Matter of 37-41 W. 86th St. Tenants Assn. v State of N.Y. Div. of Hous. & Community Renewal

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Matter of 37-41 W. 86th St. Tenants Assn. v State of N.Y. Div. of Hous. & Community Renewal 2013 NY Slip Op 30019(U) January 8, 2013 Sup Ct, NY County Docket Number: 102445/12 Judge: Doris Ling-Cohan Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] SUPREME COURT OF: TI-IE STATE OF N E W YORK- MEW YORK COUNTY PRESENT: PART 36 Hon. DORIS LING-COMAN, Justice 3 7- 4 w. %l$d $ -v (q@*r-u ORDElR T'pwo&,r - - k) The Following papers( 1 to were read on this metkwb% k / c r l P - _-Papers Notice of MotioniOrder to Show Cause ~ A f f i d a v i t s Exhibits Answering Affidavits Exhibits - 7% N 11 11: tn ~ rRd I ~ - Replying Affidavits Cross-Motion: [ ] Yes [ ] No Upon the foregoing papers, it is ordered that _-- I .-d&AeiJE 77, Cvuir'diJ,,rr. I , J.S.C. Dated: 1. CHECK ONE: ..................................................................... 2. CHECK AS APPROPRIATE: ........................... 3. CHECK IF APPROPRIATE: MOTION I : S ................................................ DORtS LlNG-CGHAN d CASE DISPOSED NON-FINAL DISPOSITION 0GRANTED 0SETTLE ORDER DENIED r]DO NOT POST 0FIDUCIARY APPOINTMENT 0GRANTED IN PART '0 SUBMIT ORDER OTHER REFERENCE [* 2] SUPREME coum OF THE STATE OF NEW YORK COUNTY OF NEW YORK: TAS PART 36 X In the Matter of the Application of 37-41 West 86thStrcct Tenants Association, ______-f___-------______________________--------------------~~--- Index No.: 102445/12 DECISION/ORDER Petitioner, Motion Seq. No. 001 -againstState of Ncw York Division of Housing and Community Renewal and EQR - 41 West 8gthLIX, HON. DORIS LING-COHAN, JSC: In this Article 78 proceeding, petitioner 37-41 West 86 Strcet Tenants Association seeks a j udgmcnt overturning an order of respondent State of New York Division of Housing and Community Renewal (DHCR), which denied the petition for administrative review ( PAR ), filed by petitioner, challcnging an earlier DHCR order. For the following reasons, the petition is granted and this application is remanded to DHCR. FACTS This proceeding concerns DHCR s determination that improvements made to 37-4 1 West 86 h Street, New York, New York ( Buildingy7), performed by Parc Coliseum ( Owner ), constitutes a major capital improvement ( MCI ). Following this finding, DFICK granted a rent increase on rent stabilized units in the Building, pursuant to Part 2522 of the Rent Stabilization Code ( RSC ). Thereafter, petitioner filed a PAR, opposing the rent increase on the following grounds: (1) the work performed on the roof terrace is not an MCI because the roof terrace is not part of the roof, and thus, does not benefit all tenants, a requirement which must be satisfied for any improvemcnt lo be considered an MCI, see RSC §2522.4(a)(2)(i)(c); (2) an engineer report, submitted by petitioner, stated that there are defects in [* 3] the improvements which should invalidate such improvements as an MCI; (3) MCI status should not be grantcd without an inspection by DHCR, or an independent engineer report from Owner to disprove petitioner s claim of defects; (4) the purported cost of the improvements was not substantiated by Owner; and ( 5 ) the architect s fee should not have been included as part of the improvement costs. In an administrative decision by DHCR, dated February 12,2012 (Administrative Decision), petitioner s PAR was denied. In such decision, DHCK found thc roof terraces to be part of the roof, such that improvements made to the roof terraces were valid MCIs. DHCR further found that any defects existing at the time petitioncr filed the PAR, had been remedied by Owner, and no further defect was claimcd by any tenant of the Building in relation to the MCI. Moreover, DHCR stated that it has discretion to decidc whethcr an inspection should be conducted before an MCT is granted. DHCR considered the invoices provided by Owner to be rcasonably substantiated, and that architect fces were properly included in the cost of the MCI increase. Petitioner brought this Article 78 procceding to challenge DHCR s Administrative Decision. Thercafter, Owner moved to intervene in this proceeding; a motion which was granted by Order and Decision of this Court, dated June 12,2012. Owner opposes the petition, and DHCR submits a verified answer refuting petitioncr s allegations. DISCUSSION Thc standard for judicial review of an administrative determination is whether the decision was made arbitrarily or without a rational basis. Greystone Mgt. Cnrp. v Conciliution and Appeals Bd., 94 A.D. 2d 614 (1 Dept 1983). An administrative determination should not bc disturbed unless the agency s action was arbitrary, in violation of lawful procedure, or in excess of its jurisdiction. Mutter qf Pel1 v Board of Educ., 34 N.Y. 2d 222 (1 974). Moreover, it is well settled that the intcrpretation given a statute by the agency charged with its enforcement will be respected by the courts if not irrational or unreasonable. See Mutter qf Fineway Supermarkets, Inc. v State Liy. Auth., 48 NY2d 464,468 (1 979); [* 4] % Matter ofHoward v Wyman, 28 NY2d 434,438 (1971); Matter oflower Manhattan Loft Tenants v New York Ct Lqft Bd , 104 AD2d 223,224 (1 St Dept 1984), urd 66 NY2d 298 (1985). iy In the instant petition, petitioner reiterates its objections to the MCI increase, which were previously stated in its PAR. Spccifically, petitioner argues that work pcrformed on roof terraces does not benefit all