Matter of 98 Riverside Dr., LLC v New York State Div. of Hous. & Community Renewal
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Matter of 98 Riverside Dr., LLC v New York State Div. of Hous. & Community Renewal 2013 NY Slip Op 33426(U) December 2, 2013 Supreme Court, New York County Docket Number: 101285/13 Judge: Cynthia S. Kern Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [* 1] SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: PART - - - Justice INDEX NO. MOTION DATE !J. y:. S. - c·; v Q N ; ::...re.;._, OP c.:J -~_,,-,'-'.~/TY 12 7 I-''<. du:../J"-"i:. MOTION SEQ. NO. .;,,-_!} ~.,,,, L... 0/ MOTION CAL NO. The following papers, numbered 1 to _ _ were read on this motion to/for - - - - - - PAPERS NUMBERED Notice of Motion/ Order to Show Cause - Affidavits - Exhibits ... Answering Affidavits - Exhibits en z Replying A f f i d a v i t s - - - - - - - - - - - - - - en <:{ Cross-Motion: a: Upon the foregoing papers, it is ordered that this motion 0 Yes No w C!:1 wz uj:: ~ en :::> FI LED ...J ...J """') 0 0 u.. I- w CJ J: w a: DEC 04 2013 l- NEW YORK COUNTY CLER~ OFFHJ! o: a: ~ w 0 LJ.. 1 j __ l a: >- ...J ...J :::> LJ.. 1(.) w 0.. en w a: en w en <:{ (.) 2 0 l- o J.S.C. ~ Check one: 0 FINAL DISPOSITION Check if appropriate: DO NOT POST NON-FINAL DISPOSITION REFERENCE [* 2] .. t SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: Part 55 ----------------------------------------------------------------------x In the Matter of the Application of 98 RIVERSIDE DRIVE, LLC, Petitioner, Index No. 101285/13 For an Order Pursuant to Article 78 of the Civil Practice Law and Rules, DECISION/ORDER -againstNEW YORK STATE DNISION OF HOUSING AND COMMUNITY RENEWAL and 98 RIVERSIDE DRIVE TENANTS ASSOCIATION, Respondents. Fl LED --------------------------------------------------------------------x HON. CYNTHIA S. KERN, J.S.C. Recitation, as required by CPLR 2219(a), of the papers ~~~n:...1~-Ji for: ~ YORK - -~ dleY'~Jms ~f\.-~~N~, ~Y' i motion ~~~~~~~~~~~~~~~~~~- Papers Notice of Motion and Affidavits Annexed.................................... Affirmations in Opposition .............. .. .... ... .... .. .... ... .... ....... .. ...... .. Replying Affidavits...................................................................... Exhibits...................................................................................... Petitioner 98 Riverside Drive, LLC commenced the instant 1 23 4 5 icle 78 proceeding seeking to challenge a determination made by respondent the New York Stat Division of Housing and Community Renewal ("DHCR") denying petitioner's Petition for Ad inistrative Review ("PAR") which sought to vacate the DHCR's Rent Administrator's ('RA") order reducing the rent in a particular apartment based on the finding that petitioner had discontinued electric inclusion in that apartment. For the reasons set forth below, the petit on is denied. The relevant facts are as follows. Petitioner is the owner of e residential apartment [* 3] building located at 98 Riverside Drive, New York, New York (the 'building"), which houses both rent controlled and rent stabilized units. Prior to March 2011 petitioner utilized a master metering system for electricity whereby it paid the bill for electric sage for the entire building and each tenant's base rent included electricity. Subsequent to M ch 2011, the tenants in the building began receiving electrical bills directly from Consolidated Edison ("Con Ed") without a decrease in the legal base rent for their apartments. On or about M y 13, 2011, petitioner filed an Application for Termination of Rent Inclusion of Electricity with CR. However, on or about July 5, 2011, petitioner withdrew that Application "in order to reev luate its course of action." On or about July 15, 2011, 69 tenants in the building (23 re t-controlled tenants and 46 rent-stabilized tenants) filed an application to reduce their rent with DHCR alleging various service reductions and conditions, including a claim that prior to M ch 2011, electricity was included in their rent, that petitioner unilaterally and without prior a proval from DHCR switched over from master metering to direct metering and that in arch 2011, Con Ed began billing each tenant directly despite the fact that the tenants continue to pay the same rent. In its response, dated December 16, 2011, petitioner admitted that it upgr <led the metering system but claimed that Con Ed erroneously began billing the tenants; that it w trying to correct the billing issue; and that it sent a letter to the tenants offering to reimburse the electrical bills by crediting the tenants' next rent bills, requiring each tenant to pay both the full rent and the electrical bill each month, turn over the electrical bill to the owner and wait for th owner to credit the tenants in the following month's rental bill. The tenants rejected the owner' proposed plan as a ·hardship and more onerous than paying just their rent and many stat d that they were not properly credited for their electrical payments. 