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A PRIMER ON THE NEW YORK

STATE DIVISION OF HOUSING

& COMMUNITY RENEWAL:

FORMS, FILINGS AND POLICY

UPDATES

Prepared in connection with a Continuing Legal Education course presented at New York County Lawyers’ Association, 14 Vesey Street, New York, NY

scheduled for Tuesday, December 9, 2014

Program Co-Sponsor:

Faculty: Magda Cruz, Belkin Burden Wenig & Goldman

Jamie Heiberger, Heiberger & Associates Josh Losardo, Belkin Burden Wenig & Goldman

Jim Marino, Kucker and Bruh Niles Welikson, Horing Welikson & Rosen

This course has been approved in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 3 Transitional and Non-Transitional credit hours; 2 Skills; 1 Professional Practice/Law Practice Management.

This program has been approved by the Board of Continuing Legal education of the Supreme Court of New Jersey for hours of total 3 CLE credits. Of these, 0 qualify as hours of credit for ethics/professionalism, and 0 qualify as hours of credit toward certification in civil trial law, criminal law, workers compensation law and/or matrimonial law.

ACCREDITED PROVIDER STATUS: NYCLA’s CLE Institute is currently certified as an Accredited Provider of continuing legal education in the States of New York and New Jersey.

Information Regarding CLE Credits and Certification

A Primer on the New York State Homes & Community Renewal and the Division of Housing & Community Renewal: Forms, Filings and Policy Updates

December 9, 2014; 9:00 AM to 12:00 PM

The New York State CLE Board Regulations require all accredited CLE providers to provide documentation that CLE course attendees are, in fact, present during the course. Please review the following NYCLA rules for MCLE credit allocation and certificate distribution.

i. You must sign-in and note the time of arrival to receive your

course materials and receive MCLE credit. The time will be verified by the Program Assistant.

ii. You will receive your MCLE certificate as you exit the room at

the end of the course. The certificates will bear your name and will be arranged in alphabetical order on the tables directly outside the auditorium.

iii. If you arrive after the course has begun, you must sign-in and note the time of your arrival. The time will be verified by the Program Assistant. If it has been determined that you will still receive educational value by attending a portion of the program, you will receive a pro-rated CLE certificate.

iv. Please note: We can only certify MCLE credit for the actual time

you are in attendance. If you leave before the end of the course, you must sign-out and enter the time you are leaving. The time will be verified by the Program Assistant. Again, if it has been determined that you received educational value from attending a portion of the program, your CLE credits will be pro-rated and the certificate will be mailed to you within one week.

v. If you leave early and do not sign out, we will assume that you left at the midpoint of the course. If it has been determined that you received educational value from the portion of the program you attended, we will pro-rate the credits accordingly, unless you can provide verification of course completion. Your certificate will be mailed to you within one week.

Thank you for choosing NYCLA as your CLE provider!

Primer on New York State Division of Housing and Community Renewal: Forms, Filings, and Policy Updates

New York County Lawyers Association, CLE Institute 14 Vesey St., New York NY 10007 December 9, 2014, 9:00 AM – 12:00 PM

Program Co-sponsor: Community Housing Improvement Program, Inc.

Speakers Magda Cruz, Belkin Burden Wenig & Goldman

Jamie Heiberger, Heiberger & Associates Josh Losardo, Belkin Burden Wenig & Goldman

Jim Marino, Kucker and Bruh Niles Welikson, Horing Welikson & Rosen

9:00 AM – 9:10 AM Introductory Remarks Bari Chase, NYCLA

Patrick Siconolfi, Executive Director, CHIP 9:10 AM – 9:40 AM Leasing Practices Jamie Heiberger, Heiberger & Associates 9:40 AM – 9:55 AM Preferential Rents Jim Marino, Kucker and Bruh 9:55 AM – 10:15 AM Legal Rent Calculations Jim Marino, Kucker and Bruh 10:15 AM – 10:30 AM Amending Registrations Magda Cruz, Belkin Burden Wenig & Goldman 10:30 AM – 10:45 AM BREAK 10:45 AM – 11:00 AM TPU Investigations and Treble Damages Josh Losardo, Belkin Burden Wenig & Goldman 11:00 AM – 11:15 AM The Four Year Rule Niles Welikson, Horing Welikson & Rosen 11:15 AM – 11:35 AM Use of the Default Formula Niles Welikson, Horing Welikson & Rosen 11:35 AM – 11:45 AM Legal Challenges to the RSC and TPU Magda Cruz, Belkin Burden Wenig & Goldman 11:45 – 12:00 PM Q & A Panel

CHIP’s participation in this seminar was made possible by a grant from Capital One

Table of Contents

Niles C. Welikson, Esq., Horing Welikson & Rosen, P.C.

RSC Amendments

Matter of Grimm Court of Appeals Decision

Cintron V. Colagero Court of Appeals Decision

Matter of Boyd 2013 Decision (Appellate Division).

Matter of Boyd 2014 Decision (Court of Appeals).

72A Realty v. Lucas Appellate Division Decision.

JRD v. Eimicke

Lavanant v. DHCR

590 W. End Assoc. v. DHCR

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RSC Amendment Summary

9 NYCRR §2520.5 paragraphs (o) and (p) are re-lettered (p) and (q) and a new paragraph (o) is added to designate the Tenant Protection Unit (TPU) as a distinct unit under DHCR

9 NYCRR §2520.11 new paragraph (u) is added to provide that an owner will be required to provide the first tenant of a deregulated unit an exit notice explaining how the unit became deregulated, how the rent was computed and what the last regulated rent was. A copy of the rent registration indicating deregulated rent must be provided to the tenant. 9 NYCRR § 2521.1 is amended to add a new subdivision (l) to establish the criteria for setting the initial legal regulated rent for housing accommodations located in properties that were or continue to be owned by housing development fund companies (HDFC). 9 NYCRR 2521.2(b) is amended, 9 NYCRR §2521.2(b)(2) is repealed, and 9 NYCRR §2521.2(c) amended to provide that where a preferential rent is charged, the legal rent can only be preserved by disclosure in a tenant’s lease; a rent registration indicating a preferential rent will not be dispositive. The owner shall be required to maintain and submit where required by DHCR the rental history immediately preceding a preferential rent to the present which may be prior to the four–year period preceding the filing of a complaint.

9 NYCRR § 2522.4(a)(3)(22) is amended to provide there will be no MCI rent increases for conversions from master to individual metering; however, electrical wiring for the building can be subject to an MCI rent increase. 9 NYCRR § 2522.4(a)(13) is amended to provide that when an MCI rent increase application is received, DHCR will initiate its own search to determine if there is an “immediately hazardous” violation in a building and, if there is such a violation, the application will be rejected with leave to renew once the violation is remedied.

9 NYCRR §2522.4(d)(3)(iii) is amended to provide that a tenant receiving DRIE (disabled) benefits will not be subject to electrical sub-metering conversions; this conforms to how SCRIE (senior citizens) tenants are treated.

9 NYCRR §2522.5(c)(1) and 9 NYCRR §2522.5(c)(3) are amended to provide the following: Required lease riders attached to leases will have greater detail as to how the rent was calculated, including details about how any IAI rent increase was calculated; tenants will be able to request documentation from owners to

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support an IAI increase; if the lease rider and/or any requested IAI documents are not provided, there can be no rent increase until the rider/documentation is provided unless the owner can prove the rent charged is otherwise legal; if the rent charged is above the legal rent during period when rider/documentation is not provided, there can be a rent overcharge proceeding and no rent increase can be collected until the rider/documentation is provided. 9 NYCRR §2522.6 (b) is amended and 9 NYCRR § 2526.1(g) is re-lettered (h) and new subdivision (g) is added to provide that when the rent on base date for establishing rent under the four-year look-back period cannot be determined or the rent set on the base date was the subject of a fraudulent scheme to deregulate, the 3-part, court-sanctioned default formula for setting rents, e.g., lowest rent for comparable unit in building, will be used and a general catch-all, e.g. data compiled by DHCR or sampling method, will be available. 9 NYCRR §2523.4(a)(1), (a)(2), (c) and (d)(2) are amended to provide: A tenant complaint of a service decrease will not be dismissed if the tenant failed to provide the owner with notice of the problem prior to filing a complaint with DHCR; any decrease in rent based upon a service decrease order will include a bar to future MCI and vacancy bonus rent increases; an owner’s time to respond to a service decrease complaint will be reduced to 20 days if the tenant, in fact, gives prior notice, otherwise the response time is 60 days; if the tenant is forced to vacate, a 5 day response time is required and; if the complaint is for lack/reduction in heat/hot water then a 20 day response time is required. 9 NYCRR §2523.5(c)(2) and (3) are amended to provide that tenants holding over after the lease expires (they failed to renew their lease) will be treated as month-to-month tenants and not held to a new full lease term. 9 NYCRR §2524.3(a), (e), and (g) are amended to amend certain notice requirements. 9 NYCRR § 2525.5 is amended to redefine harassment to include certain false filings and false statements designed to interfere with tenant’s quiet enjoyment or rights. 9 NYCRR § 2526.1(a)(2)(ii) is amended and 9 NYCRR § 2526.1(a)(2) adds new subparagraphs (iii), (iv), (v), (vi), (vii), (viii) and (ix) and 9 NYCRR § 2526.1(a)(3)(iii) is amended to provide a more comprehensive list of exceptions to the rule that when examining rent overcharges the look-back period to determine an overcharge is four years. The list of exceptions includes: when there is an allegation of a fraudulent scheme to deregulate the unit; prior to base date there is an outstanding rent reduction order based upon a decrease in services; it is determined that there is a willful rent overcharge; there is a vacant or exempt

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unit on the four-year base date, in which case DHCR may also look at the last rent registration, or; there is a need to determine whether a preferential rent exists.

9 NYCRR §2527.9 is amended by adding new subdivisions (c) and (d) to amend certain notice requirements. 9 NYCRR § 2528.3 (a) is amended to clarify that registration information may be collected as required by DHCR, RSC, or 2527.11. 9 NYCRR § 2528.3 is amended to add paragraph (c) to provide that owners will not be able to amend a rent registration without going through an administrative proceeding with notice to the tenant unless the change is governed by another government agency. 9 NYCRR § 2528.4(a) is amended to clarify that a rent freeze for failing to register will include MCI increases and vacancy bonus increases. 9 NYCRR § 2529.12 is amended to clarify filing requirements for Article 78 proceedings. 9 NYCRR § 2530.1 is amended to clarify the 60 day statute of limitations from date of mailing of an order. 9 NYCRR § 2531.2 is amended to prohibit luxury decontrol filings on SCRIE and DRIE tenants.

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New York City Rent Stabilization Code Amendments

1. 9 NYCRR §2520.5 paragraphs (o) and (p) are re-lettered (p) and (q) and a

new paragraph (o) is added as follows:

(o) The Office of the Tenant Protection Unit (TPU). The office of the DHCR designated

by the Commissioner to investigate and prosecute violations of the ETPA, the RSL and

the City and State Rent laws. In furtherance of such designation, the TPU may invoke all

authority under the ETPA, RSL, RSC and the State and City rent laws and the regulations

thereunder that inures to the Commissioner, DHCR or the Office of Rent Administration.

However, nothing contained herein shall limit the mission and authority of the Office of

Rent Administration to administer and enforce the ETPA, the RSL, and the City and State

rent laws and all such regulations promulgated thereunder.

2. 9 NYCRR 2520.11 new paragraph (u) is added as follows:

(u) The owner of any housing accommodation that is not subject to this code pursuant to

the provisions of subdivision (r) of this section or of section 2200.2(f)(19) of the New

York City Rent and Eviction Regulations, shall give written notice certified by such

owner to the first tenant of that housing accommodation after such housing

accommodation becomes exempt from the provisions of this code or the city rent law.

Such notice shall contain the last regulated rent, the reason that such housing

accommodation is not subject to this Code or the city rent law, a calculation of how either

the rental amount charged when there is no lease or the rental amount provided for in the

lease has been derived so as to reach the applicable amount qualifying for deregulation

pursuant to subdivision (r) of this section, (whether the next tenant in occupancy or any

subsequent tenant in occupancy actually is charged or pays less than the applicable

amount qualifying for deregulation), a statement that the last legal regulated rent or the

maximum rent may be verified by the tenant by contacting DHCR and the address and

telephone number of DHCR. Such notice shall be sent by certified mail within thirty days

after the tenancy commences or after the signing of the lease by both parties, whichever

occurs first or shall be delivered to the tenant at the signing of the lease. In addition, the

owner shall send and certify to the tenant a copy of the registration statement for such

housing accommodation filed with DHCR indicating that such housing accommodation

became exempt from the provisions of this code or the city rent law, which form shall

include the last regulated rent and shall be sent to the tenant within thirty days after the

tenancy commences or the filing of such registration, whichever occurs later.

3. 9 NYCRR § 2521.1 is amended to add a new subdivision (l) as follows:

(l)(1) Notwithstanding any other provisions of this code, the initial legal regulated rent

shall be established pursuant to paragraph (2) for housing accommodations located in

properties that were or continue to be owned by housing development fund companies

(HDFC’s) created pursuant to Article XI of the Private Housing Finance Law (whether

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such an HDFC was for rental housing, a mutual company, or subject to cooperative or

condominium ownership or had otherwise previously been subject to this code) where

such property has been conveyed pursuant to a judgment of foreclosure or pursuant to a

stipulation of settlement in a foreclosure action (whichever occurs first).

(2) The initial legal regulated rent shall be the highest of:

(i) maintenance or carrying charges, common charges, or rent in effect

immediately prior to such conveyance;

(ii) any minimum standard rent established by either HPD or DHCR as the

respective supervising agency of an HDFC that was in effect immediately

prior to such conveyance, even if such minimum standard rents had not

been implemented for the specific building or housing accommodation; or

(iii) the rent specifically set by HPD or DHCR as the respective supervising

agency of an HDFC where such HDFC or a successor HDFC continues to

own the building.

4. 9 NYCRR 2521.2 (b) is amended to read as follows:

Such legal regulated rent as well as preferential rent shall be [“previously established”

where: (1) the legal regulated rent is] set forth in [either] the vacancy lease or renewal

lease pursuant to which the preferential rent is charged. [; or]

5. 9 NYCRR 2521.2(b)(2) is repealed:

[(2) for a vacancy lease or renewal lease which set forth a preferential rent and which was

in effect on or before June 19, 2003, and the legal regulated rent was not set forth in

either such vacancy lease or renewal lease, the legal regulated rent was set forth in an

annual rent registration served upon the tenant in accordance with the applicable

provisions of law, except that the rental history of the housing accommodation prior to

the four-year period preceding the filing of a complaint pursuant to section 2526.1 or

2522.3 of this Title shall not be examined.]

6. 9 NYCRR 2521.2(c) is amended to read as follows:

(c) Where the amount of the legal regulated rent is set forth either in a vacancy lease or

renewal lease where a preferential rent is charged, [the amount of the legal regulated rent

shall not be required to be set forth in any subsequent renewal of such lease, except that]

the owner shall be required to maintain, and submit where required to by DHCR, the

rental history of the housing accommodation immediately preceding such preferential

rent to the present which may be prior to the four-year period preceding the filing of a

complaint [pursuant to section 2526.1 or 2522.3 of this Title shall not be examined].

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7. 9 NYCRR § 2522.4(a)(3)(22) is amended to read as follows:

(22) REWIRING:

- new copper risers and feeders extending from property box in basement to every

housing accommodation; must be of sufficient capacity (220 volts) to accommodate the

installation of air conditioner circuits in living room and/or bedroom; [and] but otherwise

excluding work done to effectuate conversion from master to individual metering of

electricity approved by DHCR pursuant to paragraph (3) of subdivision (d) of this

section.

8. 9 NYCRR § 2522.4(a)(13) is amended to read as follows:

(13) The DHCR shall not grant an owner's application for a rental adjustment pursuant to

this subdivision, in whole or in part, if it is determined by the DHCR, based upon

information received from any tenant or tenant representative or upon a review conducted

on DHCR’s own initiative that, as of the date of such application for [prior to the

granting of approval to collect] such adjustment that the owner is not maintaining all

required services, or that there are current immediately hazardous violations of any

municipal, county, State or Federal law which relate to the maintenance of such services.

However, as determined by the DHCR, such application may either be granted upon

condition that such services will be restored within a reasonable time, or dismissed with

leave to refile within sixty days which time period shall stay the two year filing

requirement provided in section (a)(8) of this paragraph. [and] In addition, certain tenant-

caused violations may be excepted.

9. 9 NYCRR 2522.4(d)(3)(iii) is amended to read as follows:

(iii) Recipients of Senior Citizen Rent Increase Exemptions (SCRIE) or Disability Rent

Increase Exemptions (DRIE): For a tenant who on the date of the conversion is receiving

a SCRIE or DRIE authorized by section 26-509 of the Rent Stabilization Law of

Nineteen Hundred Sixty-nine, the rent is not reduced and the cost of electricity remains

included in the rent, although the owner is permitted to install any equipment in such

tenant's housing accommodation as is required for effectuation of electrical conversion

pursuant to this paragraph.

(a) After the conversion, upon the vacancy of the tenant, the owner, without making

application to DHCR, is required to reduce the legal regulated rent for the housing

accommodation in accordance with the Schedule of Rent Reductions set forth in

Operational Bulletin 2003-1, and thereafter [the] any subsequent tenant is responsible for

the cost of his or her consumption of electricity, and for the legal rent as reduced,

including any applicable major capital improvement rent increase based upon the cost of

work done to effectuate the electrical conversion.

