Patel v 160 E. 48th St. Owner II, LLC

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Patel v 160 E. 48th St. Owner II, LLC 2018 NY Slip Op 31027(U) May 17, 2018 Supreme Court, New York County Docket Number: 156261/16 Judge: Gerald Lebovits Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 156261/2016 [*FILED: NEW YORK COUNTY CLERK 05/30/2018 11:28 AM 1] NYSCEF DOC. NO. 23 RECEIVED NYSCEF: 05/30/2018 NEW YORK STATE SUPREME COURT NEW YORK COUNTY: IAS PART 7 ---------------------------------------------------------------------X SEJAL PATEL, Plaintiff, Index No.: IS6261/16 DECISION/ORDER -against160 EAST 4grn STREET OWNER II, LLC, Defendant. ---------------------------------------------------------------------X Hon. Gerald Lebovits, J.S.C.: In this declaratory judgment action, plaintiffSejal Patel moves for summary judgment on the complaint (motion sequence number 001). For the following reasons, the motion is granted in part and denied in part. BACKGROUND Patel is the tenant of apartment I SS in a building (the building) located at 160 East 48th · Street in the County, City, and S~ate ofNew York. See notice of motion, exhibit A (complaint), iJ 2. Defendant 160 East 48th Street Owner II, LLC (landlord) is the building's current owner. Id., iJ 4. The landlord purchased the building from its prior owner, non-party Buchanan Apartments LLC (Buchanan), pursuant to a deed dated March 3, 2016. Id., ii 3. Patel states that he was originally the tenant of apartment SQ in the building between 200 I and 200S, and that he immediately thereafter moved into apartment I SS in 200S, for which he signed a non-rent-stabilized lease. See notice of motion, exhibit A (complaint), iii! 6-8. Patel also states that his original rent in apartment I SS was $1,6SO a month, and that his current rent is $2,6SO a month. Id.; Patel aff, iJ 2. Patel further states that he has paid all of his rent through April 6, 2017. Id., iii! 2-3. In his complaint, Patel avers that, before his tenancy there, apartment I SS was registered as a rent-controlled unit from between 1984 and 1988, and as a rent-stabilized unit between 1988 and 2004. See notice of motion, 'exhibit A (complaint), iii! 9-10. Patel has presented a copy of a 2016 "registration apartment information" statement for apartment I SS that was generated by the State of New York, Division of Housing and Community Renewal (DHCR), the agency charged with registering the legal rents for all rent-stabilized apartments located in New York City. Id., exhibit C. The DHCR's rent registration history discloses that, in 2004, apartment I SS was listed as a rent-stabilized unit occupied by Felicie Doulcet at a monthly rent of $1,66S. l 0, and that from 200S onward it was listed as "exempt - high rent vacancy." Id. Patel argues that, because Doulcet's rent was below $2,000 when she vacated the premises, and because the landlord failed to file any subsequent registrations with the DHCR reflecting an increase of apartment ISS's rent over $2,000 a month, the landlord was not entitled to treat apartment I SS as having been deregulated or to remove it from rent-stabilization, no matter that the landlord might have been 2 of 8 INDEX NO. 156261/2016 [*FILED: NEW YORK COUNTY CLERK 05/30/2018 11:28 AM 2] NYSCEF DOC. NO. 23 RECEIVED NYSCEF: 05/30/2018 entitled to increase the apartment's rent above the de-regulation threshold. Id.; exhibit A (complaint) '\l'\112-32. Patel concludes that apartment !SS remains rent-stabilized, as a matter of law, and that the landlord has been overcharging him since the inception of his tenancy. Id. The landlord has presented an affidavit from Michael Sass, the managing director of the company that acted as the managing agent for its predecessor in interest (i.e., Buchanan), who avers that, upon Doulcet's vacating apartment I SS, Buchanan was entitled to a statutory 20% "vacancy increase" to the apartment's rent, as well as to additional "individual apartment increases" (!Als) resulting from renovation work that Buchanan performed in the unit. See Sass aff in opposition, 'II 4. Sass further avers that adding the 20% vacancy increase and the !AI increases to the 2004 legal registered rent was sufficient to raise the next legal registered rent for apartment I SS above the statutory $2,000 a month deregulation threshold. Id., '\IS. Sass finally avers that "in good faith reliance on the prevailing interpretation of the law at the time, upon Doulcet's vacatur ... , Buchanan treated the apartment as luxury deregulated." Id., '\16. The landlord concludes that apartment !SS is no longer subject to rent-stabilization, and that Patel's case should be dismissed. Id., Zegen aff, '\114. Patel commenced this action on July 27, 2016, by filing a summons and complaint that sets forth causes of action for (I) a declaratory judgment; and (2) rent overcharge (including treble damages). See notice of motion, exhibit A. The court notes that Patel's first cause of action requests both declaratory and injunctive relief. Id., '\l'\12-34. The landlord filed an answer with a counterclaim for attorney