Matter of Clarendon Props. NY LLC v New York State Div. of Hous. & Community Renewal
Annotate this CaseDecided on September 13, 2013
Supreme Court, Kings County
IN THE MATTER OF THE APPLICATION OF Clarendon Properties NY, LLC, Petitioner, For a Judgment Pursuant to Article 78 of the CPLR
against
New York State Division of Housing and Community Renewal, IRENE ORTIZ, Respondents.
8898/12
Plaintiff Attorney: Gary R Connor, Esq
New York State DHCR
Defense Attorney:Karen Schwartz-Sidrane, Esq
Yvonne Lewis, J.
This proceeding is brought pursuant to CPLR. Article 78 to review the "Decision and Opinion Denying Petition for Administrative Review"of respondent New York State Division of Housing and Community Renewal ("DHCR" or "the respondent"), dated February 29, 2012. The cause for litigation initially arose out of a November 24, 2010 challenge made by Clarendon Properties NY, LLC ("Clarendon" or "the petitioner"). Clarendon filed a Petition for Administrative Review challenging the November 2, 2010 order by a Rent Administrator establishing the lawful regulated rent for the subject apartment, 1R, located at 2908 Clarendon Road ("the premises"). On February 29, 2012, DHCR issued an order and opinion ("the PAR Order") denying the petition for administrative review.The petitioner argues that DHCR's order is arbitrary, capricious, in violation of the law and thus, should have undergone administrative review. In opposition to the petition, the respondent asks that this court uphold the order and opinion denying the petition for administrative review.
Factual Background
On May 11, 2010, the petitioner requested DHCR's assistance in determining the lawful rent for the premises. The petitioner states that the building was purchased on November 18, 2009 in a foreclosure sale. The petitioner acknowledged [*2]receipt of a rent ledger listing the tenant as Irene Ortiz with a monthly rent of $250.00. However, the petitioner claimed that this information was unreliable because there were no leases or lease history documentation transferred to it and DHCR's rent registration records did not list Irene Ortiz as the tenant for 2004-2006. Furthermore, the petitioner claims that several tenants took it upon themselves to occupy various apartments during the period of foreclosure.
The petitioner argues that DHCR's should ascertain the legal tenant of record by requesting from Irene Ortiz her initial date of occupancy, a rent/lease history, and additional documents such as her driver license and utility bills which could confirm address and occupancy. On May 14, 2010, DHCR made such a request to which the tenant did not respond. Thereafter, in the order issued on November 4, 2010, the Rent Administrator determined that Irene Ortiz, had resided in the premises since 1991 based on documentary evidence in the record and that the lawful rent is, in fact, $250.00 a month.
Arguments
The petitioner asserts that DHCR has the duty and obligation to administer the Rent Stabilization Law. The petitioner argues that DHCR failed to acknowledge the burden of proof for a determination of the lawful rent in connection to a building purchased in a foreclosureproceeding; that the tenant, Irene Ortiz, failed to meet her burden of proof; that DHCR failed to apply § 2522.6 of the Rent Stabilization Code ( RSC ); that DHCR failed to set a fair and equitable market rent based upon the fact that this was a post foreclosure purchase; and that DHCR failed to hold a hearing. The petitioner contends that the Rent Administrator's decision was improper as to Ortiz's tenancy status and that legal regulated rent set for the subject premises was improper. The petitioner argues that the rent ledger is unreliable because, on information and belief, the referee collected rents for several years without clarifying the correctness of the rent and DHCR rent registration records do not indicate that Irene Ortiz lived in the apartment from 2004 to 2006. Thus, the petitioner avers that the rent of $250 a month is not the legal regulated rent.
The petitioner also argues that a fair and equitable rent should have been established according to procedures set forth in §2522.6 of the RSC. Furthermore, the petitioner argues that because Irene Ortiz did not respond to DHCR's request for documentary evidence, a fair hearing should have been held. Finally, Clarendon proffers that there was a reason for Irene Ortiz' failure to reply to DHCR's attempt to ascertain the legal tenant of record. On September 7, 2012, Irene Ortiz had a guardian ad litem appointed. Ms. Ortiz had undergone a psychiatric evaluation in which she was deemed to be suffering from mild to moderate dementia. The petitioner argues that the appointment of a guardian is an indication of the respondent's compromised mental status. The petitioner further argues that a remand of DHCR's decision would be appropriate because the guardian would be able to assist her in responding to DHCR's earlier notices.