tenants, and thereforc does not qualify as an MCI, pursuant to RSC (j 2522.4(a)(2)(i)(c). Petitioner further states that the engineer report it provided suggestcd that there were defects with the improvements made by Owner, and therefore an MCI rent increase should not be granted without an inspection from DHCR, or an indcpendent engineer report, submitted by Owner, to disprove the defects claimed. Petitioner alleges that invoices provided by Owner to prove thc cost of the improvements were unsubstantiated and fraudulent. However, petitioner fails to proffer any evidence to establish that the invoices were fraudulent, and merely asserts conclusory allegations. Petitioner also disputes the inclusion of architect s iees in the improvement cost. Owner opposes petitioner s Article 78 proceeding, arguing that the Administrative Decision was not arbitrary or capricious, and was based on the evidence it submitted in response to petitioner s PAR. DHCR submits a verified answer, which specifically refutes and opposes petitioner s allegations. DHCR argues that although RSC 8 2522.4(a)(2)(i)(c) states that, to qualify as an MCI, improvements must be performed on all similar components of a building to the benefit of all tenants, it also states that such comprehensive improvement may be exempt if an owncr can demonstrate that not all such similar components require improvement. DHCR further argues that it reasonably determined that the roof terraces are part o f the roof, as petitioner s own engineer report did not dispute this point. IIHCR statcs that improvements to the roof benefits all tenants, and thus, the improvement cost of the roof terraces were properly included in the MCI cost. However, DHCR s answering papers concede that the roof terraces do not benefit all of the tenants, but argues that its order granting the MCI reasonably held the roof terraces to be Components of the roof system which bsnefits all tenants. Despite such argument, the [* 5] order issued by DHCR specifically states that the following items were disallowed [in calculating the MCI increase]; 16 terrace doors, 8 terrace dividers and scrapdpaint windows. Order Granting MCI Rent Increase, p. 1. Nonctheless, it appears that such items were included in the MCI calculation, and DHCR, in fact, argues in its brief that thcy were properly included. Thus, petitioncr i s correct in arguing that such improvements, rnadc on the roof terraces, should not be includcd in an MCI rent increase, as it was specifically disallowed by DHCR in its own order granting the MCI rent increase based on other grounds. While an engineer report, submitted by petitioner, is documentary evidence in support of petitioner s allegations, such report did not create a rebuttable presumption which must bc refuted before an MCI rent increase could be granted. DI-ICR contends that it has the discretion to decide if an inspection should be conducted before an MCI rent increase should be granted, and that such inspection is not mandatory. The Appellate Division, First Department, has held DX-ICR has discretion to decide if an inspection is necessary . In Mutter of 370 Manhattan Ave. Co., LLC v New YorkState Division of Housing and Community Renewal, 11 AD3d 370, 371 (1 Dep t 2004). Furthermore, any defect claimed by tenants in the Building were remedied by Owner, and it is undisputed that no other complaint has been forwarded to DHCR. As such, DHCR did not abuse its discretion by not conducting an inspection prior to granting an MCI rent increase. Here, petitioner has failed to cite any authority requiring such inspection. Additionally, DHCR reasonably determined that architectural expenses, directly related to an MCI installation, qualify for a rent increase. Since the regulatory systems authorizc the DHCR to determine the qualification of installations that are the basis for an MCI rent increase application, DHCR accordingly has the authority and discretion to determine ...what related expenses are eligible for an MCI rent increase. ) In the Mutter qf 40 Park Avenue, LLC v NYS Division of Housing and Community Renewal, 201 0 NY Misc LEXIS 2303 (20 10). DHCR s decision to calculate MCI rent increase based on [* 6] invoices provided by Owner, including the architect s fees, was not arbitrary and capricious, and petitioner has cited to no authority to the contrary. However, as discussed above, petitioner has demonstrated that, pursuant to DHCR s own Order Granting MCI Rent Increase, specific improvements made on the roof terraces should not be included in the MCI calculation, and thus, the petition is granted. DECISION Accordingly, it is ORDERED that the petition is granted to the extent that rcspondent Division of Housing and Community Iienewal s Administrative Decision, dated February 12,20 12, denying petitioner s PAR, is vacated; and it is further ORDERED that this application is remanded to the Division of Housing and Community Renewal for recalculation of the MCI increase, in accordance with this decision as improvements made to roof tenaces should not be included in thc MCI calculation; and it is further ORDERED that, within thirty days of entry, petitioner shall serve upon all parties a copy of this order, together with notice of entry. This constitutes the decision of the Court. : Dated: New York, New York January ,2013 d on. Doris Ling-Cohan, JSC J:\Article 78\37-41 West 8Gth Street I cnants Assoc v DHCR - MCI Increase Challenge.wpd . ... .. .

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