fees on September 9, 2016. Id., exhibit B. Now before the court is Patel's motion for summary judgment on the complaint (motion sequence number 001). DISCUSSION Patel's motion seeks summary judgment on the complaint. When seeking summary judgment, the moving party bears the burden of proving, by competent, admissible evidence, that no material and triable issues of fact exist. See e.g. Winegradv New York Univ. Med. Ctr., 64 NY2d 8S l, 8S3 (l 98S); accord Sako/ow, Dunaud, Mercadier & Carreras v Lacher, 299 AD2d 64, 70 (I st Dept 2002). Once this showing has been made, the burden shifts to the party opposing the motion to produce evidentiary proof, in admissible form, sufficient to establish the existence of material issues of fact which require a trial of the action. See e.g. Zuckerman v City a/New York, 49 NY2d SS7, S62 {1980); accord Pemberton v New York City Tr. Auth., 304 AD2d 340, 342 (!st Dept 2003). Here, Patel's first cause of action requests hybrid declaratory and injunctive relief; specifically: "2S. . .. a declaration the premises are subject to the Rent Stabilization Code and Regulations. *** "27. . .. an injunction directing [the landlord] to tender ... a lease which conforms to the requirements of said Code and Regulations. 2 3 of 8 INDEX NO. 156261/2016 [*FILED: NEW YORK COUNTY CLERK 05/30/2018 11:28 AM 3] NYSCEF DOC. NO. 23 RECEIVED NYSCEF: 05/30/2018 -~··. "28. . .. a permanent injunction directing [the landlord] to comply in all . respects with the requirements of said Code and Regulations. **• "30. . .. a declaration that [the 20% vacancy increase that the landlord claims that it was entitled to after Doulcet left the apartment] is the maximum permissible increase at this time. "31 ... an injunction directing [the landlord] to register [apartment I SS] as a rent-stabilized apartment with the DHCR. "32. . .. a declaration that, until such time as [the landlord] tenders a lease which conforms fo the requirements of said Code and Regulations, and registers [apartment I SS] as a rent-stabilized apartment with the DHCR, the legal monthly rent remains at the last rent paid by Doulcet, namely $!,66S.10." See notice of motion, exhibit A (complaint), iii! 2S-32. This decision follows another decision that the court issues today in the case of ltzchak Palka v 160 East 48th St. Owne; 11 LLC (Index No. l S6260/! 6). It involves the same landlord, the same building, and substantially identical pleadings. This decision also incorporates all of the legal findings and rulings that the court made in the Palka decision. The first of those findings is that, because Patel's motion, like Palka's, omits any argument regarding the injunctions requested in the first cause of action, the court deems that Patel has abandoned those requests in his motion, and will, instead, confine this discussion to Patel's three proposed declarations. The first of these is a de~laration that apartment !SS is rent-stabilized. See notice of motion, exhibit A (complaint), iJ 2S. The court finds that apartment !SS is rent stabilized. The unrefuted evidence discloses that Buchanan ceased filing annual registration statements for apartment I SS in 200S, and that.the instant defendant/landlord has never filed any registration statements for the apartment. See notice of motion, exhibit C. The evidence also discloses that the last legally registered rent for apartment I SS was $1,665. l 0 a month in 2004, an amount below the applicable $2,000 a month de-regulation threshold set forth in the Rent Stabilization Code (RSC). ld., see New York City Administrative Code (NYC Admin Code)§ 26-511 (c) (5a). As the court observed in' the Palka decision, NYC Admin Code§ 26-517 (e) mandates that a landlord must file "proper and timely" annual registration statements with the DHCR for all rent regulated apartments, and a landlord's failure to submit such statements has twofold effect. First, controlling Appellate Division, First Department, case law mandates that an unregistered apartment will remain rent stabilized, whether the landlord might be entitled to a 3 4 of 8 INDEX NO. 156261/2016 [*FILED: NEW YORK COUNTY CLERK 05/30/2018 11:28 AM 4] NYSCEF DOC. NO. 23 RECEIVED NYSCEF: 05/30/2018 20% vacancy rent increase which would otherwise raise the apartment's legal rent above the RSC's $2,000 a month deregulation threshold. See Altman v 285 W Fourth LLC, 143 AD3d ~l S (!st Dept 2016). Second, NYC Admin Code§ 26-Sl 7 (e) also subjects the landlord to potential liability for imposing a rent overcharge, subject to certain exceptions listed in the statute. Here, the court also observes that, given that the last legally registered monthly rent for apartment I SS was $1,66S. l 0, a 20% vacancy increase ($333.02) would have left the apartment's rent below the $2,000.00 deregulation threshold that applied in 200S (i.e., $1,998.12). The court also observes that landlord has failed to support its claim that apartment lSS's rent was raised above the threshold by certain IA! increases. Pursuant to RSC§ 2S22.4 (a) (4), the landlord would have been allowed to