2 [* 4] On October 12, 2012, the DHCR's Rent Administrator(" ")issued an order reducing the total rent $12.00 plus an additional 7.5% for certain rent·contr led tenants, effective November 1, 2012, due to petitioner's conversion to direct meterin and for other conditions in the building which were eventually corrected by the owner. Speci cally, the RA stated: [T]he Owner acknowledged that it had changed the el ctric service in the building and installed individual meters in each iartment. The Owner indicated that it had filed an application r approval of Termination of Rent Inclusion of Electricity with DH R. ... However, the Owner subsequently withdrew the application... Therefore, the Owner has removed the service of electrical inc usion without approval ofDHCR as required by [RSC§] 2522.4(d)..and [NYRER §] 2202.16. On or about November 13, 2012, petitioner filed a PAR challenging the RA' s rent reduction order on the grounds that, inter alia, there was no reduction in servi es; Con Ed erroneously billed the tenants directly; and that petitioner was planning to reimb e the tenants for any money paid toward their electric bills. Additionally, on or about M ch 20, 2013, petitioner filed a second Application for Termination of Rent Inclusion ofElectrici with DHCR, which is currently pending. On or about August 14, 2013, DHCR's Commissioner confi ed the RA's rent reduction order finding, inter alia, that the uncontroverted evidence establishe that the tenants became responsible for the payment of electric service supplied to their respe tive apartments in March 2011 notwithstanding their prior enjoyment of an eJectrical inclusion ·n their rents pursuant to the terms of their respective leases; that despite petitioner's claim that it id not authorize Con Ed to bill the tenants directly, Con Ed's action was the direct result of petiti ner's admitted "overhaul and upgrade" to the building's electrical system; and that it is signific t that the record is devoid of any evidence showing petitioner was successful in having Con Ed iscontinue the improper 3 [* 5] - . billing of the tenants. Additionally, DHCR's Commissioner noted that petitioner had filed an Application for the Approval ofTennination of Rent Inclusion of lectricity on May 13, 2011 and that an order was issued on February 23, 2012 terminating the roceeding due to petitioner's withdrawal of the Application. DHCR's Commissioner further fo ? that the RA properly rejected petitioner's offer of reimbursement as an ..inadequate stop ap measure" and that the newly imposed duties upon the tenants were not minor inconvenie es equating to a de minimis service decrease. On September 11, 2013, DHCR received petitioner's reque for reconsideration which asserted that DHCR's August 2013 Order was arbitrary and irration as the "premature" billing by Con Ed did not rise to the level of a reduction in required/essenti I services because petitioner would eventually credit the tenants' rent for their electrical usage p ents. In a letter dated September 20, 2013, DHCR denied petitioner's request for reconsi ration finding, inter alia, that DHCR's Commissioner's authority to reopen a proceeding is s ·ctly limited to situations where the order was the direct result of illegality, irregularity in a vi I matter or fraud; that a review of the record establishes that petitioner received full due pro ess; and that DHCR's order was issued based upon petitioner's failure to maintain a required se ice without obtaining prior approval from DHCR and was therefore not illegal or fraudulent. P titioner then filed the instant Article 78 petition. On review of an Article 78 petition, "[t]he law is well settled that the courts may not overturn the decision of an administrative agency which has a ration basis and was not arbitrary and capricious." Goldstein v. Lewis, 90 A.D.2d 748, 749 (1 51 Dep't 1982). "In applying the 'arbitrary and capricious' standard, a court inquires whether the dete 4 ination under review had [* 6] ,,. a rational basis." Halperin v. City ofNew Rochelle, 24 A.D.3d 76 , 770 (2d Dep't 2005); see Pe/Iv. Board. ofEduc. o/Union Free School Dist. No. 1 o/Towns ifScarsdale & Mamaroneck, Westchester County, 34 N.Y.2d, 222, 231 (1974)("[r]ationality is hat is reviewed under both the substantial evidence rule and the arbitrary and capricious stand d. ") "The arbitrary or capricious test chiefly 'relates to whether a particular action should ave been taken or is justified ... and whether the administrative action is without foundation in fa t. ¢ Arbitrary action is without sound basis in reason and is generally taken without regard o facts." Pell, 34 N.Y.2d at 231 (internal citations omitted). In the instant action, the petition must be denied as respond t's