The respondent asserts that the PAR order was correctly entered and that there was sufficient evidence on the record, as submitted by the petitioner, to set the Legal Regulated Rent as it did. Furthermore, the respondent also asserts that there was sufficient evidence to determine that the individual listed as the tenant, Irene Ortiz, is in fact the tenant of record. The respondent contends that it had a rational basis for its determination in the PAR order because a prior DHCR order, going back to 1991, established the tenant, Irene Ortiz, as a tenant of record, together with utility records in Ortiz' name going back to 2006. DHCR also asserts the annual registration printouts which the petitioner relied upon to prove that Irene Ortiz did not live in the premises from 2004 to 2006, are not generated by DHCR. Rather, the respondent argues that such information is inserted by the building owners and should be regarded as a self-serving. Indicia of tenancy in this case. Additionally, the respondent argues that the petitioner's statement, "that there was a strong possibility that several tenants took it upon themselves to take [*3]over various apartments during the foreclosure," is an unsupported statement as there are no sworn statements or any other type of evdenceto support it.
Finally, the respondent argues that, "even if a court would have come to a different conclusion than DHCR with regard to issues of fact, the Court must still affirm DHCR's decision if the decision has a rational basis. In support of this assertion, the respondent relies upon the case of Mid-State Management Corp. v. Conciliation and Appeals Board, 112 AD2d 72, 76, 491 N.Y.S.2d 634, 637 (1st Dept. 1985) in which the Court stated, "The issue is not the truth or accuracy of the proof upon which the [agency] based its determination.It was, rather, the reasonableness of the [agency's] conclusions." Similarly, the respondent argues that it had a rational basis for setting the rent at $250 a month as rent arrears for the month the petitioner purchased the building, along with the eight months prior to that, was set at $250 a month.
In response to the petitioner's claims that DHCR failed to hold a fair hearing, the respondent argues during DHCR's Rent Administrator's hearing which originally establishes the Legal Regulated Rent, Clarendon never requested a fair hearing. The respondent also states that DHCR is not required to hold a hearing in the absence of an express statutory requirement pursuant to the holding in Plaza Realty Investors v. Conciliation and Appeals Board, 110 AD2d 704, 487 N.Y.S.2d 607 (2nd Dept. 1985). The respondent argues that because the petitioner did not cite any statutory or code provision to support its assertion, DHCR was not required to hold a hearing.
Discussion
Based on the petition and answer, the court may decide the issues raised on the papers presented and grant judgment to the prevailing party, unless there is an issue of fact requiring trial (see CPLR. 7804[h]). The relevant portion of CPLR 7803 (3) states: "The only questions that may be raised in an Article 78 proceeding are . . . whether a determination was made in violation of a lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion, including abuse of discretion as to the measure or mode of penalty or discipline imposed . . .".Under Article 78, "the court's scope of review is limited to an assessment of whether there is a rational basis for the administrative determination without disturbing underlying factual determinations." (see, Matter of Heintz v. Brown, 80 NY2d 998 [1992]). If a rational basis supporting an agency determination exists, a court has no alternative but to confirm the challenged determination (see, Matter of Pell v. Board of Educ. Of Union Free School Dist. No. 1, 34 NY2d 434, [1974]). Furthermore, in order to determine whether an agency's determination was arbitrary and capricious, courts cannot look beyond the facts and the record adduced before the agency: "[J]udicial review of an administrative determination is limited to the grounds invoked by the agency . . . If those grounds are inadequate or improper, the court is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis." (See, Matter of Scherbyn v. Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753 [1991]).