(b) After the conversion, if a tenant ceases to receive a SCRIE or DRIE, the owner,

without making application to DHCR, may reduce the rent in accordance with the

Schedule of Rent Reductions set forth in Operational Bulletin 2003-1, and thereafter the

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tenant is responsible for the cost of his or her consumption of electricity, and for the legal

rent as reduced, including any applicable major capital improvement rent increase based

upon the cost of work done to effectuate the electrical conversion, for as long as the

tenant is not receiving a SCRIE or DRIE. Thereafter, in the event that the tenant resumes

receiving a SCRIE or DRIE, the owner, without making application to DHCR, is required

to eliminate the rent reduction and resume responsibility for the tenant's electric bills.

10. 9 NYCRR §2522.5(c)(1) is amended to read as follows and (c)(ii) is

renumbered (c)(iv) and a new (c)(ii) and (c)(iii) are added as follows:

(1) For housing accommodations subject to this Code, an owner shall furnish to each

tenant signing a vacancy or renewal lease, a rider in a form promulgated or approved by

the DHCR, in larger type than the lease, describing the rights and duties of owners and

tenants as provided for under the RSL including a detailed description in a format as

prescribed by DHCR of how the rent was adjusted from the prior legal rent. Such rider

shall conform to the "plain English" requirements of section 5-702 of the General

Obligations Law[,]. Copies of the form as promulgated by DHCR shall also be available

in [Spanish, and] all languages that may be required pursuant to DHCR’s language access

plan. The rider shall be attached as an addendum to the lease. Upon the face of each

rider, in bold print, in English and any other language as required by the DHCR language

access plan, shall appear the following: "ATTACHED RIDER SETS FORTH RIGHTS

AND OBLIGATIONS OF TENANTS AND LANDLORDS UNDER THE RENT

STABILIZATION LAW." [("LOS DERECHOS Y RESPONSABILIDADES DE

INQUILINOS Y CASEROS ESTAN DISPONIBLE EN ESPANOL")].

(i) For vacancy leases, such rider shall in addition also include a notice of the prior legal

regulated rent, if any, which was in effect immediately prior to the vacancy, an

explanation, and in a format prescribed by DHCR, [of] how the rental amount provided

for in the vacancy lease has been computed above the amount shown in the most recent

annual registration statement, as well as the prior lease, and a statement that any increase

above the amount set forth in such registration statement is in accordance with

adjustments permitted by the rent guidelines board and this Code.

(ii) Such rider shall also set forth that the tenant may, within sixty days of the execution

of the lease, require the owner to provide the documentation directly to the tenant

supporting the detailed description regarding the adjustment of the prior legal rent

pursuant to paragraph (i) of this subdivision. The owner shall provide such

documentation within thirty days of that request.

(iii) The method of service of the lease rider, the tenant request for documentation, and

the owner’s provision of documentation, together with proof of same, shall conform to

the requirements set forth in the lease rider itself or such other bulletin or document

rendered pursuant to section 2527.11.

[(ii)] (iv) [re-numbered only – text remains the same]

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11. 9 NYCRR §2522.5(c)(3) is amended to read as follows:

(3) [Upon complaint by the] Where a tenant, permanent tenant or hotel occupant [that he

or she was] is not furnished, as required by the above provision, with a copy of the lease

rider pursuant to paragraph (1), [or] the notice pursuant to paragraph (2) [of this

subdivision], or the documentation required on demand by paragraph (1)(ii) of this

subdivision, the owner shall not be entitled to collect any adjustments in excess of the

rent set forth in the prior lease unless the owner can establish that the rent collected was

otherwise legal. In addition to issuing an order with respect to applicable overcharges,

[the] DHCR shall order the owner to furnish the missing rider, [or] notice, or

documentation. [In addition to such other penalties provided for pursuant to section

2526.2 of this Title, if the owner fails to comply within 20 days of such order, the owner

shall not be entitled to collect any guidelines lease adjustment authorized for any current

lease from the commencement date of such lease.] The furnishing of the rider, [or] notice,

or documentation by the owner to the tenant or hotel occupant shall result in the

elimination, prospectively, of such penalty. With respect to housing accommodations in

hotels, noncompliance by the owner shall not prevent the hotel occupant from becoming

a permanent tenant.

12. 9 NYCRR §2522.6 (b) is amended to read as follows:

(b) (1) Such order shall determine such facts or establish the legal regulated rent in

accordance with the provisions of this Code. Where such order establishes the legal

regulated rent, it shall contain a directive that all rent collected by the owner in excess of

the legal regulated rent established under this section for such period as is provided in

section 2526.1(a) of this Title, or the date of the commencement of the tenancy, if later,

either be refunded to the tenant, or be enforced in the same manner as prescribed in

section 2526.1(e) and (f) of this Title. Orders issued pursuant to this section shall be

based upon the law and Code provisions in effect on March 31, 1984, if the complaint

was filed prior to April 1, 1984.

(2)Where either (i) the rent charged on the base date cannot be determined, or (ii) a full

rental history from the base date is not provided, or (iii) the base date rent is the product

of a fraudulent scheme to deregulate the apartment, or (iv) a rental practice proscribed

under section 2525.3 (b), (c) and (d) has been committed, the rent shall be established at

the lowest of the following amounts set forth in paragraph (3).

(3) These amounts are:

(i) the lowest rent registered pursuant to section 2528.3 of this Code for a comparable

apartment in the building in effect on the date the complaining tenant first occupied

the apartment; or

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(ii) the complaining tenant’s initial rent reduced by the percentage adjustment

authorized by section 2522.8 of this Code; or

(iii) the last registered rent paid by the prior tenant (if within the four year period of

review); or

(iv) if the documentation set forth in (i) through (iii) of this paragraph is not available

or is inappropriate, an amount based on data compiled by the DHCR, using sampling

methods determined by the DHCR, for regulated housing accommodations.

(4) However, in the absence of collusion or any relationship between an owner and any

prior owner, where such owner purchases the housing accommodations upon a judicial

sale, or such other sale effected in connection with, or to resolve, in whole or in part, a

bankruptcy proceeding, mortgage foreclosure action or other judicial proceeding, and no

records sufficient to establish the legal regulated rent were made available to such

purchaser, such orders shall establish the legal regulated rent on the date of the inception

of the complaining tenant's tenancy, or the date four years prior to the date of the filing of

an overcharge complaint pursuant to section 2526.1 of this Title, whichever is most

recent, based on either:

(i) [(1)] documented rents for comparable housing accommodations, whether or not

subject to regulation pursuant to this Code, submitted by the owner, subject to rebuttal by

the tenant; or

(ii) [(2)] if the documentation set forth in subparagraph (i[1]) of this [subdivision]

paragraph is not available or is inappropriate, data compiled by the DHCR, using

sampling methods determined by the DHCR, for regulated housing accommodations; or

(iii) [(3)] in the event that the information described in both subparagraphs (i) [(1)]

and (ii) [(2)] of this [subdivision] paragraph is not available, the complaining tenant's rent

reduced by the most recent guidelines adjustment.

(5) This subdivision shall also apply where the owner purchases the housing

accommodations subsequent to such judicial or other sale. [Notwithstanding the

foregoing, this subdivision shall not be deemed to impose any greater burden upon

owners with regard to record keeping than is provided pursuant to RSL section 26-

516(g). In addition, where the amount of rent set forth in the rent registration statement

filed four years prior to the date the most recent registration statement was required to

have been filed pursuant to Part 2528 of this Title is not challenged within four years of

its filing, neither such rent nor service of any registration shall be subject to challenge any

time thereafter.]

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13. 9 NYCRR §2523.4(a)(1), (a)(2), (c) and (d)(2) are amended to read as follows:

(a)(1) A tenant may apply to the DHCR for a reduction of the legal regulated rent to the

level in effect prior to the most recent guidelines adjustment, subject to the limitations of

subdivisions (c)-(h) of this section, and the DHCR shall so reduce the rent for the period

for which it is found that the owner has failed to maintain required services. The order

reducing the rent shall further bar the owner from applying for or collecting any further

increases in rent including such increases pursuant to section 2522.8 of this Title until

such services are restored or no longer required pursuant to an order of the DHCR. If the

DHCR further finds that the owner has knowingly filed a false certification, it may, in

addition to abating the rent, assess the owner with the reasonable costs of the proceeding,

including reasonable attorney’s fees, and impose a penalty not in excess of $250 for each

false certification.

(a)(2) Where an application for a rent adjustment pursuant to section 2522.4(a)(2) of this

Title has been granted, and collection of such rent adjustment commenced prior to the

issuance of the rent reduction order, the owner will be permitted to continue to collect the

rent adjustment regardless of the effective date of the rent reduction order,

notwithstanding that such date is prior to the effective date of the order granting the

adjustment. [In addition, regardless of the effective date thereof, a rent reduction order

will not affect the continued collection of a rent adjustment pursuant to section

2522.4(a)(1) of this Title, where collection of such rent adjustment commenced prior to

the issuance of the rent reduction order.] However, an owner will not be permitted to

collect any increment pursuant to section 2522.4(a)(8) that was otherwise scheduled to go

into effect after the effective date of the rent reduction order.

(c) Except for complaints pertaining to heat and hot water or other conditions requiring

emergency repairs, [B] before filing an application for a reduction of the legal regulated

rent pursuant to subdivision (a) of this section, a tenant [must have] should [first]

notify[ied] the owner or the owner's agent in writing of all the service problems listed in

such application. A copy of the written notice to the owner or agent with proof of mailing

or delivery [must] should be attached to the application. Applications should [may only]

be filed with the DHCR no earlier than ten [10 and no later than 60] days after such

notice is given to the owner or agent. Failure to provide such prior written notice will not

be grounds for dismissal of the application. [Prior written notice to the owner or agent is

not required for complaints pertaining to heat or hot water, or other conditions requiring

emergency repairs.] Applications based upon a lack of adequate heat or hot water must be

accompanied by a report from the appropriate city agency finding such lack of adequate

heat or hot water.

(d)(2) Upon receipt of a copy of the tenant’s complaint from the DHCR, an owner shall

have twenty (20) [45] days in which to respond[.] if the tenant provided DHCR with the

proof of the written notice to the owner. If the tenant did not provide proof of written

notice to the owner, an owner shall have sixty (60) days in which to respond. If the

tenant’s complaint indicates that the tenant has been forced to vacate the premises, the

owner shall have five (5) days to respond. If the complaint pertains to heat and hot water

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or to a condition which in DHCR’s opinion may require emergency repairs, the owner

shall have twenty (20) days to respond. Nothing herein shall preclude DHCR from

granting an owner’s request for a reasonable extension of time to respond in order to

establish that service problems have been repaired. [the rest of the sections remains the

same]

14. 9 NYCRR §2523.5(c)(2) and (3) are amended to read as follows:

(2) Where the tenant fails to timely renew an expiring lease or rental agreement offered

pursuant to this section, and remains in occupancy after expiration of the lease, such lease

or rental agreement may be deemed to be in effect, for the purpose of determining the

rent in an overcharge proceeding, where such deeming would be appropriate pursuant to

Real Property Law section 232-c. In such event, the expiring lease will be deemed to

have been renewed upon the same terms and conditions at the legal regulated rent,

together with any guidelines adjustments that would have been applicable had the offer of

a renewal lease been timely accepted. Unless otherwise dictated by Real Property Law

section 232-c, [T]the effective date of the rent adjustment under the “deemed” renewal

lease shall commence on the first rent payment date occurring no less than 90 days after

such offer is made by the owner.

(3) [Notwithstanding] Where there is no deemed lease pursuant to the provisions of

paragraph (2) of this subdivision, an owner may [elect to] commence an action or

proceeding to recover possession of a housing accommodation in a court of competent

jurisdiction pursuant to sections 2524.2(c)(1) and 2524.3(f) of this Title, where the tenant,

upon the expiration of the existing lease or rental agreement, fails to timely renew such

lease in the manner prescribed by this section.

15. 9 NYCRR §2524.3(a), (e), and (g) are amended to read as follows:

(a) The tenant is violating a substantial obligation of his or her tenancy other than the

obligation to surrender possession of such housing accommodation, and has failed to cure

such violation after written notice by the owner that the violations cease within 10 days;

or the tenant has willfully violated such an obligation inflicting serious and substantial

injury upon the owner within the three-month period immediately prior to the

commencement of the proceeding. If the written notice by the owner that the violations

cease within ten days is served by mail, then five additional days, because of service by

mail, shall be added, for a total of 15 days, before an action or proceeding to recover

possession may be commenced after service of the notice required by section 2524.2 of

this Part.

(e) The tenant has unreasonably refused the owner access to the housing accommodation

for the purpose of making necessary repairs or improvements required by law or

authorized by the DHCR, or for the purpose of inspection or showing the housing

accommodation to a prospective purchaser, mortgagee or prospective mortgagee, or other

9

person having a legitimate interest therein; provided, however, that in the latter event

such refusal shall not be a ground for removal or eviction unless the tenant shall have

been given at least five days' notice of the inspection or showing, to be arranged at the

mutual convenience of the tenant and owner so as to enable the tenant to be present at the

inspection or showing, and that such inspection or showing of the housing

accommodation is not contrary to the provisions of the tenant's lease or rental agreement.

If the notice of inspection or showing is served by mail, then the tenant shall be allowed

five additional days to comply, for a total of ten days because of service by mail, before

such tenant’s refusal to allow the owner access shall become a ground for removal or

eviction.

(g) For housing accommodations in hotels, the tenant has refused, after at least 20 days'

written notice, and an additional five days if the written notice is served by mail, to move

to a substantially similar housing accommodation in the same building at the same legal

regulated rent where there is a rehabilitation as set forth in section 2524.5(a)(3) of this

Part, provided:

16. 9 NYCRR § 2525.5 is amended to read as follows:

It shall be unlawful for any owner or any person acting on his or her behalf, directly or

indirectly, to engage in any course of conduct (including but not limited to interruption or

discontinuance of required services, or unwarranted or baseless court proceedings, or

filing of false documents with or making false statements to DHCR) which interferes

with, or disturbs, or is intended to interfere with or disturb, the privacy, comfort, peace,

repose or quiet enjoyment of the tenant in his or her use or occupancy of the housing

accommodation, or is intended to cause the tenant to vacate such housing accommodation

or waive or not exercise any right afforded under this Code including the right of

continued occupancy and regulation under the RSC and RSL.

17. 9 NYCRR § 2526.1(a)(2)(ii) is amended to read as follows:

(ii) subject to paragraphs (iii), (iv), (v), (vi), (vii), (viii) and (ix) of this paragraph, the

rental history of the housing accommodation prior to the four-year period preceding the

filing of a complaint pursuant to this section, and section 2522.3 of this Title, shall not be

examined; [.] and [This subparagraph shall preclude] examination of a rent registration

for any year commencing prior to the base date, as defined in section 2520.6(f) of this

Title, whether filed before or after such base date shall be precluded. [Except in the case

of decontrol pursuant to section 2520.11(r) or (s) of this Title, nothing contained herein

shall limit a determination as to whether a housing accommodation is subject to the RSL

and this Code, nor shall there be a limit on the continuing eligibility of an owner to

collect rent increases pursuant to section 2522.4 of this Title, which may have been

subject to deferred implementation, pursuant to section 2522.4(a)(8) in order to protect

tenants from excessive rent increases.]

10

18. 9 NYCRR § 2526.1(a)(2) new subparagraphs (iii), (iv), (v), vi), (vii), (viii) and

(ix) are added as follows:

(iii) Except in the case of decontrol pursuant to section 2520.11(r) or (s) of this Title,

nothing contained in this section shall limit a determination as to whether a housing

accommodation is subject to the RSL and this Code, nor shall there be a limit on the

continuing eligibility of an owner to collect rent increases pursuant to section 2522.4 of

this Title, which may have been subject to deferred implementation, pursuant to section

2522.4(a)(8) in order to protect tenants from excessive rent increases.

(iv) In a proceeding pursuant to this section the rental history of the housing

accommodation pre-dating the base date may be examined for the limited purpose of

determining whether a fraudulent scheme to destabilize the housing accommodation or a

rental practice proscribed under section 2525.3 (b), (c) or (d) rendered unreliable the rent

on the base date.

(v) An order issued pursuant to section 2523.4(a) of this Code remaining in effect within

four years of the filing of a complaint pursuant to this section may be used to determine

an overcharge or award an overcharge or calculate an award of the amount of an

overcharge.

(vi) For the purpose of determining if the owner establishes by a preponderance of the

evidence that the overcharge was not willful, examination of the rental history of the

housing accommodation prior to the four-year period preceding the filing of a complaint

pursuant to this section shall not be precluded.

(vii) For the purpose of determining any adjustment in the legal regulated rent pursuant to

section 2522.8(a)(2)(ii) of this Title, or any adjustment pursuant to a guideline

promulgated by the New York City Rent Guidelines Board that requires information

regarding the length of occupancy by a present or prior tenant or the rent of such tenants,

review of the rental history of the housing accommodation prior to the four-year period

preceding the filing of a complaint pursuant to this section shall not be precluded.

(viii) For the purposes of establishing the existence or terms and conditions of a

preferential rent under section 2521.2(c), review of the rental history of the housing

accommodation prior to the four-year period preceding the filing of a complaint pursuant

to this section shall not be precluded.

