fatal to petitioner's IAII claim. (PWV Acquisition, LLC v. Toscano, 2005 NY Slip Op 51870[U], *1 [App Term 1st Dept] citing Matter of Linden v. DHCR, 217 AD2d 407.) Thus, petitioner's proof, at best, supports a finding of routine maintenance for which no rent increase lies. (In re 425 3rd Avenue Realty Co., ex rel Mayerhauser Realty, Inc. v. NYS DHCR, 29 AD2d at 333; Linden v. NYS DHCR, 217 AD2d 407; Mayfair York Company v. DHCR, 240 AD2d 158 [1st Dep't 1997].)

Even if the court were to somehow find that petitioner had made actual improvements to the Apartment, petitioner has still failed to provide sufficient documentation to permit an IAII. DHCR Policy Statement 90 10 provides that any IAII must be supported by a canceled check contemporaneous with the completion of the work; invoice receipt marked paid in full; contemporaneous with the completion of the work; signed contract agreement; or contractor's affidavit indicating that the installation was completed and paid in full. This court must apply these standards in evaluating petitioner's IAII claim. (Missionary Sisters of Sacred Heart v. Meer, 131 AD2d 393, 396 - 397 [1st Dept 1987].) Appellate courts have upheld the documentation requirements of Policy Statement 90 10 (Gruber v. DHCR, 1 AD3d 112, 113 [1st Dept 2003]; Ador Realty, LLC v. DHCR, 25 AD3d 128, 139 [2d Dept 2005]; Graham Ct. Owners Corp. v. Green, 2006 NY Slip Op 50333[U], *1 [App Term 1st Dept]; Clearwater Realty Co. v. Yonac, 8 Misc 3d 115, 117 [App Term 2d & 11th Jud Dists 2005]) as they enable trial courts to discern ordinary repairs from enhanced services. (Charles Birdoff & Co. v. DHCR, 204 AD2d 630, 631 [2d Dept 1994].)

The only documentary evidence of the alleged improvements to the Apartment consisted of a series of checks. (Pet. Exhs. 9 and 11.) However, none of those checks bore any indication that they were used in connection with the work allegedly performed in the Apartment. Check number 2420, for example, was earmarked for capital improvement work at the building and is dated July 10, 2003 over five months after the alleged completion of the work to the apartment. (Pet. Exhs. 9 and 11.) Similarly, check number 2305 refers to "8953 6B." (Id.) The court has no way of knowing whether this check refers to respondent's Apartment 6B or some other apartment. Further, the check itself is dated February 7, 2003 which may or may not be contemporaneous with the completion of the alleged work as Mr. Caporale was unsure of whether the work was completed in February or March, 2003. As such, these checks, without more, are of no probative value in supporting an IAII. (Lirakis v. 180 Seventh Avenue Assoc., LLC, 2007 NY Slip Op 50551[U], *1 [App Term 1st Dept].) [*4]

Indeed, in this vein the court notes that petitioner did not remedy the deficiency in its proof via credible, detailed testimony from any of its witnesses. (Id.; cf. Clearwater Realty Co. v. Yonac, 8 Misc 3d at 117 - 118, testimony and other evidence overwhelmingly establishing performance of a gut renovation excuse failure to earmark checks.) Rather, Mr. Caporale and Mr. Cohen offered general, conclusory testimony that they installed new sheetrock, floors, doors, sinks, cabinets, faucets, tile, and trim without any specification of the cost of these alleged improvements. (PWV Acquisition, LLC v. Toscano, 2003 NY Slip Op 51048[U], *1.) And even had petitioner laid a proper foundation for the admissibility of its invoices relating to the alleged work, the court notes again that petitioner failed to offer any evidence of the pre renovation condition of the Apartment such that an IAII could lie. (See 461 Central Park West Co., LLC v. Wang, 2006 NY Slip Op 51226[U], * 1 [App Term 1st Dep't].)