In the case at bar the court must determine: whether DHCR's determination of the Legal Regulated Rent was rational, whether DHCR erred in relying upon the "receiver's records" as the rent figures and the named tenant of 1R were different on the registration records of DHCR than what was found by DHCR in its Rent Administrator's Order, whether DHCR erred by "failing to implement RSC § 2522.6" and use the criteria for setting rents set forth in that section, and finally, whether DHCR erred in failing to schedule a hearing. RSC § 2522.6(a) establishes the standards for orders where the legal regulated rent or other facts are in dispute, in doubt, or not known, or where the legal regulated rent must be fixed. With regard to the question of whether setting the legal regulated rent at $250.00 a month for the premises is rational, this Court holds that it is so. An aspect of the arbitrary and capricious test is that the reasonableness of the agency's determination must be judged solely on the [*4]grounds stated by the agency at the time of its determination (see, Scherbyn v. Wayne-Finger Lakes Bd. of Co-op. Educational Services, 77 NY2d 753 [1991]). In this case, $250 was the rent figure listed on the ledger sheet for the premises, 1R, listing "I. Ortiz" as the tenant. Furthermore, the ledger contains arrears equaling $250 a month for the eight months prior to the month that the petitioner purchased the building. The petitioner argues that DHCR ignores the fact that the rent history only went back only eight months in 2009 due to the foreclosure proceeding. It is noted however, the petitioner did not submit any documentation supporting it's assertion that the legally regulated rent should be something other than the $250 that it currently is. Since this information used to determine the legally regulated rent was provided by the petitioner itself, it is reasonable to conclude that the respondent was rational in setting the legal regulated rent at $250.
In reference to issue of whether DHCR erred in failing to implementRSC§ 2522.6, the Court holds that DHCR made no mistake when it chose not to implement RSC § 2522.6.Originally, the PAR order stated that merely because the building was purchased by the petitioner pursuant to a Referee's deed in foreclosure, that alone is not sufficient to invoke equity and that, generally, it was incumbent upon the purchaser to establish the legality of rents by performing due diligence prior to the purchase.The PAR order further claimed that theRSC§ 2522.6(a) may be invoked where the legal regulated rent is not known or is the subject of a dispute between the owner and tenant. In the instantcase, the tenant did not dispute the legality of the rent shown on the rent ledger. There is also no proof that the lawful rent was in doubt or dispute at the time of the sale or prior thereto.Furthermore, although the petitioner calls the rent ledger "unreliable", it does not explicitly deny that this was the rent actually collected and received for the premises. Therefore, it cannot be said in good faith that the legal regulated rent is unknown and, hence, it is not necessary for RSC § 2522.6 to be invoked.
In regard to the issue of the tenant's occupation of the premises, the interpretation of such a status involves an evaluation of factual data. The Court of Appeals held in Ansonia Residents Association et al v. New York State Division of Housing and Community Renewal, 75 NY2d 206, 551 N.Y.S.2d 871 (1989) that in cases involving such evaluations of data, it is permissible to defer this process to the government agency charged with the responsibility for administration of the statute. The Court sees no reason to deviate from the standard set forth in Ansonia Residents Association et al., Id.In support of its contentions, the petitioner states that it was informed of various things by the managing agent for the receiver and by an individual connected with the owner prior to the foreclosure. However, these statements are presented in the form of the petitioner's interpretation of the statements. No statements from these individuals themselves are provided, making the statements little more than self-serving conclusions of the petitioner.
On the issue of the hearing, the Court concedes that a hearing may have been useful in facilitating the movement of the case. However, since the petitioner's request for a hearing came after the order was issued and was not supported statutorily, then it is reasonable for the respondent to resolve the matter on the basis of written submissions and documentary review so long as the parties are given a full and fair opportunity to present their objections to DHCR. (see, El-Kam Realty v DHCR, 180 AD2d 412, 579 N.Y.S.2d [2nd Dept. 1989]).
This court holds that the Deputy Commissioner's order is not arbitrary, capricious, nor does it demonstrate an abuse of discretion on any grounds. Subsequently, the order and opinion denying petition for an administrative review is upheld.
This constitutes the decision, order, and judgment of the court.
E N T E R
____________________________
yvonne lewis, JSC
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