decision had a rational basis. Pursuant to the Rent Stabilization Law ("RSL") and its impl enting regulations set forth in the Rent Stabilization Code ("RSC"), an owner of a rent-stabilize building must maintain and continue all services provided to tenants of the building. See RSL § 26-514; see also RSC§§ 2520.6(r)(l) & (3) and RSC§§ 2522.4(d) & (e). DHCR is required o reduce the rent for rentstabilized tenants if an owner improperly reduces, eliminates or inad quately maintains a service. See RSL § 26-514; see also RSC§ 2523.4(a). Rent control tenants njoy similar protections for the continuation of essential services. See RCL § 260495[h](2); see lso New York City Rent and Eviction Regulations ("NYRER") § 2202.22(a). Pursuant to bo rent control and rent stabilization laws, the owner must obtain prior permission from DH R to change from a master metering system, whereby the owner pays for all electrical use and it ·s included in each tenant's rent, to an individual metering system whereby the tenants pay for th ir own electrical usage. Specifically, the owner must file a specialized application to reduces rvices, known as an "Application for Termination of Rent Inclusion of Electricity." See 5 SC§ 2522.4(d)(3). If [* 7] DHCR grants an owner's application to exclude electricity from th rent, the legal base rent is then lowered in accordance with appropriate guidelines set forth in DHCR's Operational Bulletin and Updates. In the instant case, it is undisputed that petitioner ch ged the master metering system in the building and installed direct individual tenant meteri g and that petitioner did not obtain DHCR's approval before doing so. Although petitioner asse s that it filed an application to exclude electrical charges from rent, the first application was wi drawn and the second application was not filed until March 20, 2013 and is still pending. Therefore, it was rational for the DHCR to find that petitioner improperly reduced services to the building by failing to comply with the requirements of the RSL and RSC. Additionally, it was rat onal for DHCR to find that the reduction in service was not cured by petitioner's reimbursemen plan as it improperly put the onus on the tenants to keep track of unwanted account statements fr m Con Ed, to make timely payment of bills to avoid a shut-off of electricity and to follow up th petitioner's offices for a monthly reimbursement. Petitioner's assertion that it "had no intent on of converting the Building to direct metering ... until after [it] obtained DHCR's permi sion to exclude electric charges from the legal rents of the affected regulated Tenants" is i aterial as it is undisputed that petitioner expended over $1,100,000.00 to upgrade and overhau the building's electrical system prior to obtaining DHCR's permission and that this is why C n Ed began billing the tenants directly. Although petitioner has submitted copies of e-mails to suppo its claim that Con Ed erroneously billed the tenants and that petitioner tried to correct the "Hing issue, these are facts and information that were not before the DHCR when it made its fin I determination. "The role of a court in reviewing a decision of an administrative agency .. .is Jim ted with the standard of 6 [* 8] ¢ < " review being whether the administrative determination was in viol tion of a lawful procedure or was affected by an error of law or was arbitrary and capricious and without a rational basis in the administrative record." Rowan v. NYC HPD, 21Misc.3d1235 at 3 (Sup. Ct. N.Y. Ct., 2011); see also Matter of Pell v. Board ofEduc., 34 N. Y.2d 222, 231 ( 19 ). "The court cannot conduct a de novo review of the facts and circumstances or substi te the court's judgment for that of the agency's determination" as judicial review of administr ive determinations is confined to the facts and record adduced before the agency. Rowa , 21 Misc.3d *3; see also Greystone Management Corp. v. Conciliation and Appeals Bd., 94 .D.2d 614, 616 (!51 Dept 1983), affd 62 N.Y.2d 763 (1994). However, even if the court cou d consider the additional documents, they only confirm that petitioner directed Con Ed to re ove the metering system before petitioner filed the appropriate application with DHCR to ex lude electricity. Further, petitioner's claim that it told Con Ed "electricity only" is without m rit as that is not a clear directive to the utility company to continue charging all electricity 'lls to petitioner rather than to the tenants. Finally, as this court has denied the petition in its entirety, p titioner's request for a stay ofDHCR's order denying petitioner's PAR is denied as moot. Accordingly, the petition is denied in its entirety. This const tutes the decision and order of the court. Date: p. l ?- t i-3> Fl LED oE.C 04 2013 Enter: _ _-l--......_,f------- NEWYORK COUNTY ct.ER~ o~ 7 J.S.C.
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