(ix) For the purpose of establishing the legal regulated rent pursuant to section

2526.1(a)(3)(iii) where the apartment was vacant or temporarily exempt on the base date,

review of the rental history of the housing accommodation prior to the four-year period

preceding the filing of a complaint pursuant to this section shall not be precluded.

11

19. 9 NYCRR § 2526.1(a)(3)(iii) is amended to read as follows:

Where a housing accommodation is vacant or temporarily exempt from regulation

pursuant to section 2520.11 of this Title on the base date, the legal regulated rent shall be

[the rent agreed to by the owner and the first rent stabilized tenant taking occupancy after

such vacancy or temporary exemption, and reserved in a lease or rental agreement; or, in

the event a lesser amount is shown in the first registration for a year commencing after

such tenant takes occupancy, the amount shown in such registration, as adjusted pursuant

to this Code.] the prior legal regulated rent for the housing accommodation, the

appropriate increase under section 2522.8, and if vacated or temporarily exempt for more

than one year, as further increased by successive two year guideline increases that could

have otherwise been offered during the period of such vacancy or exemption and such

other rental adjustments that would have been allowed under this Code.

20. 9 NYCRR § 2526.1(g) is re-lettered (h) and new subdivision (g) is added to

read as follows:

(g) Where the rent charged on the base date cannot be determined, a full rental history

from the base date is not provided, or the base date rent is the product of a fraudulent

scheme to deregulate the apartment or a rental practice proscribed under 2525.3(c) and

(d) has been committed, the rent shall be established at the lowest of the following

amounts.

(1) the lowest rent registered pursuant to section 2528.3 of this Code for a

comparable apartment in the building in effect on the date the complaining tenant

first occupied the apartment; or

(2) the complaining tenant’s initial rent reduced by the percentage adjustment

authorized by section 2522.8 of this Code; or

(3) the last registered rent paid by the prior tenant (if within the four year period of

review; or

(4) if the documentation set forth in paragraphs (1)through (3) of this subdivision is

not available or is inappropriate, data compiled by the DHCR, using sampling

methods determined by the DHCR, for regulated housing accommodations.

However, in the absence of collusion or any relationship between an owner and any prior

owner, where such owner purchases the housing accommodations upon a judicial sale, or

such other sale effected in connection with, or to resolve, in whole or in part, a

bankruptcy proceeding, mortgage foreclosure action or other judicial proceeding, and no

records sufficient to establish the legal regulated rent were made available to such

purchaser, such orders shall establish the legal regulated rent on the date of the inception

of the complaining tenant's tenancy, or the date four years prior to the date of the filing of

an overcharge complaint pursuant to this section, whichever is most recent, based on

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either:

(1) documented rents for comparable housing accommodations, whether or not subject

to regulation pursuant to this Code, submitted by the owner, subject to rebuttal by the

tenant; or

(2) if the documentation set forth in paragraph (1) of this subdivision is not available

or is inappropriate, data compiled by the DHCR, using sampling methods determined by

the DHCR, for regulated housing accommodations; or

(3) in the event that the information described in both paragraphs (1) and (2) of this

subdivision is not available, the complaining tenant's rent reduced by the most recent

guidelines adjustment.

This subdivision shall also apply where the owner purchases the housing

accommodations subsequent to such judicial or other sale.

[(g)] (h) [re-lettered only – text remains the same]

21. 9 NYCRR §2527.9 is amended by adding new subdivisions (c) and (d) to read

as follows:

(c) Unless otherwise expressly provided in this code, no additional time is required for

service by mail of any notice, order, answer, lease offer or other papers, beyond the time

period set forth in the code and such time period provided is inclusive of the time for

mailing.

(d) Unless otherwise expressly provided in this code, no additional time is required to

respond or to take any action when served by mail with any notice, order, answer, lease

offer, or other papers, beyond the time period set forth in this code and the time to

respond is commenced upon mailing of said notice, order answer, lease offer or other

paper.

22. 9 NYCRR § 2528.3 (a) is amended to read as follows:

(a) An annual registration shall be filed containing the current rent for each housing

accommodation not otherwise exempt, a certification of services, and such other

information as may be required by the DHCR, pursuant to the RSL, RSC or section

2527.11.

23. 9 NYCRR § 2528.3 is amended to add paragraph (c) to read as follows:

(c) An owner seeking to file an amended registration statement for other than the present

registration year must file an application pursuant to sections 2522.6(b) and Part 2527 of

this code as applicable to establish the propriety of such amendment unless the

13

amendment has already been directed by DHCR or is directed by another governmental

agency that supervises such housing accommodation.

24. 9 NYCRR § 2528.4(a) is amended to read as follows:

(a) The failure to properly and timely comply, on or after the base date, with the rent

registration requirements of this Part shall, until such time as such registration is

completed, bar an owner from applying for or collecting any rent in excess of: the base

date rent, plus any lawful adjustments allowable prior to the failure to register. Such a

bar includes but is not limited to rent adjustments pursuant to section 2522.8 of this title.

The late filing of a registration shall result in the elimination, prospectively, of such

penalty, and for proceedings commenced on or after July 1, 1991, provided that increases

in the legal regulated rent were lawful except for the failure to file a timely registration,

an owner, upon the service and filing of a late registration, shall not be found to have

collected a rent in excess of the legal regulated rent at any time prior to the filing of the

late registration. Nothing herein shall be construed to permit the examination of a rental

history for the period prior to four years before the commencement of a proceeding

pursuant to sections 2522.3 and 2526.1 of this Title.

25. 9 NYCRR § 2529.12 is amended to read as follows:

The filing of a PAR against an order, other than an order adjusting, fixing or establishing

the legal regulated rent, shall stay such order until the final determination of the PAR by

the commissioner. Notwithstanding the above, that portion of an order fixing a penalty

pursuant to section 2526.1(a) of this Title, that portion of an order resulting in a

retroactive rent abatement pursuant to section 2523.4 of this Title, that portion of an order

resulting in a retroactive rent decrease pursuant to section 2522.3 of this Title, and that

portion of an order resulting in a retroactive rent increase pursuant to section

2522.4(a)(2), (3), (b) and (c) of this Title, shall also be stayed by the timely filing of a

PAR against such orders until the expiration of the period for seeking review pursuant to

article seventy-eight of the civil practice law and rules [60 days have elapsed after the

determination of the PAR by the commissioner]. However, an order granting a rent

adjustment pursuant to section 2522.4(a)(2) of this Title, against which there is no PAR

filed by a tenant that is pending, shall not be stayed. Nothing herein contained shall limit

the commissioner from granting or vacating a stay under appropriate circumstances, on

such terms and conditions as the commissioner may deem appropriate.

26. 9 NYCRR § 2530.1 is amended to read as follows:

A proceeding for judicial review pursuant to article 78 of the Civil Practice Law and

Rules may be instituted only to review a final order of the DHCR pursuant to section

2526.2(c)(2) of this Title; or to review a final order of the commissioner pursuant to

section 2529.8 of this Title; or after the expiration of the 90-day or extended period

within which the commissioner may determine a PAR pursuant to section 2529.11 of this

14

Title, and which, therefore, may be "deemed denied" by the petitioner. The petition for

judicial review shall be brought in the Supreme Court in the county in which the subject

housing accommodation is located and shall be served upon the DHCR and the Attorney

General. A proceeding for judicial review of an order issued pursuant to section

2526.2(c)(2) or section 2529.8 of this Title shall be brought within 60 days after the

issuance date of such order. Issuance date is defined as the date of mailing of the order. A

party aggrieved by a PAR order issued after the 90-day or extended period of time within

which the petitioner could deem his or her petition "denied" pursuant to section 2529.11

of this Title, shall have 60 days from the date of such order to commence a proceeding

for judicial review, notwithstanding that 60 days have elapsed after such 90-day or

extended "deemed denial" period has expired. Service of the petition upon the DHCR

shall be made by either: [the rest of the section remains the same]

27. 9 NYCRR § 2531.2 is amended to add a new paragraph (e) as follows:

(e) No such ICF may be served on any apartment where the tenant is the recipient of a

Senior Citizen Rent Increase Exemption (SCRIE) or a Disability Rent Increase

Exemption (DRIE).

1

CONSOLIDATED - REGULATORY IMPACT STATEMENT SUMMARY

1. STATUTORY AUTHORITY:

The Administrative Code of the City of New York, (also known as “the Rent

Stabilization Law”) (RSL) §26-511(b) provides authority to the Division of Housing and

Community Renewal (“DHCR”) to amend the implementing regulations (also known as “the

Rent Stabilization Code”) (“RSC”); Section 44 of Chap. 97, Part B of the Laws of 2011 (“the

Rent Law of 2011”) further empowers DHCR to promulgate rules and regulations to

implement and enforce all provisions of the Rent Law of 2011 and any law renewed or

continued by the Rent Law of 2011 which includes the RSL.

RSL§§ 26-504.2(b); 26-511(c); 26-511(d); 26-514; 26-516(b); and 26-517 also provide

specific statutory authority governing the subject matter of many of the proposed

amendments.

2. LEGISLATIVE OBJECTIVES

The overall legislative objectives are contained in Sections 26-501 and 26-502 of the

RSL and Section 2 of the Emergency Tenant Protection Act (“ETPA”). Because of a serious

public emergency, the regulation of residential rents and evictions is necessary to prevent the

exaction of unreasonable rents and rent increases and to forestall other disruptive practices

that would produce threats to public health, safety and general welfare. DHCR is specifically

authorized by RSL §26-511(c)(1) to promulgate regulations to protect tenants and the public

interest, and is empowered by the Rent Law of 2011 to promulgate regulations to implement

and enforce new provisions added by the Rent Law of 2011 as well as any law continued or

renewed by the Rent Law of 2011 which includes the RSL.

2

3. NEEDS AND BENEFITS DHCR has not engaged in an extensive amendment process with respect to these

regulations since 2000. Since that time there has been significant litigation interpreting, not

only these regulations, but the laws they implement. In addition, DHCR has had twelve

years of experience in administration which informs this process so does its continuing

dialogue during this period with owners, tenants, and their respective advocates. This

dialogue is not only through its Office of Rent Administration (ORA) which engages in close

to one hundred forums and meetings on an annual basis, but through the Tenant Protection

Unit (TPU) which has been created to investigate and prosecute violations of the RSL.

DHCR underwent the regulatory process for the promulgation of amendments expressly

required by the Rent Law of 2011 which generated further comments.

This specific promulgation process was also preceded by a mass email outreach to known

stakeholders in the field to solicit additional comments and suggestions.

The needs and benefits of some of the specific modifications proposed are highlighted

below.

a. Addition of TPU definition

Its inclusion demonstrates DHCR’s commitment to the TPU and proactive enforcement

of the RSL.

b. Codification of “Exit Registrations”

This new provision in the regulation is taken from RSL §26-504.2(b) and provides for the

service of appropriate notices on a tenant in an apartment alleged to be exempt from the RSL

because of high rent vacancy deregulation. With the passage of the Rent Law of 2011 which

3

expressly gave DHCR additional authorization to enforce the RSL, inclusion of this

provision in the regulations is appropriate.

Greater oversight is demonstrably necessary in light of discrepancies among the

registrations filed; those that are no longer being filed with high rent vacancy deregulation as

the stated reason; and the number of units simply failing to register but without explanation.

Tying compliance into the current registration system provides an appropriate

enforcement mechanism.

c. Preferential Rent Review

There exists a compelling need to adopt a new regulation which requires owners, in

situations where a tenant is initially charged a preferential lesser rent and then charged a

higher rent, to demonstrate the legitimacy of that higher rent. Close to twenty-five percent of

the rents in New York City are listed in DHCR’s registration data-base as having preferential

rents.

The present regulations contain incorrect legal standards. Further, courts have also

acknowledged that the “4 year rule” of review gives way in areas where there is a continuing

obligation to conform one’s conduct to standards created by other provisions of the Rent

Stabilization Law.

The present rule of time-limiting review to four years of preferential rent (regardless of

when the higher rent was theoretically assumed to be proper, but never really established),

places tenants in an untenable situation that discourages the exercise of their right to obtain a

proper rent history.

4

d. Submetering costs and MCI eligibility

This new provision properly recalibrates what equipment is MCI eligible with respect to

submetering.

e. “C” violations and MCI’s

DHCR will now be conducting independent reviews of New York City’s database for

immediately hazardous violations which will assure uniform and consistent enforcement of

this standard governing MCI’s.

f. Enhanced DRIE and SCRIE Protections

Since the last code review, the State of New York adopted a Disability Rent Increase

Exemption (DRIE) for eligible low income disabled tenants similar to the existing Senior

Citizen Rent Increase Exemption (SCRIE) available to the low income elderly.

DHCR regulations, which already prohibit the implementation of electrical submetering

for SCRIE recipients, will be extended to disabled tenants receiving DRIE.

DHCR also is amending its regulations to exempt both SCRIE and DRIE tenants from the

high income/high rent deregulation procedures set forth in the RSL as those tenancies have

already been vetted through other government programs to have income far below that

required for deregulation.

g. Lease Rider Requirements and Enforcement

DHCR data and experience shows that Individual Apartment Improvement (IAI)

increases upon vacancy make up one of the largest components of increases under the RSL.

Paradoxically, a tenant may now only secure meaningful information or review of the

propriety of these increases by filing an overcharge complaint before DHCR or a Court.

Providing more information in the vacancy lease rider itself, as well as affording tenants the

5

ability to demand supporting documentation directly from the owners without Court or

DHCR intercession, will provide a cost effective alternative to such proceedings.

h. Codification of the overcharge “default formula”

DHCR uses this kind of formula for setting rents where an owner fails to provide

appropriate documentation to establish the legal rent in an overcharge proceeding or where

there was an illusory prime tenancy or a fraudulent scheme to deregulate the housing

accommodation. However, the regulations themselves, did not incorporate it.

i. Strengthening the process for service complaints

The present regulation provides that tenants are required, prior to filing a service

complaint with DHCR, to send a certified letter to the owner regarding the service

deficiency.

More than a decade of implementation has led DHCR to the conclusion that the rule has

often become a hurdle that suppresses the filing of complaints by the most vulnerable

tenants.

The DHCR amendments also bar those parts of MCI increases slated for future

collection, where there is a subsequently issued service reduction order. Precluding the

collection of these future 6% MCI increments until an outstanding service deficiency is

cured, is consistent with the plain language of the RSL, which bars collection of increases

where there is a failure to provide services and will aid DHCR in incentivizing prompt

restoration of services.

Similarly vacancy and longevity increases will no longer be allowed where there is an

outstanding service reduction.

6

j. Deemed Leases

A 2000 codification of “deemed lease” rules apparently allowed owners to claim that

they could extract the full rent from tenants for a new lease term where a tenant may have

remained only for a short period prior to moving out. DHCR is returning to the more

traditional and appropriate use of such “deemed leases” in overcharge proceedings.

k. Harassment Definition

This regulation expands the definition of “harassment” to reflect some of the more up-to-

date schemes to deprive tenants of their legitimate rights as rent stabilized tenants. Not every

harassing act is designed to create a vacancy, but can include intimidating the tenant in place

to preclude the legitimate exercise of such rights. These actions can include false and

illegitimate filings before DHCR

l. Codification of Certain Four Year Rule Exceptions

These provisions seek to set forth, in one place, a more comprehensive list of areas

where, to date, by statute, case law or regulation, the “four year rule” that ordinarily governs

rent and overcharge review, has been held not to be applicable and changes the rules with

respect to preferential rents and “vacancy on the base date” cases.

The preferential rent change has already been explained. With claims of vacancies on the

base date, it is more appropriate to test the validity of a present rent against these usual

standards of overcharge review, rather than simply rubber-stamping any rent that is collected

because of an alleged fortuity of a vacancy.

7

m. Amended registration and registration requirements

DHCR had accepted for filing, amended annual registrations at any time for any year.

These amendments, if treated similarly to “late” registrations under the RSL, could carry a

substantial penalty, but no penalty has been imposed.

The number of such amendments is significant and has the effect of corrupting the

purpose of DHCR’s registration data base as a contemporaneously created history of rents.

Now, such amendments, where appropriate, would be reviewed and regulated by DHCR.

DHCR is also amending the registration provisions to appropriately reflect DHCR’s

authority and ability to change the registration forms themselves each year to capture data

appropriate for the administration and enforcement of the RSL and RSC.

n. Freeze of Vacancy Bonuses based on Failure to Register

This change will conform DHCR’s practice to this statutory penalty for failing to

properly register.

4. COSTS The regulated parties are tenants and owners. There are no additional direct costs

imposed as costs of regular administration are capped at $10 per unit per year. The amended

regulations do not impose any new responsibility upon state or local government. Owners

will need to be initially more vigilant to assure their compliance with these changes, but such

costs are already a generally-accepted expense of owning regulated housing. There are

increased penalties in some instances if the regulations are violated, but the costs of

conforming present business practices to the change in standards is not substantial. In

addition, these consequences are largely consistent with existing case law or otherwise

necessary to secure compliance. DHCR has made a significant effort to assure a safe harbor

8

or alternatives from the more dire consequences for owners who are operating in good faith

and in substantial compliance.

5. LOCAL GOVERNMENT MANDATES

No new program, service, duty or responsibility is imposed on local government.