Finally, petitioner's IAII claim runs procedurally afoul of the RSL and RSC. Specifically, where a landlord fails to file a proper and timely initial or annual rent registration statement, he/she cannot charge or collect rent in excess of the last registered rent. (RSL § 26 517[e]; RSC § 2528.4[a].) The DHCR records in evidence reveal that petitioner has not registered a rent for the Apartment with the agency since December 10, 2004. (Pet. Exh. 3.) Although Mr. Fishman testified that he filed annual rent registration statements for the years 2005 - 2007 with the Rent Stabilization Association, at no time did he introduce proof of those filings or other competent evidence that a timely registration had been filed with DHCR. Further, there is no evidence that petitioner ever provided respondent with a rider to her initial lease reflecting how her rent was calculated as required by RSC § 2522.5[c][1], rendering this purported increase violative of the RSC. (See West 58th Street Properties, LLC v. Kulbersh, NYLJ, August 20, 2003, at 19, col. 2 [Civ Ct, Hous Part, NY Co, Schneider, J.].)

Based on the foregoing, the court concludes that petitioner has failed to meet its burden of establishing, by a preponderance of the evidence, the existence of improvements to justify a rent increase under RSL 26 511[c][13] and 9 NYCRR § 2522.4[a][1]. (985 Fifth Ave. Inc. v. DHCR, 171 AD2d 572, 574 [1st Dept 1991], lv denied, 78 NY2d 861 [1991]. See also Matter of Sohn v. DHCR, 258 AD2d 384 [1st Dept 1999]; Charles Birdoff & Co. v. DHCR, 204 AD2d at 630.) Accordingly, the court further finds that petitioner has overcharged respondent. Specifically, petitioner was entitled to a 20% vacancy increase upon the former tenant of record's rent of $497.66 per month, yielding a rent of $597.19 per month. (RSL § 26 511[c][5 a]; RSC § 2522.8[a]; Rent Guidelines Board Order 34.) As petitioner has failed to register any rent with DHCR since 2004, respondent's rent remains $597.19 to date. (RSL § 26 517[e]; RSC § 2528.4[a].) Petitioner is directed to register this rent with DHCR as well as serve a proper renewal lease upon respondent in accordance with the RSL and RSC within 30 days of this Decision/Order.

Upon reviewing respondent's total payments to petitioner to date, the court finds that petitioner has overcharged respondent in the sum of $11,399.16 through July 31, 2007 [FN1]. Although respondent is entitled to prejudgment interest upon this overcharge at the rate of nine percent per year (RSL § 26 516[a][4]; CPLR § 5004; Mohassel v. Fenwick, 5 NY3d 44, 50 [*5][2005]), she only seeks interest at the rate of five percent per year which the court awards in the sum of $2,031.32.[FN2] (See Fleetwood v. Haberman, 2005 NY Slip Op 51645[U] *1, [App Term 1st Dept] citing Busbee v. Ken Rob Company, et al., 280 AD2d 406 [1st Dept 2001].) Further, this overcharge is presumed to be willful unless the petitioner proves otherwise. (RSL § 26 516[a]; RSC § 2526.1[a][1]; Yorkroad Associates v. DHCR, 19 AD3d at 218 [1st Dept 2005]; Tockwotten Associates, LLC v. DHCR, 7 AD3d 453, 455 [1st Dep't 2004]; Ador Realty v. DHCR, 25 AD3d at 140.) Petitioner however has failed to introduce any mitigating evidence from which this court could fairly conclude that this overcharge was anything but willful. The court therefore awards respondent treble damages on her overcharge in the sum of $22,314.72.[FN3] (RSL § 26 516[a].)

Accordingly, the Clerk of the Court is directed to enter judgment in favor of respondent dismissing the petition. The Clerk shall also enter a money judgment in favor of respondent and against petitioner in the sum of $35,745.20, representing the overcharge ($11,399.16), interest on the overcharge ($2,031.32) and treble damages ($22,314.72). The parties are directed to retrieve their exhibits from the Part T Clerk forthwith. This constitutes the Decision/Order of the Court, copies of which are being mailed today to the parties as set forth below.

Dated:November 27, 2007

Bronx, NY

__________________________________

Hon. Jaya K. Madhavan

To: [*6]

Clerk of the Court Footnotes

Footnote 1:The court adopts the overcharge calculations set forth in the appendix to respondent's Post trial Memorandum of Law ("Appendix").

Footnote 2:The court adopts the interest calculations set forth in the Appendix.

Footnote 3:Contrary to respondent's contention, treble damage awards are limited to the two year period prior to the filing of respondent's overcharge complaint not the filing of the petition. (RSL § 26 516[a][2][i].) As respondent's amended answer was interposed on December 28, 2006 and not nunc pro tunc treble damages are assessed upon the overcharge for the period of December 2004 through November 2006, for a total of $7,438.24 × 3 = $22,314.72.