permanently add l/40th of the total cost of any pre2011 renovation work performed in apartment !SS to the apartment's rent stabilized rent, provided that the work consisted of certain statutorily listed IA Is. See also Rent Stabilization Law (RSL) § 26-Sl 1 (c) (13). The DHCR has promulgated a series of"operational bulletins" that set forth the agency's rules regarding what types of evidence it will deem sufficient proof of a landlord's IA! expenditures, in satisfaction of RSC § 2S22.4 (a) (4). These rules might be considered stringent. But following a remand from the Court of Appeals in Jemrock Realty Co., LLC v Krugman (13 NY3d 924 [2010]), the Appellate Division, First Department, has recognized that these rules are not binding on trial courts, which must, instead, make a factual inquiry into the IA! expenditures that are alleged in any given case, and then issue a determination that is "based on the persuasive force of the evidence submitted by the parties." Jemrock Realty Co., LLC v Krugman, 72 AD3d 438, 440 (1st Dept 2010), quoting 13 NY3d at 926. But here the landlord has presented no evidence concerning alleged IA!s in apartment !SS, apart from Sass's unsupported claim that they were performed. This evidence is insufficient, and the court must, therefore, reject as unfounded the landlord's argument that the purported !AI increases raised apartment l SS's rent over the deregulation threshold. The court concludes that apartment I SS is still rent-stabilized. The landlord's failure to comply with NYC Admin Code § 26-S l 7 (e ), and its failure to establish the above-mentioned IA! increases, mandate this conclusion as a matter oflaw. Therefore, the court grants that portion of Patel's motion as it relates to the first proposed declaration in his first cause of action. Patel's second proposed declaration is that the only rent increase that the landlord is entitled to at this time is a 20% vacancy increase over Doulcet's last registered rent of $1,66S. l O, or $333.02. See notice of motion, exhibit A (complaint), '1/ 30. As the court previously observed, such a finding would result in a legal monthly rent of$1,998.12, which is under the $2,000 a month statutory deregulation threshold. NYC Admin Code§ 26-Sl l (c) (S-a). But in the Palka decision, the court also found that a determination that this is the only rent increase that the landlord is entitled to would be unwarranted. The NYC Admin Code § 26-S l 7 (e) permits landlords to undertake curative measures, including the filing ofretroactive DHCR registrations, 4 5 of 8 INDEX NO. 156261/2016 [*FILED: NEW YORK COUNTY CLERK 05/30/2018 11:28 AM 5] NYSCEF DOC. NO. 23 RECEIVED NYSCEF: 05/30/2018 by which landlords may remove any legal impediments to their collecting rent increases. Here, too, the court's finding that the landlord has so far failed to establish the right to augment . apartment l SS's rent with IAI increases does not mean that it is forever foreclosed from domg so. The landlord may well establish such a right, if it can present sufficient proof of its expenditures for statutorily-recognized IAI renovation work. Therefore, the court denies that part of Patel's motion as it relates to the second proposed declaration in his first cause of action. Patel's third proposed declaration seeks a judgment that, until such time as the landlord tenders a lease that conforms to the requirements of the RSC and registers apartment I SS as a rent-stabilized unit with the DHCR, "the legal monthly rent remains at the last rent paid by Doulcet, namely $1,66S. IO." See notice of motion, exhibit A (complaint), iJ 32. In the Palka decision, the court noted the holding of the Appellate Division, First Department in Altman v 285 W Fourth LLC (143 AD3d 41S [!st Dept 2016], "Altman 11"), that an apartment will remain rent stabilized, despite the availability of a 20% vacancy increase which would raise its rent above the deregulation threshold, where the landlord has failed to submit annual registration statements to the DHCR, in violation of NYC Admin Code§ 26-Sl7 (e). Here, the court has already determined that apartment I SS is rent stabilized, for the reasons discussed above. 1 The court concludes that, as was the case with Palka's apartment, Patel is entitled to a declaration that the landlord must register apartment I SS with the DHCR as a rent-stabilized unit, and must issue Patel a rent-stabilized lease that reflects the apartment's current legal rent. The issues of calculating that rent, and also of calculating any overcharge that the landlord might be liable for as a result of its failure to file statutorily required registration statements, are committed to a Special Referee to hear and report on the issues. Pending the court's receipt and acceptance of the Referee's report, however, the court directs Patel to pay, and landlord to accept, monthly rent for apartment I SS in the amount of $1,998.12, which reflects the apartment's last legally registered monthly rent of$1,66S.IO, plus a 20% vacancy increase of$333.02. The balance of Patel's motion seeks summary judgment