6. PAPERWORK

The amendments may, in a limited fashion, increase the paperwork burden. There will

be additional costs associated with filings and the need for additional record retention, but

these costs are comparably minimal and are of a kind with already existing registration and

record keeping requirements.

Any particularized specific claims that a changed regulation may create hardship or

inequity can and will be handled in the context of the administrative applications.

7. DUPLICATION No known duplication of State or Federal requirements except to the extent required by

law.

8. ALTERNATIVES

DHCR considered a variety of alternatives to many of these new rules. The alternative of

continuing the rule presently in place for all of these changes was considered and rejected.

Other alternatives suggested, but rejected included; treating amended registrations as the

equivalent of late registration, creating even more stringent pre-requirements for MCI filings

with respect to violation clearance, and even more severe penalties for notice violations with

respect to exit registrations and the provision of the lease rider. Continuation of the present

lease rider rule, requiring an order from DHCR directing that such a rider be provided prior

to any penalty, was not a real option as it effectively limits an owner’s necessary compliance

9

with lease rider requirements to a subset of tenants already sufficiently knowledgeable to file

a complaint with DHCR.

9. FEDERAL STANDARDS

Do not exceed any known minimum Federal standards. 10. COMPLIANCE SCHEDULE

It is not anticipated that regulated parties will require any significant additional time to

comply with the proposed rules.

1

CONSOLIDATED - REGULATORY IMPACT STATEMENT

1. STATUTORY AUTHORITY:

Section 26-511(b) of the Administrative Code of the City of New York, (also known as

“the Rent Stabilization Law”) (RSL) and RSL section 26-518(a) provide authority to the

Division of Housing and Community Renewal (“DHCR”) to amend the implementing

regulations (also known as “the Rent Stabilization Code”) (“RSC”); Section 44 of Chap. 97,

Part B of the Laws of 2011 (“the Rent Law of 2011”) further empowers DHCR to

promulgate rules and regulations to implement and enforce all provisions of the Rent Law of

2011 and any law renewed or continued by the Rent Law of 2011 which includes the RSL.

The RSL also provides specific statutory authority governing the subject matter of many

of the proposed amendments: RSL §26-504.2(b) provides for notice and information to

tenants upon deregulation and service of an “exit” rent registration identifying such

apartments as now exempt from regulation. RSL §26-517 provides for rent registration

generally. RSL §26-511(c)14 provides for “preferential rents” and the subsequent charging

of a legal rent, tied also to its use to meet deregulation rent thresholds. RSL §26-511(c)(2)

mandates promulgation of a code that requires owners not to exceed the level of lawful rents.

RSL §26-511(c)14 requires owners at the option of the tenant to grant one or two year

vacancy and renewal increases. RSL §26-511(c)(5) allows the RSC to include guidelines to

assure that the levels for rent increase will not be subverted or made ineffective. RSL §26-

511(c)(6)(b) provides that DHCR may establish criteria whereby it may act upon major

capital improvement (“MCI”) applications. RSL §26-511(d) provides for a rent stabilized

lease rider in a form promulgated by DHCR. RSL §26-516(b) empowers DHCR to enforce

the RSL and the RSC by issuance of appropriate orders, issuance of overcharge

2

determinations, and to establish treble damages. RSL §26-516 provides that in addition to

any other remedy provided by law, any tenant may apply to DHCR for a reduction of the rent

in effect prior its most recent adjustment and an order requiring such services to be

maintained; that DHCR shall reduce the rent to such level where an owner has failed to

maintain such services; that such owner “shall also be barred from applying for or collecting

any further rent increases”; and that the restoration of such services shall result in the

prospective elimination of such sanctions.

2. LEGISLATIVE OBJECTIVES

The overall legislative objectives are contained in Sections 26-501 and 26-502 of the

RSL and Section 2 of the Emergency Tenant Protection Act (“ETPA”). The Legislature has

determined that, because of a serious public emergency, the regulation of residential rents

and evictions is necessary to prevent the exaction of unreasonable rents and rent increases

and to forestall other disruptive practices that would produce threats to public health, safety

and general welfare. The legislation also has an objective to assure that any transition from

regulation to normal market bargaining with respect to such landlords and tenants is

administered with due regard to these emergency conditions.

DHCR is specifically authorized by RSL §26-511(c)(1) to promulgate regulations to

protect tenants and the public interest, and is empowered by the Rent Law of 2011 to

promulgate regulations to implement and enforce new provisions added by the Rent Law of

2011 as well as any law continued or renewed by the Rent Law of 2011. These laws include

the ETPA, the RSL, and the City and State Rent Control Laws.

3

3. NEEDS AND BENEFITS DHCR has not engaged in an extensive amendment process with respect to these

regulations since 2000. Since that time there has been significant litigation interpreting, not

only these regulations, but the laws they implement. In addition, DHCR has had twelve

years of experience in administration which informs this process, as does its continuing

dialogue during this period with owners, tenants, and their respective advocates.

DHCR personnel within its Office of Rent Administration (ORA) engages in close to one

hundred forums and meetings on an annual basis where the administration and

implementation of these laws are discussed.

In the last year this information gathering process has been enhanced through several

additional actions taken by DHCR.

First, DHCR created the Tenant Protection Unit (TPU), a unit designated by the

Commissioner to investigate and prosecute violations of the ETPA, the RSL and the City and

State Rent Laws. TPU, itself, has met with the various stakeholders in an effort to ascertain

what issues and concerns impinge on the owner and tenant community affected by these

regulations.

Second, DHCR underwent the regulatory process for the promulgation of amendments

expressly required by the Rent Law of 2011. That process generated significant comments

on other issues relating to the Rent Stabilization Code.

Third, this specific promulgation process was preceded by a mass email outreach to

known stakeholders in the field to solicit even further comments and suggestions.

The needs and benefits of some of the specific modifications proposed are highlighted below.

4

a. Addition of TPU.

Although the existing regulations already provide for delegation of functions under RSL,

the inclusion of TPU as a specific term within the regulations, demonstrates DHCR’s

commitment to the TPU and proactive enforcement of the RSL.

b. Codification of “Exit Registrations.”

This new provision in the regulation is taken almost verbatim from RSL §26-504.2(b), a

provision of the RSL added by the New York City Council pursuant to Local Law No. 12 of

2000. It provides for the service of appropriate notices on a tenant who resides in an

apartment that an owner asserts is no longer subject to the RSL because of high rent vacancy

deregulation. The enforcement of this section without a corresponding regulatory provision

has been inconsistent and problematic. Although Courts have denied increases without

compliance with its provisions because of its initial enactment by the City Council, there was

some question as to the ability to integrate it into a DHCR enforcement paradigm as a portion

of the Rent Laws. With the passage of the Rent Law of 2011 which expressly gave DHCR

authorization to enforce any such law, the state legislature resolved this matter, making its

inclusion of this provision in the regulations appropriate.

This greater oversight is long overdue. In New York City in 2011, 14,175 exit

registrations were filed; in 2010, 16,907 units; and in 2009, 18,617. Those owners listing

high rent vacancy deregulation as the reason was a lesser subset; on an annual basis: 11,364

units in 2011, 12,911 units in 2010 and 13,557 units in 2009. However, the number of units

leaving the system (and without explanation) seems to be higher. In 2009, annual

registrations (without initial registrations) were filed for 865,374 apartments. In 2011,

771,648 were filed, demonstrating that 93,726 units left the registration system. TPU and

5

ORA have an ongoing program to ascertain why apartments are not being registered. This

program’s inquires have resulted in the re-registration of 1,688 buildings with 16,969

apartments as of March 2013, all leaving a significant gap. Obviously there needs to be a

more regularized reporting requirement with consequences rather than the present system

which has no enforcement mechanism.

Tying compliance into the current registration system will provide an enforcement

mechanism subject to the same curative provisions used in the applicable registration

provisions in the RSL. The exit registrations, themselves, give owners a contemporaneous

benchmark which will aid them in legitimate efforts to contemporaneously establish the

propriety of high rent/vacancy deregulation and help them defend against claims by tenants

that such deregulations are part of a fraudulent scheme as defined by the Court of Appeals in

Grimm v DHCR, 15 N.Y.3d 358, 912 N.Y.S.2d 491 (1st Dept. 2010). Conversely, tenants

will have greater awareness of their rights and be able to more accurately ascertain whether

their apartment was properly deregulated.

c. Preferential Rent Review

Courts have ruled that the present regulations are incorrect to the extent that they assume

that the preferential rent may be preserved exclusively by the filing of a registration or that

the passage of more than four years precludes review as to whether there is a truly

preferential rent.

Courts have also acknowledged that the “4 year rule” gives way in areas where there is a

continuing obligation to conform one’s conduct to standards created by other provisions of

the Rent Stabilization Law.

6

Preferential rent is one of those areas. There exists a compelling need to adopt a new

regulation which requires owners, in situations where a tenant is initially charged a

preferential lesser rent and then charged a higher rent, to demonstrate the legitimacy of that

higher rent.

Clearly there can be no conceivable way to check whether that “previously established”

higher rent was proper without first examining the lease preceding it, and any other increases

that went into creating that higher rent, even if such increases are more than four years before

a complaint is filed. No statutory proscription exists to review that higher rent because of the

passage of four years.

Time-limiting that review to four years regardless of when the higher rent was

theoretically assumed to be proper, but never really established, places tenants in an

untenable situation that discourages the exercise of their right to obtain a proper rent history.

A tenant would need to decide, if the tenant is not paying this higher rent, whether to seek an

immediate review of the higher rent or to hold off on seeking a rental review and let the time

period for review run out and risk paying that higher rent at a later date without review.

Alternatively, in seeking that review, the tenant would risk no longer being treated as a

“preferred” by the owner upon lease renewal. Filing now may be a “lose” situation; failure to

file may be a “lose” situation later.

As for owners, the actual benefits inuring to them that have been advanced as rationales

behind these preferences are questionable when weighted against the actual data. Either

owners, it is explained, are providing discounts to those they perceive will be good tenants;

or in that certain boroughs, the rent stabilized rents will actually exceed market rents.

7

Neither explanation comes close to explaining the scope and prevalence of such

preferential rents, given the legislature’s findings that government intervention is necessary

to prevent the exaction of even higher rents and rent increases, and that owner advocacy

groups routinely assert that the legal rents under this system deprive owners of an appropriate

return. On the other hand, in Grimm v. DHCR, supra, the Court of Appeals indicated that

such claims of a discount may well be part of a fraudulent scheme to deregulate an

apartment.

Close to twenty-five percent of the rents, 203,408 apartments in New York City,

according to DHCR registration data-base, are listed as of May 2012 as having preferential

rents (814,500 were registered), and there is no discernable pattern to support the rationale

that these are simply lower rents in less “hot” boroughs. These preferential rents are equally

prevalent in each of the four boroughs of New York City which have the majority of rent

regulated units, with the largest number of preferential rents in Manhattan, cutting against the

proffered explanation that preferential rents are an out-of-Manhattan phenomenon. As

reported by DHCR to the NYC Rent Guidelines Board, as of May 16, 2012, there are 42,537

preferential rents registered in the Bronx, 50,406 in Brooklyn, 47,669 in Queens and 60,778

in Manhattan.

d. Submetering costs and MCI eligibility

This new provision properly recalibrates what equipment is MCI eligible with respect to

submetering so that tenants are not charged for that part of a submetering installation that

primarily benefits owners.

Submetering promotes energy efficiency by placing the costs of electrical usage as well

as its future fluctuations directly on the tenants rather than filtering those increases through

8

the RSL system of controlling rent increases. Thus, “market risks” related to energy costs

are essentially shifted from the owners to their tenants with the goal of making tenants more

likely to conserve and budget their electrical usage. Tenants do receive a corresponding

decrease from their legal rent when DHCR approves submetering, based on a formula that

will reflect the estimated current cost of such electrical usage. However, allowing an MCI

rent increase based on the installation of the device that enables such submetering,

immediately results in less of a rent decrease than that formula provides. Other possible

alternatives, such as barring submetering or continuing the present formulation, are not as

appropriate. The regulatory amendment still promotes the energy conservation consistent

with what DHCR and its predecessor rent agencies have done for forty years, but more

appropriately apportions some of the costs between owner and tenant. Accordingly, DHCR

will still allow increases for rewiring and electrical upgrades, but not for the submetering

equipment itself.

e. “C” violations and MCI’s

The presence of an immediately hazardous “C” violation leads to the denial of an MCI.

Weinreb Management v. DHCR, 295 A.D.2d 232, 744 N.Y.S.2d 321 (1st Dept. 2002); 370

Manhattan Avenue Co., LLC v. DHCR, 11 A.D.3d 370, 783 N.Y.S.2d 38 (1st Dept. 2004);

251 West 98th Street Owners LLC v. DHCR, 276 A.D.2d 265, 713 N.Y.S.2d 729 (1st Dept.

2000)

Although not so limited by its regulations, as a matter of practice, DHCR was not

conducting any independent review of the New York City’s Violation Database, but only

reviewed such violations where they were otherwise brought to DHCR’s attention.

9

This practice, itself, has already been mitigated by subsequent case law, where the

Appellate Division noted that others than the affected tenant themselves could legitimately

bring such violations to DHCR’s attention. Fieldbridge Associates LLC v. DHCR, 87

A.D.3d 598, 927 N.Y.S.2d 918 (1st Dept. 2011)

Since the promulgation of this Code provision in 1987, the New York City Violation

database has become readily available online, and New York City has implemented

numerous efficiencies to assure its data is current.

This new codification benefits owners and tenants. Tenants will obtain uniform and

consistent enforcement of the already existing regulatory standards governing MCI’s. For

both owners and tenants, the modification in procedure to be applied after the effective date

of the regulatory change is further coupled with a specific test period which provides all

parties going forward with greater certainty as to whether specific violations will impinge on

the grant of the MCI itself, or instead be the subject of a subsequent rent decrease

application.

f. Enhanced DRIE and SCRIE Protections

Since the last code review, the State of New York adopted a Disability Rent Increase

Exemption (DRIE) for eligible low income disabled tenants similar to the existing Senior

Citizen Rent Increase Exemption (SCRIE) available to the low income elderly.

DHCR regulations, which already prohibit the implementation of electrical submetering

for SCRIE recipients, will be extended to disabled tenants receiving DRIE.

DHCR also is amending its regulations to exempt both SCRIE and DRIE tenants from the

high income/high rent deregulation procedures set forth in the RSL. As those tenancies have

already been vetted through other government programs to have income far below that

10

required for deregulation, the procedure, if invoked by the owners, cannot obtain any

meaningful result. It simply creates unneeded stress on these vulnerable populations. Even

worse, it may result in the inappropriate loss of apartments through these senior or disabled

tenants failing to adequately respond to mechanically generated notices as part of the process.

g. Lease Rider Requirements and Enforcement

DHCR data and experience shows that Individual Apartment Improvement (IAI)

increases upon vacancy make up one of the largest components of increases under the Rent

Stabilization Law. Paradoxically, because the improvements do not require tenant consent,

they are among the least regulated. A tenant may only secure meaningful information or

review of the propriety of these increases by filing an overcharge complaint before DHCR or

a Court. This is a somewhat cumbersome and costly process for both owners and tenants.

Providing more information in the vacancy lease rider itself, as well as affording tenants the

ability to demand supporting documentation directly from the owners without Court or

DHCR intercession, will provide a cost effective alternative to such proceedings. Greater

transparency in how vacancy rents are set, will allow greater self-policing and encourage

voluntary compliance with the Rent Stabilization Law. The change, itself, is not a

significantly increased burden on owners as owners are already required to retain this

information and make it available to DHCR, or face severe penalties.

The Rent Stabilization Code, itself, used to contain severe penalties for failing to provide

such lease riders and Courts have denied increases that an owner seeks to secure without an

appropriate lease. DHCR designed the consequences for non-compliance to be similar to

those for failing to register, which contains ways to recognize a variety of mitigating

circumstances, and also time-limits the period for these direct demands for information.

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h. Codification of the overcharge “default formula”

DHCR and its predecessor agency have used this type of formula for setting rents where

an owner fails to provide appropriate documentation to establish the legal rent in an

overcharge proceeding. The same test is also used where there was an illusory prime tenancy

or a fraudulent scheme to deregulate the housing accommodation.

However, the regulations, themselves, did not incorporate the formula. Instead, a

modified formula was included in the RSL by the 2000 amendments that is available only in

very limited circumstances, largely for buyers in foreclosure proceedings. The inclusion of

this limited formula but not the actual rule itself has caused confusion.

i. Strengthening the process for service complaints

The present regulation provides that tenants are required, as a precondition to filing a

service complaint with DHCR, to send a certified letter to the owner 10 to 60 days prior to

filing a complaint regarding the service deficiency. A failure to append the letter to the

DHCR complaint, results in dismissal of the application.

This rule, enacted as part of the Code in 2000, had, as its goal, fostering voluntary

compliance by owners to provide required services.

More than a decade of implementation has led DHCR to the conclusion that, while

positive interaction between owners and tenants regarding repairs without DHCR’s

intervention needs to be encouraged, the dismissal of meritorious service complaints on this

basis is an even greater problem. The rule has often become a hurdle that suppresses the

filing of complaints by the most vulnerable tenants.

DHCR, as part of its service reduction procedures, already recognizes and gives owners

notice and an opportunity to cure service complaints prior to the issuance of rent reduction

12

orders. Even after such reductions, DHCR has a process to restore the rents. Nonetheless,

extensive numbers of rent reduction cases are granted and applications for rent (service)

restoration need to be filed.