on his second cause of action, which seeks money damages for rent overcharge, and treble damages because the overcharge was "willful," in violation of RSC§ 2S26.l (a) (I). See notice of motion, exhibit A (complaint), iii! 33-37. In the Palka decision, the court took note of the holding of the Appellate Division, First Department, in Taylor v 72A Realty Assoc., L.P. (ISl AD3d 9S [!st Dept 2017]) that "The timing of ... retroactive registrations may play a role in this case on the issue of willfulness. We have recognized that at least by March 2012 the law clearly required the retroactive return of apartments like these to rent regulation. In the Lucas decision ... , we made it clear that an improperly deregulated apartment was required to be returned to rent stabilization and that the base date The landlord failed to submit any registration statements for apartment I SS in violation of NYC Admin Code§ 26-Sl 7 (e) and the apartment's rent remains below the deregulation threshold even with a 20% vacancy increase. s 6 of 8 INDEX NO. 156261/2016 [*FILED: NEW YORK COUNTY CLERK 05/30/2018 11:28 AM 6] NYSCEF DOC. NO. 23 RECEIVED NYSCEF: 05/30/2018 rent should not have been set at the market rate. The owner here failed to register [the subject] apartment . .'. and readjust the rent until 2014 when faced with this litigation. These facts preclude any determination at this time about whether an overcharge, if any, was willful, and the owner should be allowed the opportunity to explain the reasons for such delay and the steps, if any, it undertook to bring itself in compliance. Legal fees also cannot be determined without the underlying issues of overcharge and penalty being decided." 151 AD3d at I 06-107. Here, as in Palka, the court finds that, pursuant to Taylor, the Special Referee should receive evidence.on the issue of"willfulness" and include a recommendation about whether such "willfulness,'' if any, mandates the imposition of treble damages on any rent overcharge that the landlord max be liable for, if any. The court finds that that portion of Patel's motion as it seeks summary judgment on his second cause of action is granted to the extent that those issues are referred to a Special Referee (along with so much of Patel's motion as it relates to the balance of his first cause of action). Finally, as in Palka, Patei's request for legal fees will be the subject of a legal-fee hearing at the close of this litigation. ACCORDINGLY, for the foregoing reasons, it is hereby ORDERED that the motion, pursuant to CPLR 3212, ofplaintiffSejal Patel (motion · sequence number 001) is granted solely to the extent that so much of said motion as it seeks a declaratory judgment with respect to the subject matter of the complaint's first cause of action is granted to the extent set forth below, with costs and disbursements to plaintiff as taxed by the Clerk, but is otherwise denied; and it is further ORDERED that the portion of plaintiff's motion seeking injunctive relief is denied without prejudice; and it is further ADJUDGED and DECLARED that 1) Apartment 15S in the building located at 160 East 4gth Street in the County, City and State ofNew York is a rentstabilizec:i unit subject to the provisions of the Rent Stabilization Law and Code; and 2) the defendant/landlord 160 East 48th Street Owner II, LLC is directed to immediately register apartment 15S with the State of New York Division of Housing and Community Renewal ~s a rent-stabilized unit and to thereafter provide plaintiff with a lease that reflects the apartment's current legal registered rent (once same has been calculated); and 6 7 of 8 INDEX NO. 156261/2016 [*FILED: NEW YORK COUNTY CLERK 05/30/2018 11:28 AM 7] NYSCEF DOC. NO. 23 RECEIVED NYSCEF: 05/30/2018 T 3) until the d~fendant/landlord provides such lease, defendant/landlord is barred from collecting rent in excess of apartment 15S's previous legal registered rent ($1,665.10 per month) plus a permissible 20% vacancy increase ($333.02) for a total of$1,998.12 per month; and it is further ORDERED that the balance of this motion is granted to the extent that it is referred to a Special Referee to hear and report with recommendations on the following issues: 1) the calculation of the current, legal rent for apartment 15 S (utilizing the DHCR's "default formula"); 2) the calculation of what amount, if any, rent overcharge the defendantilandlord is liable for; and 3) a recommendation about whether the defendant/landlord acted "willfully" in imposing the overcharge, if any, I except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further ORDERED that counsel for the plaintiff shall, within 30 days from the date of this order, serve a copy of this order with notice of entry, together with a completed Information Sheet, upon the Special Referee Clerk in the Motion Support Office in Rm. 119 at 60 Centre Street, who is directed to place this matter on the calendar of the Special Referee's Part (Part 50 R) for the earliest convenient date. Dated: May 17, 2018 7 8 of 8

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