For calendar year 2009, there were 2,469 rent reduction applications properly filed based

on failure to provide services and 1,013 rent reductions orders issued. For the calendar year

2010, there were 2,432 applications filed and 1,048 rent reduction orders issued. For the

calendar year 2011 there were 2,342 applications filed and 1,156 rent reduction orders issued.

Rent restoration applications, after some lag time, eventually roughly match rent

reductions ordered. For the calendar year 2009, there were 1,165 restoration applications

filed. For the calendar year 2010, there were 1,146 applications filed. For the calendar year

2011, there were 1,141 applications filed. (Significantly, over the three year period, more

than 25% of the rent (service) restoration orders found services not restored.)

DHCR has recently implemented its “code red” processing whereby DHCR, on the most

egregious service issues notifies owners of the service reduction complaint and through the

inspection process will assist owners in getting access to apartments, if necessary. The

experience in this type of case processing is similar to that of filings where owners receive

written notification of a service reduction by the tenant, in that in over 40% of the cases, rent

reduction orders are issued due to the failure of owners to make repairs. The difference in

code red case processing is that because no initial notice is required as a pre-requisite to

filing with DHCR, action is taken much more quickly (orders are generally issued within 61

days of filing) when compared to standard processing which requires that the case may only

be filed within a time period of 10 to 60 days after a tenant notifies an owner.

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On the other hand, staff analysis shows that based on this pre-letter request, over sixteen

percent of the service complaints that tenants try to file are rejected in whole based on the

failure to send a “pre-letter” with another fifteen percent rejected in part where that letter

does not raise each service problem upon which a DHCR complaint is then filed or there was

another defect with the filing. Approximately seventy-five percent of rejected complaints are

never re-filed. While a portion of these cases may have been addressed by the owners, the

large percentage of cases granted after owners have been given notice suggests that is not the

situation. Staff review of a significant sampling of the rejected complaints has also led to the

conclusion that the effect of this rule falls disproportionately on complainants with limited

English language proficiency as well as those identified as elderly and infirm. This

disproportionate impact unfortunately makes sense, as such tenants are being called upon to

navigate a technically dense requirement without the aid and/or intervention of the

government as a precondition to obtaining actual government help.

Even where such notice is, in DHCR’s opinion, appropriately given, there has been some

owner movement in actual practice to turn the notice into a strict pleading requirement, to

defeat service complaints, on the basis of” improper service”, or that the tenant failed to use

the appropriate legal name for the owner.

The proposed DHCR modification still encourages direct owner and tenant interaction to

secure repairs and will recognize, as part of its case-by-case processing, that time, if

reasonable under the circumstances, may be afforded to owners to provide necessary repairs.

However, the continuation of the regulation in its present form is untenable and

unconscionable.

14

The DHCR amendments also bar those parts of MCI increases that have a future effective

date, where there is a subsequently issued service reduction order with an effective date

which is prior to the date slated for MCI increase collection. Precluding the collection of

these future 6% MCI increments until an outstanding service deficiency is cured, is

consistent with the plain language of the RSL, which bars collection of increases where there

is a failure to provide services and will aid DHCR in incentivizing prompt restoration of

services.

Similarly vacancy and longevity increases will no longer be allowed where there is an

outstanding service reduction. DHCR’s prior position to the opposite effect was consistent

with its understanding that a failure to otherwise comply with the RSL did not affect the

ability to collect these increases. However, the Appellate Division has now ruled otherwise.

See, Bradbury v. 342 West 30th Street Corporation, 84 A.D.3d 681, 924 N.Y.S.2d 349 (1st

Dept. 2011).

j. Deemed Leases

The use of “deemed leases” has an extensive history in overcharge cases and has been

used in the past to shield owners from unwarranted overcharge awards where a tenant may

not have executed a renewal lease, but remained for the entire term of such lease without

eviction and paid the increase attendant on renewal. However, the 2000 codification of the

deemed lease rule instead allowed owners to claim that the rule could be used as a sword, to

extract the full rent from tenants for a complete lease term where a tenant may have remained

only for a short period prior to moving out. The Appellate Division, 2nd Department, in

Samson Mgt. v. Hubert, 92 A.D.3d 932, 939 N.Y.S.2d 138 (2nd Dept. 2012), found that the

2000 regulatory provision, if it was indeed seeking to give a legal gloss to such behavior,

15

would be contrary to law. Hence, DHCR is amending its regulation to conform to the

Court’s decision in Samson Mgt. v. Hubert and return to the traditional usage of “deemed

leases.”

k. Harassment Definition

This regulation expands the definition of “harassment” to reflect some of the more up-to-

date schemes to deprive tenants of their legitimate rights as rent stabilized tenants. Not every

harassing act is designed to create a vacancy, but can include intimidating the tenant in place

to preclude the legitimate exercise of such rights. These actions can include false and

illegitimate filings before DHCR

l. Codification of Certain Four Year Rule Exceptions

These provisions seeks to set forth, in one place, a more comprehensive list of areas

where, to date, by statute, case law or regulation, the “four year rule” that ordinarily governs

rent and overcharge review, has been held not to be applicable. The list should serve as a

useful guide to owners and tenants. The list contains two areas expressly modified by these

regulations: preferential rents and vacancy on the base date cases.

The needs and benefits for the change with respect to preferential rents have already been

explained.

As to vacancies, DHCR, prior to this amendment, took the position that if an apartment

was vacant or exempt (usually by owner occupancy) on the base date (four years prior to the

filing of an overcharge complaint), DHCR was precluded from determining whether the

present tenant’s rent was legal. Rather than finding the correct rent by calculating what

would have been the proper increase for that period, as it would have if the vacancy or

exemption was within four years, DHCR would dismiss the complaint. Although this prior

16

policy was upheld, experience has demonstrated that this is an area where it is more

appropriate to test the validity of a present rent against these usual standards, even if these

standards required rental information that occurred before the base date, rather than simply

rubber-stamping any rent that is collected.

The lack of a proper base date lease (which is what the owner would be asserting) is the

identical lack of proof that could otherwise lead to use of the default method in setting the

rent. In fact, there have been owners who have inappropriately used the “vacancy on base

date” defense in an effort to defeat such legitimate review.

The present rule is not required by statute as the Appellate Division, First Department,

has already reviewed information before the base date where there was such a vacancy, but

because the owner claimed the rent was now also unregulated, it did not fall within the

parameters of what had been the existing regulation. Gordon v. 305 Riverside Corp., 93

A.D.3d 596, 941 N.Y.S.2d 93 (1st Dept. 2012). There is ongoing litigation over the

applicability of the four year rule to Roberts litigation; given that such litigation is still

ongoing and not finally determined, it is not contained in this regulation.

m. Amended registration and registration requirements

Although not provided for by regulation, through its own inaction by not rejecting them,

DHCR had allowed owners to file “amended” registrations at any time for any year. These

amendments, if treated similarly to “late” registrations under the RSL, could carry a

substantial penalty, but no penalty has been imposed.

The number of such amendments is significant. In 2009, amended registrations for 1,129

buildings representing 5,958 apartments were filed; in 2010, amended registrations for 1,259

buildings representing 8,597 apartments were filed; in 2011, amended registrations for 402

17

buildings representing 4,579 apartments were filed. The unsupervised inclusion of

amendments in the registration system has the effect of corrupting the purpose of DHCR’s

registration data base as a contemporaneously created history of rents. An amended

registration was cited by the Court of Appeals in Grimm v. DHCR, supra, as one of the

indicia of a fraudulent scheme to deregulate a housing accommodation.

The new DHCR rule would still allow for such amendments, where appropriate, but

would ensure that the process was regulated by itself or another governmental agency, and

where appropriate, assure there was also notice to the present tenant, who could comment on

the owner’s rationale for seeking such amendment.

DHCR is also amending the registration provisions to appropriately reflect DHCR’s

authority and ability to change the registration forms themselves each year to capture data

appropriate for the administration and enforcement of the RSL and RSC.

n. Freeze of Vacancy Bonuses based on Failure to Register

This change will conform DHCR’s practice to the Court’s interpretation of this statutory

penalty for failing to properly register.

o. Housing Development Fund Companies

This provision provides an appropriate rent-setting mechanism for Housing Development

Fund Companies upon a foreclosure which are not presently covered by DHCR’s

deconversion regulations and balances the need for an economic rent with the low income

nature of these tenancies.

4. COSTS The regulated parties are residential tenants and the owners of the rent stabilized housing

accommodations in which such tenants reside. There are no additional direct costs imposed

18

on tenants or owners by these amendments as owner direct costs are capped at $10 per unit

per year. The amended regulations do not impose any new program, service, duty or

responsibility upon any state agency or instrumentality thereof, or local government. Owners

of regulated housing accommodations will need to be initially more vigilant to assure their

compliance with these changes. Compliance costs are already a generally-accepted expense

of owning regulated housing. There are increased penalties in some instances if the

regulations are violated, but the costs of conforming present business practices to the change

in standards is not substantial. In addition, these consequences are largely consistent with

existing case law or otherwise necessary to secure compliance. DHCR has made a

significant effort to assure a safe harbor or alternatives from the more dire consequences for

owners who are operating in good faith and in substantial compliance. Tenants will not incur

any additional costs through implementation of the proposed regulations.

The additional costs need to be weighed against the actual outlay by owners leading to

what DHCR is seeking to supervise, monitor, and make more transparent by many of these

changes: increases leading to the possible deregulation of units. Imposing rents that

approach deregulation thresholds requires a significant outlay of funds on the part of owners.

The median rent stabilized rent is $1,107 per month. The median stay of a rent stabilized

tenant is 7 to 8 years, based on DHCR’s review of turn-over from its registration database.

Thus, adding the vacancy bonus and longevity increase to the median rent will result in a rent

of $1,288 per month while the amount to deregulate an apartment is a rent of $2,500. This

means an owner must increase the rent through the installation of individual apartment

improvements costing either $72,880 or $42,420, depending on the number of units in the

building. This financial outlay stands in contrast to the median family income of a rent

19

stabilized tenancy of $37,000 per year and mean family income of $51,357 per year as

reported by NYC Rent Guidelines Board.

5. LOCAL GOVERNMENT MANDATES

The proposed rule making will not impose any new program, service, duty or

responsibility upon any level of local government.

6. PAPERWORK

The amendments may, in a limited fashion, increase the paperwork burden. There will

be additional costs associated with filings and the need for additional record retention, but it

is relatively minimal. The filing of exit notices and registrations and the use of proper lease

riders are already part of the RSL. Serving final registrations is an extremely limited cost

and registration has otherwise been an annual owner cost since 1984 for these housing

accommodations.

There may be more instances where an owner may need to retain proof of the legality of

rent for a longer period, but a prudent owner would already retain that information for other

purposes, such as assuring that an increase was not part of a fraudulent scheme to deregulate

an apartment, making sure leases were offered on the same terms and conditions, assuring

that a preferential rent was correct, and to resolve possible jurisdictional disputes. Any

particularized specific claims that a changed regulation may create hardship or inequity can

and will be best handled in the context of the administrative applications, themselves, where

such factual claims can be assessed. IG Second Generation Partners, L.P. v. DHCR, 10

N.Y.3d 474, 859 N.Y.S.2d 598 (2008)

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7. DUPLICATION

The amendments do not add any provisions that duplicate any known State or Federal

requirements except to the extent required by law. There are instances where a rent stabilized

property participates in another State, city or Federal housing program. In those instances,

there may be a need to comply with the RSC requirements as well as the mandates of that

city, State or Federal program.

8. ALTERNATIVES

DHCR considered a variety of alternatives to many of these new rules. As set forth in

part in the Needs and Benefits section, the alternatives of continuing the rule presently in

place for all of these changes were considered and rejected.

There were other alternatives suggested as part of DHCR’s outreach that were reviewed

initially as part of DHCR’s initial deliberative process, but were rejected.

For example:

DHCR considered treating any attempt to amend registrations as the equivalent

of late registration, since it nullifies the previous timely filing. However, this blanket

penalty gave way to a more nuanced procedure to allow review of the reasons for

amendments and to make amendments subject to review and supervision.

DHCR considered creating more stringent pre-requirements for MCI filings with

respect to violation clearance. However, in leaving those other building violations to

service reductions, while tightening up procedures to assure the clearance of

immediately hazardous violations, DHCR sought to strike a balance between the

need to assure owner compensation for building improvements and the maintenance

of already existing services.

21

DHCR considered the implementation of more severe penalties for notice

violations with respect to exit registrations and the provision of the lease rider. Rather

than create a blanket denial of increases, DHCR made the consequences act in lock

step with regular registration penalties to assure that a paperwork failure, in and of

itself, would not lead to an excessive penalty, if the rent was otherwise legal and

proper. However, continuation of the present rule, which required as a precondition to

any penalty for failing to provide a rider that the tenant obtain an order from DHCR

directing that such a rider be provided, was not a real option. The purpose of the rider

is to advise tenants of their rent stabilized rights and to allow them to make an

informed decision as to whether the invocation of DHCR’s intercession to obtain

those rights is necessary. This precondition, by definition, limits penalties for failing

to provide a rider only to those tenants already sufficiently savvy about their rights to

already know them. It also effectively limits an owner’s necessary compliance with

lease rider requirements to the same subset of knowledgeable tenants, thus assuring

that the purpose of the rider is effectively gutted by regulation.

9. FEDERAL STANDARDS

The proposed amendments do not exceed any known minimum Federal standards.

10. COMPLIANCE SCHEDULE It is not anticipated that regulated parties will require any significant additional time to

comply with the proposed rules.

CONSOLIDATED - RURAL AREA FLEXIBILITY ANALYSIS

The Rent Stabilization Code applies exclusively to New York City, and therefore,

the proposed rules will not impose any reporting, recordkeeping, or other compliance

requirements on public or private entities located in any rural area pursuant to

Subdivision 10 of SAPA Section 102.

1

CONSOLIDATED - REGULATORY FLEXIBILITY ANALYSIS (FOR SMALL BUSINESSES AND LOCAL GOVERNMENTS)

1. EFFECT OF RULE

The Rent Stabilization Code (“RSC”) applies only to rent stabilized housing units in

New York City. The class of small businesses affected by these proposed

amendments would be limited to certain small property owners, who own limited

numbers of rent stabilized units. The amended regulations would have limited

burdensome impact on such businesses. These amendments to the RSC, which apply

exclusively in New York City, are expected to have no impact on the local

government thereof.

2. COMPLIANCE REQUIREMENTS

The proposed amendments would require small businesses that own regulated

residential housing units to perform some minimal additional recordkeeping or

reporting. Such businesses will continue to need to keep records of rent increases and

improvements made to the properties in order to qualify for rent increases authorized

under the proposed changes, but in addition to keeping such records, will also be

required in vacancy and renewal lease riders to provide such records to the tenant. In

addition, rent increases will not be permissible until the proper lease rider is provided

to the tenant. The rent would be frozen based on such failure if the rent is otherwise

illegal.

Further, such businesses will be required to provide a valid explanation for the

need to amend registration statements already filed with DHCR. The proposed

2

amendment of the registration statements must also be provided to the tenant in

occupancy and would generally require the owner to provide DHCR an explanation

of the need for such amendment.

In addition, small businesses will be required to produce rental records prior to the

four year review of rental records in circumstances where there is a finding of a

fraudulent scheme to deregulate an apartment; where there is a “preferential rent” in

order to establish the terms and conditions of such preferential rent and whether it

was previously established; and where an apartment was vacant or temporarily

exempt on the base date. While these businesses may need to retain proof of the

legality of rent for a longer period and produce such to DHCR, a prudent business

owner would already have retained that information for these purposes already based

on existing case law.

Such businesses will also be required to file an exit registration with DHCR when

an apartment is deregulated and required to serve such on the tenant who resides in

the apartment that the business asserts is no longer subject to regulation. The exit

registrations themselves give these businesses a contemporaneous benchmark which

will aid them in legitimate efforts to contemporaneously establish the propriety of

high rent/vacancy deregulation and help them defend against claims by tenants that

such deregulations are part of fraudulent scheme as defined by the Court of Appeals

in Grimm v DHCR, 15 N.Y.3d 358, 912 N.Y.S.2d 491 (1st Dept. 2010). This

requirement has also been statutory since 2000.

Businesses for a very limited time period will also be required to provide

additional information directly to tenants with respect to explaining the propriety of

3

IAI charges comprising the rent as a new lease. However, since the purpose of this is

to cut down on rent overcharge proceedings before DHCR and the court, it may be

ultimately more cost effective than waiting on administrative or judicial proceedings

to supply the information.

3. PROFESSIONAL SERVICES

The proposed amendments will not require small businesses to obtain any new or

additional professional services. Many businesses do use a professional service to file

and serve their annual registrations. Even if the filing of a rent registration was

considered a new requirement, as explained in the Regulatory Impact Statement, the

cost is comparatively minimal.

4. COMPLIANCE COSTS

There is no indication that the proposed amendments will impose any significant,

initial costs upon small businesses. There are no additional direct costs imposed on

these businesses by these amendments as owner direct costs are capped at $10 per

unit per year. Small business owners of regulated housing accommodations will need

to be initially more vigilant to assure their compliance with these changes.

Compliance costs are already a generally-accepted expense of owning regulated

housing. There are increased penalties in some instances if the regulations are

violated, but the costs of conforming present business practices to the change in

standards is not substantial. In addition, these consequences are largely consistent

with existing case law or otherwise necessary to secure compliance. DHCR has made

a significant effort to assure a safe harbor or alternatives from the more dire

4

consequences for owners who are operating in good faith and in substantial

compliance.

The additional costs need to be weighed against the actual outlay by owners

leading to what DHCR is seeking to supervise by many of these changes: increases

leading to the possible deregulation of units. Imposing rents that approach

deregulation thresholds requires a significant outlay of funds on the part of owners.

The median rent stabilized rent is $1,107 per month. The median stay of a rent

stabilized tenant is 7 to 8 years based on DHCR’s review of turn over from its

registration database. Thus adding the vacancy bonus and longevity increase to the

median rent will result in a rent of $1,288 per month while the amount to deregulate

an apartment is a rent of $2,500. This means an owner must increase the rent through

individual apartment improvements through installation of improvements costing

either $72,880 or $42,420 depending on the number of units in the building. This

financial outlay stands in contrast to the median family income of a rent stabilized

tenancy of $37,000 per year and mean family income of $51,357 per year as reported

by New York City Rent Guidelines Board.

The amended regulations do not impose any new program, service, duty or

responsibility upon any state agency or instrumentality thereof, or local government.

5. ECONOMIC AND TECHNOLGICAL FEASIBILITY

Compliance is not anticipated to require any unusual, new or burdensome

technological applications but ultimately encourages the use of “online” filings and

use of DHCR forms, which are increasingly online, which will actually reduce costs.

5

6. MINIMIZING ADVERSE IMPACT The proposed regulations have no adverse impact on local government. They will

have comparatively minimal costs to businesses considering that these changes are

necessary to enforce a statute designed to protect the public health safety and welfare.

The regulations being implemented do not create different regulatory standards for

small businesses. Instead DHCR in the administrative proceedings themselves can

take equitable circumstances into consideration which may include the size of the

business. It is difficult, on a blanket regulatory basis, to make exceptions for small

businesses. Outside of the proceedings themselves, it is difficult to ascertain the size

of the business subject to these regulations as a single business may own multiple

properties often created as single asset corporations. However, as set forth in the

Regulatory Impact Statement, the new rules recognize a variety of mitigating

circumstances, safe harbors and curative provisions so that an otherwise legally

compliant owner suffers minimal or no penalties for a paperwork omission error. To

the extent the approaches suggested in SAPA section 202-b are otherwise appropriate,

present procedures take these into account.

7. SMALL BUSINESS AND LOCAL GOVERNMENT PARTICIPATION

DHCR personnel within its Office of Rent Administration (ORA) engages in close to

one hundred forums and meetings on an annual basis with community groups, owner

and tenant advocacy organizations and local officials where the administration and

implementation of these provisions was under discussion. In the last year this

information gathering process has been enhanced through several additional actions

taken by DHCR.

6

DHCR created the Tenant Protection Unit (TPU) a unit designated by the

Commissioner to investigate and prosecute violations of the ETPA, the RSL and the

City and State Rent Laws. TPU itself has met with the various stakeholders in an

effort to ascertain what issues and concerns impinge on the owner and tenant

community affected by these regulations.

Further, DHCR held a public hearing on the implementation of regulations to

conform to the changes in the rent laws enacted by the 2011 Law at which many of

these provisions were raised by commenters as suggested changes and ORA

subsequently sent outreach letters to stakeholders, specifically including small

businesses and their advocates, seeking comments and suggestions on changes to the

regulations. Finally, the Rent Stabilization Law specifically provides for review by

the New York City Department of Housing Preservation and Development prior to

promulgation.

CONSOLIDATED - JOB IMPACT STATEMENT It is apparent from the text of the rules, required by statutory amendment, that

there will be no adverse impact on jobs and employment opportunities by the

promulgation of these regulations.

ExecutiveOrderNo.17LocalGovernmentMandateEvaluationImpactonLocalGovernmentandPropertyTaxpayers

Submitting Agency: DHCR NYCRR Citation: 9 NYCRR 2520.5(o); 2520.11(u); 2521.1; 2521.2(b), (c); 2522.4(a)(3)(22); 2522.4(a)(13); 2522.4(d)(3)(iii); 2522.5(c)(1); 2522.5(c)(3); 2522.6(b); 2523.4(a)(1), (a)(2), (c), (d)(2); 2523.5(c)(2), (c)(3); 2524.3(a), (e), (g); 2525.5; 2526.1(a)(2); 2526.1(a)(3)(iii); 2526.1(g); 2527.9; 2528.3; 2528.4(a); 2529.12; 2530.1; 2531.2 Description of the Regulation: The proposed regulations codify the addition of the Tenant Protection Unit; codify exit registrations, provide an appropriate rent setting mechanism for HDFCs upon a foreclosure; remove language preserving preferential rents solely through registrations; remove submetering costs as eligible for MCI increases and allow DHCR to independently review “C” violations to deny MCI applications; add enhanced DRIE and SCRIE protections; increase requirements for lease rider with additional explanation of rent increases and the ability of tenants to demand supporting documentation, and provide for a rent freeze for failure to provide the lease rider or supporting documentation unless the rent would otherwise be legal; codify the default formula for rent setting with an alternative fourth method; remove service complaint pre-notice as a basis for dismissal of a complaint, reduce time for owners to respond to a service complaint, prevent 6% MCI increases from being collected after a service reduction order, and bar vacancy bonuses after a service reduction order; conform deemed lease provision to case law; redefine harassment to include certain false filings intended to deprive tenants of continued rent stabilized protections; codify exceptions to four year statute of limitations; require DHCR or other government approval for amended registrations if not amended within appropriate filing year; clarify that a rent freeze due to failure to register includes vacancy bonuses; add five days for mailing of certain notices, exclude additional five days for mailing of other papers and notices not already specified, and clarify that Article 78 statute of limitations runs from date of mailing of DHCR order. Statutory Authority for the Regulation: The Administrative Code of the City of New York and Section 44 of Chapter 97, Part B of the Laws of 2011 enable DHCR to amend the Rent Stabilization Code. Agency Contact: Gary R. Connor – General Counsel Telephone: (212) 480-6707 Email: gconnor@nyshcr.org 1. Does the regulation impose a mandate on a county, city, town, village, school district or

special district that requires such entity to:

a. Provide or undertake any program, project or activity; Yes No X

b. Increase spending for an existing program, project or activity (even if such program, project or activity is voluntarily undertaken by a local government unit);

Yes No

c. Grant any new property tax exemption, or broaden the eligibility or increase the value of any existing property tax exemption; or

Yes No

d. Carry out a legal requirement that would likely have the effect of raising property taxes.

Yes No If the answer to all questions above are “no,” ensuring the regulation will not result in a mandate on local governments and property taxpayers, an accounting and the approval of the Office for Taxpayer Accountability are not required. If the answer to any question above is “yes,” and the regulation may have a fiscal impact on local governments and property taxpayers, please proceed to items 2 – 3. 2. Is the mandate required by federal law or regulation or state law?

Yes No

a. If yes, please cite the specific provision in the statute or federal regulation.

b. If yes, please describe any elements of the regulation not specifically mandated by

the statute or regulation. 3. If any portion of the mandate is not required by federal or state law, please attach to

this Checklist an Accounting for such portion containing:*

a. A description of the mandate in the regulation;

b. An accounting of the impacts of such mandate that includes:

(i) A fiscal impact statement;

(ii) A cost-benefit analysis, which includes:

(x) a specific delineation of the costs and benefits to local governments and property taxpayers; and

(y) a quantification of the impact on local government revenue and

expenditures, where such impact is quantifiable based on available

information (please consult with the Governor’s Office of Regulatory Reform if further guidance is needed);

c. A description of input sought and received from affected local governments;

d. A description of the proposed revenue sources to fund such mandate; and

e. An explanation as to why this regulation should be advanced with a mandate. *Note: The “Regulatory and Flexibility Analysis for Small Businesses and Local Governments” may be attached so long as the items set forth in 3 above are fully accounted for in the Analysis.

[*1]

Argued September 13, 2010; decided October 19, 2010

Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin., 68 AD3d 29, affirmed.

{**15 NY3d at 362} OPINION OF THE COURT

Ciparick, J.

On this appeal, we are asked to determine whether the rationale employed in Thornton v Baron (5 NY3d 175 [2005]), which allowed the parties to look back farther than four years, applies in a situation where it is alleged that the standard base date rent is tainted by [*2]fraudulent conduct on the part of a landlord. We conclude that it does, and that such base date rent may not be used as a basis for calculating subsequent regulated rent if fraud is indeed present.

I.

In 1999, prior to the tenancy of petitioner Sylvie Grimm, the rent-stabilized apartment at issue here was registered with the Division of Housing and Community Renewal (DHCR) at a monthly rent of $578.86. In 2000, upon a vacancy in the apartment, rather than using the

Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin.

2010 NY Slip Op 07379 [15 NY3d 358]

October 19, 2010

Ciparick, J.

Court of Appeals

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, December 8, 2010

In the Matter of Sylvie Grimm, Respondent,v

State of New York Division of Housing and Community Renewal Office of Rent Administration, Appellant. 151 Owners Corp., Intervenor-Appellant.

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required rent-setting formula to determine the rent that it could legally charge the next tenants of the apartment, the owner notified prospective tenants that the rent for the subject apartment was $2,000 per month. However, the owner informed the prospective tenants that, if they agreed to make certain repairs and improvements to the apartment at their own expense, the rent would be reduced to{**15 NY3d at 363} $1,450. Both sums were unlawful because of the rent-stabilized status of the apartment. The tenants accepted the offer, and signed a written lease agreement without a rent-stabilized lease rider. The owner apparently did not provide those tenants with a statement showing the apartment was registered with DHCR.

In 2004, petitioner moved into the apartment, agreeing to the rental rate of $1,450. Her initial lease did not specify that the apartment was rent stabilized. Thereafter, in July 2005, petitioner filed a rent overcharge complaint with DHCR. The landlord, intervenor 151 Owners Corp., soon after receiving the overcharge complaint, sent petitioner revised versions of her 2004 and 2005 leases which advised that the apartment was subject to rent stabilization. In its answer to the overcharge complaint, 151 Owners Corp. admitted that the apartment had not been registered with DHCR since 1999. At the same time it filed the answer to the overcharge complaint, 151 Owners Corp. filed registration statements with DHCR for the years 2001 through 2005.

In an order dated June 21, 2006, the DHCR Rent Administrator denied petitioner's overcharge complaint on the ground that the rent on the "base date"—i.e., the date four years prior to the filing of the complaint—was $1,450, and the rent adjustments subsequent to the base date had been lawful. The Rent Administrator did not address the issue whether the registration statement in effect on the base date was reliable or set forth a lawful rent. DHCR denied petitioner's request for administrative review of the Rent Administrator's determination, and denied her request for reconsideration.

Petitioner thereafter commenced this CPLR article 78 proceeding challenging DHCR's determination denying administrative review. The petition sought (1) a declaration that she was the legal rent-stabilized tenant of the apartment and (2) remand to DHCR "with the direction that the rent for the subject apartment should be frozen at the 1999 amount, because the [*3]owner failed to register the subject apartment for 2000, and computing the rent overcharge amount."

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Supreme Court granted the petition, vacated DHCR's determination and "remanded [the matter] . . . for reconsideration in accordance with [the court's] decision" (2007 NY Slip Op 34184[U], *5). Supreme Court noted that DHCR's determination simply calculated the rent by assuming, without actually determining, that the registration in effect on the base date was{**15 NY3d at 364} reliable. The court also noted that DHCR did not specifically reject petitioner's allegations of fraud. The court reasoned, under Thornton v Baron (5 NY3d 175, 181 [2005]), that DHCR's failure to consider petitioner's allegations of fraud and the reliability of the rent charged on the base date warranted remand to the agency for de novo review of the overcharge complaint.

DHCR and 151 Owners Corp. separately appealed. The Appellate Division affirmed, with two Justices dissenting (Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin., 68 AD3d 29 [1st Dept 2009]). The court reasoned:

"Given the specific facts of this case, DHCR should not be allowed to turn a blind eye to what could be fraud and an attempt by the landlord to circumvent the Rent Stabilization Law . . .

"[W]here, as here, there is an indication of possible fraud that would render the rent records unreliable, it is an abuse of discretion for DHCR not to investigate it" (id. at 33).

The two dissenting Justices voted to reverse and "would [have found] that [DHCR] acted rationally in complying with the legislative intent expressed in the statute of limitations set forth in CPLR 213-a and [the] Rent Stabilization Law" (id. at 34 [Buckley, J., dissenting]).

DHCR and 151 Owners Corp. appealed by permission of the Appellate Division, which certified the following question: "Was the order of Supreme Court, as affirmed by this Court, properly made?" We now affirm and answer the certified question in the affirmative.

II.

As we have previously explained, rent overcharge claims are generally subject to a four-year statute of limitations. Specifically, Rent Stabilization Law of 1969 (Administrative Code of City of NY) § 26-516 (hereinafter Rent Stabilization Law), as amended by the Rent Regulation Reform Act (RRRA) of 1997, states:

"[A] complaint under this subdivision shall be filed with [DHCR] within four

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years of the first overcharge alleged and no determination of an{**15 NY3d at 365} overcharge and no award or calculation of an award of the amount of an overcharge may be based upon an overcharge having occurred more than four years before the complaint is filed . . . This paragraph shall preclude examination of the rental history of the housing accommodation prior to the four-year period preceding the filing of a complaint pursuant to this subdivision" (Rent Stabilization Law § 26-516 [a] [2]; see also CPLR 213-a).

[*4]The RRRA "clarified and reinforced the four-year statute of limitations applicable to rent overcharge claims . . . by limiting examination of the rental history of housing accommodations prior to the four-year period preceding the filing of an overcharge complaint" (Thornton, 5 NY3d at 180, citing Matter of Gilman v New York State Div. of Hous. & Community Renewal, 99 NY2d 144, 149 [2002]; see also Matter of Cintron v Calogero, 15 NY3d 347 [2010] [decided today]; Governor's Approval Mem, Bill Jacket, L 1997, ch 116). To effectuate the purpose of the four-year limitations period, in rent overcharge cases DHCR regulations, as relevant here, set the "legal regulated rent" as the rent charged on the "base date," which is the "date four years prior to the date of the filing of [the overcharge] complaint" plus any subsequent lawful increases (9 NYCRR 2520.6 [e], [f] [1]; 2526.1 [a] [3] [i]).

The four-year limitations period was explained in our decision in Thornton (5 NY3d 175[2005]), where we held that a lease provision purporting to exempt an apartment from the Rent Stabilization Law in exchange for an agreement not to use the apartment as a primary residence was void as against public policy (see id. at 179-180). Our ruling was made in connection with a scheme between a landlord and an illusory tenant to agree that an apartment would not be used as the named tenant's primary residence, resulting in the elimination of the rent-stabilized status of the apartment. Acknowledging that the apartment's prior rental history could not be examined, and that the stabilized rent before the fraudulent scheme was of no relevance, we nonetheless rejected the owner's contention that "the legal regulated rent should be established by simple reference to the rental history" on the date four years prior to the commencement of the overcharge action (id. at 180-181). We explained that the lease was "void at its inception" because its "circumvent[ion of] the Rent Stabilization Law" violated public policy (id. at 181). As a result, the rent registration statement in effect on the base date "listing this illegal rent was also a{**15 NY3d at 366}nullity" (id.). Rather than using the registration statement to ascertain the rent on the base date, we instructed DHCR to use the so-called default formula to calculate the rent on the

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base date, as it does when no reliable records are available (see id.; see also Levinson v 390 W. End Assoc., L.L.C., 22 AD3d 397, 400-401 [1st Dept 2005]).[FN1]

DHCR contends that our holding in Thornton should be constrained to the narrow set of circumstances described in that case and that we should limit its application to cases involving illusory tenancies. We disagree and conclude that, where the overcharge complaint alleges fraud, as here, DHCR has an obligation to ascertain whether the rent on the base date is a [*5]lawful rent. Accordingly, here, as the Appellate Division concluded, DHCR acted arbitrarily and capriciously in failing to meet that obligation where there existed substantial indicia of fraud on the record.

In particular, here it is alleged that the tenants immediately preceding petitioner paid significantly more than the previously registered rent, and were not given a rent-stabilized lease rider.[FN2] Moreover those tenants were informed that their rent would be higher but for their performance of upgrades and improvements at their own expense. Almost simultaneously with the substantial increase in the rent for the affected unit, the owner ceased filing annual registration statements (see Rent Stabilization Code [9 NYCRR] § 2528.3 [a] [requiring annual registration statements be filed with DHCR]) and later filed several years' registration statements retroactively after receiving petitioner's overcharge complaint. Finally, petitioner's initial lease did not contain a rent-stabilized rider. The combination of these factors should have led DHCR to investigate the legality of the base date rent, rather than blindly using the rent charged on the date four years prior to the filing of the rent overcharge claim.

Our holding should not be construed as concluding that fraud exists, or that the default formula should be used in this case.{**15 NY3d at 367} Rather, we merely conclude that DHCR acted arbitrarily in disregarding the nature of petitioner's allegations and in using a base date without, at a minimum, examining its own records to ascertain the reliability and the legality of the rent charged on that date.

DHCR also argues that, under the Appellate Division's holding, any "bump" in an apartment's rent—even those authorized without prior DHCR approval, such as rent increases upon installation of improvements to an apartment (see Rent Stabilization Law § 26-511 [c] [13])—will establish a colorable claim of fraud requiring DHCR investigation. Again, we disagree. Generally, an increase in the rent alone will not be sufficient to establish a

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"colorable claim of fraud," and a mere allegation of fraud alone, without more, will not be sufficient to require DHCR to inquire further. What is required is evidence of a landlord's fraudulent deregulation scheme to remove an apartment from the protections of rent stabilization. As in Thornton, the rental history may be examined for the limited purpose of determining whether a fraudulent scheme to destabilize the apartment tainted the reliability of the rent on the base date. [*6]

In sum, the Appellate Division correctly applied Thornton to this rent overcharge proceeding and properly concluded that DHCR has an obligation to ascertain whether petitioner's allegations of fraud warrant the use of the default formula when calculating any rent overcharge that may have occurred. Accordingly, the order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative.

Smith, J. (dissenting). In Thornton v Baron (5 NY3d 175 [2005]) and Matter of Cintron v Calogero (15 NY3d 347 [2010] [decided today]), the Court carved out exceptions to the command of the Rent Regulation Reform Act of 1997 that a rent charged more than four years before a tenant complains may not be considered in deciding an overcharge claim. But in this case, the majority goes far beyond making an exception. The majority has, in substance, largely repealed the statute—or, perhaps, has turned it into a source of endlessly complex litigation. I am not sure which it has done, and I am not sure which is worse.

The statute and the regulations implementing it are unequivocal.{**15 NY3d at 368}

"[N]o determination of an overcharge and no award or calculation of an award of the amount of an overcharge may be based upon an overcharge having occurred more than four years before the complaint is filed . . . . This paragraph shall preclude examination of the rental history of the housing accommodation prior to the four-year period preceding the filing of a complaint pursuant to this subdivision" (Rent Stabilization Law [RSL] of 1969 [Administrative Code of City of NY] § 26-516 [a] [2]; see also id. § 26-516 [a] ["Where the amount of rent set forth in the annual rent registration statement filed four years prior to the most recent registration statement is not challenged within four years of its filing, neither such rent nor service of any registration shall be subject to challenge at any time thereafter"]; Rent Stabilization Code [9 NYCRR] § 2526.1 [a] [2]).

Thornton and Cintron presented special situations in which, for understandable reasons, a majority of the Court decided that this language should not be taken literally. Thorntoninvolved an elaborate fraudulent scheme, in which illusory leases containing false

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representations were created, collusive lawsuits brought and a court misled into entering orders that made it possible to collect illegal rents; the Court held that such an extreme form of misconduct should not be protected by the four-year time bar. Cintron presented the problem of how to reconcile the four-year limitation with another section of the statute providing for rent reduction orders of indefinite duration.

But this is a garden-variety overcharge case—perhaps the paradigm of the situation for which the four-year limitation was intended. The landlord charged an illegal rent, and the illegality went undetected for more than four years. The statute says plainly that in such a [*7]case, the rent charged four years previously shall not be subject to challenge. But the majority holds that a challenge is allowed.

The majority's justification for this result is that "the overcharge complaint alleges fraud" and that there are "indicia of fraud"—consisting essentially of allegations that the landlord lied to previous tenants about what the legal maximum rent was (majority op at 366). In other words, the majority seems to equate "fraud" with a wilful overcharge—as though the{**15 NY3d at 369} four-year limit were applicable only to landlords who overcharge by mistake. In fact, the statute contains its own remedy for wilful overcharges: treble damages (RSL § 26-516 [a]). It does not make the four-year limitation inapplicable in wilful overcharge cases—cases which, as the Legislature certainly knew, are a large number of the cases to which the limitation on its face applies.

The majority seemingly tries to temper its holding by saying that "an increase in the rent alone will not be sufficient to establish a 'colorable claim of fraud' " and that "a mere allegation of fraud alone, without more, will not be sufficient to require DHCR to inquire further" (majority op at 367). But obviously it does not take much "more" than an allegation of fraud—there is practically nothing more in this case. The majority adds that what DHCR is supposed to "inquire" about is whether there was a "fraudulent scheme to destabilize the apartment" (id.). It does not say what it takes to prove such a "fraudulent scheme." Simply a wilful overcharge? A wilful overcharge coupled with the hope that the overcharge will eventually result in the apartment's escape from rent stabilization?

If the majority opinion does not simply nullify the four-year limit in every case where the overcharge was not a good faith error, it requires DHCR to undertake an inquiry that the majority leaves wholly undefined. And what if DHCR's inquiry shows that, though there was

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a wilful overcharge, there was no "fraudulent scheme"? Does this mean that, if the landlord has been charging an illegal rent for more than four years, it may continue to do so?

The majority opinion can be read to mean either that the four-year limitation has largely ceased to exist, or that any case to which the limit applies on its face must lead to a mini-litigation, in which DHCR tries to figure out whether the overcharge was "fraudulent" enough to escape the time limit. If the former, the majority has simply tossed aside the Legislature's command. If the latter, I do not envy DHCR its task.

Chief Judge Lippman and Judges Pigott and Jones concur with Judge Ciparick; Judge Smith dissents in a separate opinion in which Judges Graffeo and Read concur.

Order affirmed, etc.

Footnotes

Footnote 1: The default formula "uses the lowest rent charged for a rent-stabilized apartment with the same number of rooms in the same building on the relevant base date" (Thornton, 5 NY3d at 180 n 1; Levinson, 22 AD3d at 400-401).

Footnote 2: The Rent Stabilization Code requires that, for each vacancy or renewal lease for premises subject to the Rent Stabilization Code, the landlord "shall furnish to each tenant signing a vacancy or renewal lease, a rider in a form promulgated or approved by the DHCR, in larger type than the lease, describing the rights and duties of owners and tenants as provided for under" the Rent Stabilization Law (Rent Stabilization Code [9 NYCRR] § 2522.5 [c] [1]).

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Court of Appeals of New York.In the Matter of Oscar CINTRON, Appellant,

v.Judith A. CALOGERO, as Commissioner of the Di-vision of Housing and Community Renewal of the

State of New York, Respondent.

Oct. 19, 2010.

Background: Tenant commenced article 78 pro-ceeding seeking to annul final order of Division ofHousing and Community Renewal (DHCR) insofaras it limited rent overcharges recoverable by tenantto four years prior to filing of overcharge com-plaint, and limited treble damages to two years pri-or to filing of complaint. The Supreme Court,Bronx County, Sallie Manzanet, J., denied petition.Tenant appealed. The Supreme Court, AppellateDivision, 59 A.D.3d 345, 874 N.Y.S.2d 76, af-firmed. Tenant appealed.

Holding: The Court of Appeals, Ciparick, J., heldthat DHCR could consider rent reduction ordersentered outside of four-year limitations period indetermining amount of overcharge.

Reversed and remitted.

Smith, J., filed dissenting opinion.

West Headnotes

[1] Landlord and Tenant 233 1950(3)

233 Landlord and Tenant233IX Regulated Rents

233IX(C) Prohibited Landlord Conduct233k1945 Proceedings

233k1950 Evidence233k1950(3) k. Admissibility. Most

Cited Cases(Formerly 233k200.75)

Division of Housing and Community Renewal(DHCR) should, in calculating any rent overcharge,honor rent reduction orders that, while issued priorto four-year limitations period, remained in effectduring that period. McKinney's CPLR 213–a; NewYork City Administrative Code, § 26–516(a)(2).

[2] Landlord and Tenant 233 1948

233 Landlord and Tenant233IX Regulated Rents

233IX(C) Prohibited Landlord Conduct233k1945 Proceedings

233k1948 k. Time to sue and limita-tions. Most Cited Cases

(Formerly 233k200.72)Purpose of the four-year limitations or look-

back period for rent overcharge claims is to allevi-ate the burden on honest landlords to retain rent re-cords indefinitely. McKinney's CPLR 213–a; NewYork City Administrative Code, § 26–516(a)(2).

[3] Landlord and Tenant 233 1906

233 Landlord and Tenant233IX Regulated Rents

233IX(A) Regulation of Rents in General233IX(A)4 Adjustment of Rent

233k1903 Grounds for Adjustment233k1906 k. Changes in facilities

or services. Most Cited Cases(Formerly 233k200.57)Rent reduction orders place continuing obliga-

tion upon owner to reduce rent until required ser-vices are restored or repairs are made. New YorkCity Administrative Code, § 26–514.

[4] Landlord and Tenant 233 1950(3)

233 Landlord and Tenant233IX Regulated Rents

233IX(C) Prohibited Landlord Conduct233k1945 Proceedings

233k1950 Evidence233k1950(3) k. Admissibility. Most

938 N.E.2d 931 Page 115 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498, 2010 N.Y. Slip Op. 07376(Cite as: 15 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498)

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Cited Cases(Formerly 233k200.75)Rent reduction orders impose continuing oblig-

ation on landlord and, if still in effect during four-year look-back period, are in fact part of rental his-tory which Division of Housing and CommunityRenewal (DHCR) must consider in evaluating ten-ant's overcharge complaint. McKinney's CPLR213–a; New York City Administrative Code, §26–516(a)(2).

[5] Landlord and Tenant 233 1950(3)

233 Landlord and Tenant233IX Regulated Rents

233IX(C) Prohibited Landlord Conduct233k1945 Proceedings

233k1950 Evidence233k1950(3) k. Admissibility. Most

Cited Cases(Formerly 233k200.75)Rent Stabilization Law permitted Division of

Housing and Community Renewal (DHCR) to con-sider rent reduction orders entered outside of four-year limitations period applicable to tenant's rentovercharge claim in determining amount of over-charge, where those orders remained in effect dur-ing the limitations period. McKinney's CPLR 213–a; New York City Administrative Code, §26–516(a)(2).

***499 BAS Legal Advocacy Program, Inc., Bronx(Randolph Petsche of counsel), for appellant.

Gary R. Connor, General Counsel, New York StateDivision of Housing and Community Renewal,New York City (Martin B. Schneider of counsel),for respondent.

South Brooklyn Legal Services, Brooklyn (John C.Gray, Edward Josephson and Pavita Krishnaswamyof counsel) and Queens Legal Services, Jamaica(Heejung Kook of counsel), for Pratt Area Com-munity Council and others, amici curiae.

Legal Aid Society, Brooklyn (Steven Banks,

Patrick J. Langhenry, Stephen Myers and JamilaWideman of counsel), for Met Council, Inc.,amicus curiae.

*351 **932 OPINION OF THE COURTCIPARICK, J.

[1] On this appeal, we are asked to interpret theRent Stabilization Law to ascertain the con-sequences on a current rent overcharge claim oftwo rent reduction orders issued prior to, but in ef-fect during, the four-year period preceding the fil-ing of an overcharge claim. We conclude that theDivision of Housing and Community Renewal (DHCR) should, in calculating any rent overcharge,honor rent reduction orders that, while issued priorto the four-year limitations period, remained in ef-fect during that period.

I.In 1986, petitioner Oscar Cintron became a

tenant of 2975 Decatur Avenue, apartment 5C, inthe Bronx, at an initial stabilized rent of $348.91per month. The following year, petitioner filed acomplaint with DHCR against the building's thenowner, alleging a decrease in services related to,among other things, the apartment's refrigerator,door lock and fire escape window. As a result of thecomplaint, DHCR issued an order reducing peti-tioner's rent “by the percentage of the most recentguidelines adjustment for the tenant's lease whichcommenced before the effective date of th[e] rentreduction [order],” and providing that the ownercould not collect any rent *352 increase until a rentrestoration order was issued. The rent reduction or-der did not set a particular level of rent. Accordingto petitioner, the 1987 rent reduction order shouldhave resulted in a reduction of his rent to $326.23per month.

In 1989, petitioner filed another complaint withDHCR, alleging a roach infestation of the apart-ment's stove. DHCR issued another rent reductionorder. Despite the 1987 and 1989 rent reduction or-ders, however, the owner failed to make any repairsand continued to charge petitioner the unreduced

938 N.E.2d 931 Page 215 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498, 2010 N.Y. Slip Op. 07376(Cite as: 15 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498)

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rent.

In 1991, when the current owner purchased thebuilding, petitioner allegedly advised him of therent reduction orders. Although the current ownerapparently also failed to make any repairs, petition-er continued to pay the unreduced rent and enteredinto a series of leases requiring him to pay greaterrents.

On December 11, 2003, petitioner filed a com-plaint alleging that the rent of $579.99 **933***500 charged in the lease then in effect consti-tuted an overcharge based on the current and priorowners' failure to comply with the 1987 and 1989rent reduction orders. A DHCR Rent Administratordetermined that the base date to be used was thedate four years prior to the filing of the overchargecomplaint—December 11, 1999—and establishedthat the legal regulated rent on the base date was$508.99, which was the rent charged by the currentowner and paid by petitioner on that date. Althoughtaking notice of the 1987 and 1989 rent reductionorders, the Rent Administrator in establishing thelegal stabilized rent calculated the overcharge usingthe base date of December 11, 1999. The Rent Ad-ministrator awarded petitioner a rent refund of$1,008.77, which included interest but did not in-clude treble damages, and prospectively froze therent at the base date level from December 11, 1999until February 1, 2004. Effective February 1, 2004,the Rent Administrator removed the 1987 and 1989rent reduction orders and restored the rent to thefull amount of $579.99, which included rent in-creases.

Petitioner sought administrative review of theRent Administrator's order. DHCR granted the peti-tion for administrative review to the extent of modi-fying the order by (1) reversing the portion of theorder that denied treble damages and (2) awardingtreble damages beginning two years prior to the fil-ing of the overcharge complaint. DHCR denied theremainder of petitioner's challenges, concludingthat the Rent Administrator properly limited recov-ery to the four years preceding the overcharge *353

complaint and correctly used the base daterent—$508.99 as of December 11, 1999—ratherthan the rent established by the 1987 and 1989 rentreduction orders in calculating the overcharge.

Petitioner commenced this CPLR article 78proceeding seeking to annul DHCR's order. Su-preme Court denied the petition and dismissed theproceeding, concluding that DHCR's determinationwas not arbitrary or capricious and had a rationalbasis.

On petitioner's appeal, the Appellate Divisionaffirmed, holding:

“The order, finding the base rent date to beDecember 11, 1999 (four years prior to the filingof the overcharge complaint), establishing thelegal base rent as the amount paid on that date,freezing that rent until February 1, 2004, duringwhich time rent reduction orders were extant, anddirecting the owner to refund overcharges collec-ted from the base rent date inclusive of trebledamages, was not arbitrary and capricious, andhad a rational basis” ( Matter of Cintron v. Calo-gero, 59 A.D.3d 345, 346, 874 N.Y.S.2d 76 [1stDept.2009] [citations omitted] ).FN1

FN1. The Appellate Division further heldthat “ DHCR appropriately limited theamount of rent overcharges recoverable tothe four years prior to the filing of theovercharge complaint” (59 A.D.3d at 346,874 N.Y.S.2d 76). This is not an issue onthis appeal as petitioner has abandoned hisclaim for rent overcharges in excess offour years prior to the filing of his rentovercharge claim with DHCR. Petitioner ismerely seeking to have the base rent dateset at an earlier time.

Petitioner appealed to this Court by permissionof the Appellate Division, which certified the fol-lowing question: “Was the order of this Court,which affirmed the order of the Supreme Court,

938 N.E.2d 931 Page 315 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498, 2010 N.Y. Slip Op. 07376(Cite as: 15 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498)

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properly made?” Because the Appellate Divisionorder is final, we need not answer the certifiedquestion.

II.[2] Regardless of the forum in which it is com-

menced, a rent overcharge claim is **934 ***501subject to a four-year statute of limitations (seeRent Stabilization Law of 1969 [AdministrativeCode of City of NY] § 26–516 [a][2] [hereinafterRent Stabilization Law]; CPLR 213–a).FN2 TheRent Regulation Reform Act of 1997 “clarified andreinforced the four-year statute of limitations *354applicable to rent overcharge claims ... by limitingexamination of the rental history of housing accom-modations prior to the four-year period precedingthe filing of an overcharge complaint” (Thornton v.Baron, 5 N.Y.3d 175, 180, 800 N.Y.S.2d 118, 833N.E.2d 261 [2005], citing Matter of Gilman v. NewYork State Div. of Hous. & Community Renewal, 99N.Y.2d 144, 149, 753 N.Y.S.2d 1, 782 N.E.2d 1137[2002]; see also Matter of Grimm v. State of N.Y.Div. of Hous. & Community Renewal Off. of RentAdmin., 15 N.Y.3d 358, 912 N.Y.S.2d 491, 938N.E.2d 924 [2010] [decided today] ). Notably, theterm “rental history” is not defined in the relevantstatutes or in DHCR regulations and we need notattempt to define it here. As we have previously ex-plained, the purpose of the four-year limitations orlook-back period is to “alleviate the burden on hon-est landlords to retain rent records indefinitely” (Thornton, 5 N.Y.3d at 181, 800 N.Y.S.2d 118, 833N.E.2d 261, citing Matter of Gilman, 99 N.Y.2d at149, 753 N.Y.S.2d 1, 782 N.E.2d 1137; see alsoJenkins v. Fieldbridge Assoc., LLC, 65 A.D.3d 169,174, 877 N.Y.S.2d 375 [2d Dept.2009], appeal dis-missed 13 N.Y.3d 855, 891 N.Y.S.2d 688, 920N.E.2d 92 [2009] ).

FN2. Rent Stabilization Law §26–516(a)(2) states:

“[A] complaint under this subdivisionshall be filed with [DHCR] within fouryears of the first overcharge alleged andno determination of an overcharge and

no award or calculation of an award ofthe amount of an overcharge may bebased upon an overcharge having oc-curred more than four years before thecomplaint is filed ... This paragraph shallpreclude examination of the rental his-tory of the housing accommodation priorto the four-year period preceding the fil-ing of a complaint pursuant to this subdi-vision,”

and CPLR 213–a states:

“An action on a residential rent over-charge shall be commenced within fouryears of the first overcharge alleged andno determination of an overcharge andno award or calculation of an award ofthe amount of any overcharge may bebased upon an overcharge having oc-curred more than four years before theaction is commenced. This section shallpreclude examination of the rental his-tory of the housing accommodation priorto the four-year period immediately pre-ceding the commencement of the ac-tion.”

[3] Moreover, Rent Stabilization Law § 26–514, which addresses rent reduction orders, states:

“[A]ny tenant may apply to [DHCR] for a reduc-tion in the rent to the level in effect prior to itsmost recent adjustment and for an order requiringservices to be maintained as provided in this sec-tion, and [DHCR] shall so reduce the rent if it isfound that the owner has failed to maintain suchservices. The owner shall also be barred from ap-plying for or collecting any further rent in-creases. The restoration of such services shallresult in the prospective elimination of such sanc-tions” (emphasis added).

Rent reduction orders thus place a “continuingobligation” *355 upon an owner to reduce rent untilthe required services are restored or repairs are

938 N.E.2d 931 Page 415 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498, 2010 N.Y. Slip Op. 07376(Cite as: 15 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498)

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made (Thelma Realty Co. v. Harvey, 190 Misc.2d303, 305–306, 737 N.Y.S.2d 500 [App.Term, 2dDept. 2001]; see also Matter of Condo Units v. NewYork State Div. of Hous. & Community Renewal, 4A.D.3d 424, 425, 771 N.Y.S.2d 380 [2d Dept.2004], lv. denied **935***5025 N.Y.3d 705, 801N.Y.S.2d 251, 834 N.E.2d 1261 [2005]; Crimminsv. Handler & Co., 249 A.D.2d 89, 91, 671N.Y.S.2d 469 [1st Dept.1998] ). Here, it is allegedthat the landlord failed to fulfill his continuing ob-ligation by willfully flouting DHCR rent reductionorders.

The Rent Stabilization Law and Code are un-fortunately silent as to the effect that a rent reduc-tion order, issued prior to the four-year limitationsperiod but still in effect during that period, as is thecase here, has on a subsequent overcharge com-plaint based on that order. Petitioner argues thatDHCR rent reduction orders must be considered byDHCR in establishing the legal stabilized rent foran apartment for the purposes of an overchargecomplaint and that, because the rent reduction or-ders here remained in effect—and imposed a con-tinuing duty on the landlord to reduce rent—duringthe relevant four-year period, the four-year look-back rule is no bar to considering those orders forthe purposes of calculating the amount by whichpetitioner was overcharged (see Thornton, 5 N.Y.3dat 180, 800 N.Y.S.2d 118, 833 N.E.2d 261; see alsoMatter of 508 Realty Assoc., LLC v. New York StateDiv. of Hous. & Community Renewal, 61 A.D.3d753, 755–756, 877 N.Y.S.2d 392 [2d Dept.2009];Jenkins, 65 A.D.3d at 173, 877 N.Y.S.2d 375). DH-CR, on the other hand, argues that its determinationis supported by a rational basis and is consistentwith the statute as the Legislature intended the four-year limitations/look-back period to be absolute,prohibiting the consideration of earlier rent recordsfor the purpose of calculating a rent overcharge.

In this matter of statutory construction, wheredeference to an agency's interpretation is not re-quired (see e.g. Roberts v. Tishman Speyer Props.,L.P., 13 N.Y.3d 270, 285, 890 N.Y.S.2d 388, 918

N.E.2d 900 [2009] ), we find petitioner's argumentmore persuasive as it best reconciles and harmon-izes the legislative aims of both the four-year limit-ations/ look-back period as set forth in Rent Stabil-ization Law § 26–516(a)(2) and CPLR 213–a andthe “continuing obligation” of a landlord to reducerent and make repairs as per Rent Stabilization Law§ 26–514 (see McKinney's Cons. Laws of NY,Book 1, Statutes §§ 95, 96 [in interpreting statutes,the goal is to further the intent, spirit and purposeof a statute, to harmonize all parts of a statute togive effect and meaning to every part] ).

[4] Certainly, DHCR can take notice of its ownorders and the rent registrations it maintains to as-certain the rent established *356 by a rent reductionorder without imposing onerous obligations onlandlords. Moreover, refusing to give effect to arent reduction order's direction to roll back rent incases where the order remained in effect during thestatutory four-year period would countenance thelandlord's failure to restore required services andthwart the goals of the Legislature in enacting RentStabilization Law § 26–514, namely, to “motivateowners of rent-stabilized housing accommodationsto provide required services, compensate tenantsdeprived of those services, and preserve and main-tain the housing stock in New York City” (Jenkins,65 A.D.3d at 173, 877 N.Y.S.2d 375, citing Matterof Hyde Park Assoc. v. Higgins, 191 A.D.2d 440,442, 594 N.Y.S.2d 57 [1st Dept.1993] ). In short,rent reduction orders impose a continuing obliga-tion on a landlord and, if still in effect during thefour-year period, are in fact part of the rental his-tory which DHCR must consider.

[5] We conclude that the purposes of the relev-ant statutes are best served here if DHCR calculatesthe amount of rent overcharge by reference to the1987 and 1989 rent reduction orders, which re-mained in effect during the four-year limitationsperiod and, accordingly, were part **936 ***503 ofthe rental history that the Rent Stabilization Lawpermits DHCR to consider.

Accordingly, the order of the Appellate Divi-

938 N.E.2d 931 Page 515 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498, 2010 N.Y. Slip Op. 07376(Cite as: 15 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498)

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sion should be reversed, with costs, and the case re-mitted to Supreme Court with directions to remandto respondent DHCR for further proceedings in ac-cordance with this opinion. The certified questionshould not be answered upon the ground that it isunnecessary.

SMITH, J., dissenting.The relevant provisions of the Rent Regulation

Reform Act of 1997 seem as clear to me as they didwhen I dissented in Thornton v. Baron, 5 N.Y.3d175, 800 N.Y.S.2d 118, 833 N.E.2d 261 (2005).

“[N]o determination of an overcharge and noaward or calculation of an award of the amountof an overcharge may be based upon an over-charge having occurred more than four years be-fore the complaint is filed.... This paragraph shallpreclude examination of the rental history of thehousing accommodation prior to the four-yearperiod preceding the filing of a complaint pursu-ant to this subdivision” (Rent Stabilization Law[RSL] of 1969 [Administrative Code of City ofNY] § 26–516[a][2]; see also id. § 26–516[a][“Where the amount of rent set forth in the annu-al rent registration statement filed four years pri-or to the most recent registration statement*357is not challenged within four years of its filing,neither such rent nor service of any registrationshall be subject to challenge at any time there-after”]; Rent Stabilization Code [9 NYCRR] §2526.1[a][2] ).

In Thornton, this Court, unjustifiably I thought,wrote an exception into the statute, and in this caseit writes another one, which I also think unjustified.

I grant that there is some tension between thecommand of the 1997 Reform Act that rental his-tory going back more than four years may not beconsidered and the provision of RSL § 26–514 thatrent reduction orders based on a failure to providerequired services remain in effect until the defi-ciency in services is cured. There is not such a starkconflict, however, as to justify the majority's choiceto let one statute nullify the other. DHCR has, it

seems to me, found a fair solution by ordering that,where the noncompliance goes on for more thanfour years, the rent is in effect frozen for a rollingfour-year period—so that the tenant cannot get theadvantage of a rent level more than four years old,but the landlord is never free from the reduction or-der's effect. This works no undue hardship on thetenant, who need only file a complaint within fouryears of being overcharged to avoid any time bar.

It is thus unnecessary to resort to the fictionembraced by the majority that a rent level existingmore than four years earlier is transformed by therent reduction order into a “part of the [more re-cent] rental history which DHCR must consider”(majority op. at 356, 912 N.Y.S.2d at 502–03, 938N.E.2d at 935–36). I would affirm the order of theAppellate Division.

Chief Judge LIPPMAN and Judges GRAFFEO,READ, PIGOTT and JONES concur with JudgeCIPARICK; Judge SMITH dissents and votes to af-firm in a separate opinion.

Order reversed, etc.

N.Y.,2010.Cintron v. Calogero15 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498,2010 N.Y. Slip Op. 07376

END OF DOCUMENT

938 N.E.2d 931 Page 615 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498, 2010 N.Y. Slip Op. 07376(Cite as: 15 N.Y.3d 347, 938 N.E.2d 931, 912 N.Y.S.2d 498)

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—[*1] Kelley S. Boyd, appellant pro se.

Gary R. Connor, New York (Jack Kuttner of counsel), for New York State Division of Housing and Community Renewal, respondent.

Rappaport, Hertz, Cherson & Rosenthal, P.C., Forest Hills (David I. Paul of counsel), for 232/242 Realty Co., LLC., respondent.

Judgment, Supreme Court, New York County (Barbara Jaffe, J.), entered May 18, 2012, insofar as appealed from as limited by the briefs, denying the petition and dismissing the proceeding brought pursuant to CPLR article 78 to annul the determination of respondent New York State Division of Housing and Community Renewal (DHCR), issued July 19, 2011, which denied petitioner's petition for administrative review (PAR) of the denial of her rent overcharge complaint, reversed, on the law, without costs, the judgment vacated, and the matter remanded to DHCR for further proceedings consistent herewith.

Although petitioner filed her overcharge complaint more than four years after the building owner registered the monthly rent, she contends that DHCR should not have accepted $1,750 as the registered monthly rent on the base date, April 7, 2005, because there are substantial indicia of fraud.

The owner increased the registered monthly rent from $572 in July 2004, when a long

Matter of Boyd v New York State Div. of Hous. & Community Renewal

2013 NY Slip Op 06966 [110 AD3d 594]

October 29, 2013

Appellate Division, First Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, November 27, 2013

In the Matter of Kelley S. Boyd, Appellant,v

New York State Division of Housing and Community Renewal et al., Respondents.

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time tenant vacated the apartment, to $1,750 in October 2004. More than 90% of the increase reflects an adjustment for "individual apartment improvements" (IAIs) under the Rent Stabilization Law of 1969 (Administrative Code of City of NY § 26-501 et seq.) and the Rent Stabilization Code (9 NYCRR 2520.1 et seq.). To justify that adjustment, the owner would have had to spend about $39,000 to renovate the apartment in 2004. Petitioner, who moved into the apartment in 2007, is currently paying rent of over $2,000 a month.

In a letter to DHCR, petitioner set forth a specific and detailed description of the apartment in 2007, alleging that, based on its condition when she moved in, the owner could not have spent $39,000 for improvements to the building, which was constructed in 1932. Among other things, petitioner stated that the hardwood floors, bathtub, doors, and fixtures are original to [*2]the apartment, and that the kitchen had been updated with low-quality appliances which she estimated cost less than $1,000. She described the kitchen as having "very inexpensive Home Depot cabinets," slat floors, and a used or recycled sink that did not fit in the cutout in the wall. The owner has never submitted any evidence rebutting petitioner's claim that the IAIs were minimal and cost far less than claimed.

Under the standard set forth in Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin. (15 NY3d 358 [2010]), petitioner made a sufficient showing of fraud to require DHCR to investigate the legality of the base date rent (see also Bogatin v Windermere Owners LLC, 98 AD3d 896 [1st Dept 2012]). Although the "look-back" for an apartment's rental history is ordinarily limited to the four-year period preceding the date that the petitioner files the complaint (see Thornton v Baron, 5 NY3d 175, 180 [2005]), where fraud is alleged and there is "substantial indicia of fraud on the record," DHCR is obliged to investigate whether the base date rate was legal and "act[s] arbitrarily and capriciously in failing to meet that obligation" (Grimm, 15 NY3d at 366).

Thus, we find that DHCR's disparate treatment of the parties' claims was arbitrary. While the agency made no attempt to evaluate the legitimacy of petitioner's claims despite their consistency and degree of detail, DHCR credited the owner's implicit claim that it spent $39,000 to renovate the apartment simply because "it would not be difficult for anyone with any experience in this industry to believe it could have taken $39,000 in IAIs to update the appearance and equipment in an apartment which had not changed hands for thirty-two years." This justification for the agency's determination is irrational. Finding that the owner "could have" spent $39,000 in IAIs, where the owner never submitted any evidence

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controverting petitioner's claims is not equivalent to finding that the owner actually made improvements costing that much. Accordingly, this matter should be remanded to DHCR to give the parties the opportunity to present evidence in connection with the legality of the base rate rent.

Under the circumstances presented, DHCR acted within its discretion by resolving the PAR on the merits even though petitioner filed it outside the 35-day statutory time frame (9 NYCRR 2529.2), and, contrary to the owner's contention, the record does provide a basis to amend the caption. Concur—Mazzarelli, J.P., Freedman and Feinman, JJ.

Sweeny and Gische, JJ., dissent in a memorandum by Gische, J., as follows: I respectfully dissent. I do not agree with the majority, that petitioner presented sufficient evidence of a fraudulent increase in the legal registered rent for the subject apartment, justifying the examination of the apartment's rental history beyond the statutory four-year look-back period (see Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26-516 [a] [2]).

Petitioner, who moved into the subject apartment in March 2007 pursuant to a one-year lease at a monthly rent of $2,000, filed a rent overcharge claim with DHCR on April 7, 2009, alleging that the owner had obtained a fraudulent increase in the legal registered rent for the apartment from $571.70 per month in July 2004 to $1,750 per month in October 2004, when a new tenant took occupancy. This allegation of fraud was supported only by a letter containing [*3]petitioner's personal observations of the improvements to the subject apartment (IAIs) and her comparison to unidentified fixtures at a big box home improvement store. She estimated that, based upon her research and calculations, the most the improvements could have cost was $5,000. Thus, she maintains that allowing for permissible increases, the legal rent for the first vacancy tenant in October 2004 should have been $974, not $1,750. Petitioner provides no real evidence for her conclusions on value, nor does she account for labor costs or assert that she has any relevant experience qualifying her to opine on the value of the work done. Thus, whether the letter adequately details her complaints about the nature or condition of the IAIs she admits were made to the subject apartment is of no moment in concluding their value.

While acknowledging that the "look-back" period for her overcharge complaint was only four years from the filing date, petitioner argues that DHCR should nonetheless have

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investigated the basis for the IAI increase claimed by the owner before the four-year period because of the poor quality of the improvements.

After initially issuing an erroneous order dated April 15, 2010, dismissing petitioner's rent overcharge complaint on the basis that the subject apartment was not rent-stabilized, DHCR, on its own initiative, reopened the proceeding after the then recent Court of Appeals decision in Roberts v Tishman Speyer Props., L.P. (13 NY3d 270 [2009]), and accepted further submissions by the parties.

In its superseding order dated October 4, 2010, DHCR determined that the subject apartment was, in fact, rent-stabilized because the building was receiving J-51 benefits (see Roberts, 13 NY3d at 279-286). However, using the base date of April 7, 2005, which was four years prior to the filing date of petitioner's rent overcharge complaint, at which time the lease rent was $1,750, DHCR determined that there had been no rent overcharge. Petitioner filed a petition for administrative review which was denied by DHCR on July 19, 2011 on the basis that there was no reason to deviate from the four-year look-back rule, or put the owner to its proof as to the IAIs made over four years before the overcharge complaint was filed. The court below upheld the agency's determination and dismissed the petition.

In general, no determination of an overcharge and no calculation of an award of the amount of an overcharge may be based upon an overcharge having occurred more than four years preceding the filing of an overcharge complaint (Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26-516 [a]). In order to effectuate the purpose of the four-year limitation period, the legal regulated rent is set at the base date, which is four years prior to the filing of the overcharge complaint, plus any subsequent lawful increases (Rent Stabilization Code [9 NYCRR] § 2520.6 [e], [f] [1]; 2526.1 [a] [3] [i]). The Court of Appeals culled out a common-law exception to the four-year look-back period where the rent was set by the landlord as part of a fraudulent scheme. Only where there is a "colorable" claim of fraud may the rental history outside the four-year period be examined (see Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin., 15 NY3d 358, 364 [2010]; Thornton v Baron, 5 NY3d 175, 180 [2005]). A colorable claim of fraud requires that the tenant present something more than a mere allegation of fraud. It requires some evidence that the owner engaged in a fraudulent act or scheme more than four years prior to the tenant's filing of the rent overcharge claim, justifying the agency's examination of the entire rent history (Matter of Grimm, 15 NY3d at 367).

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The fact that there has been a sizeable increase in the rent for the subject apartment prior to the look-back period does not, alone, support or establish that the tenant has a colorable claim of fraud. This is true even where, as here, the bump up in rent was based upon the installation of [*4]improvements to an apartment which did not require prior DHCR approval (id.). Significantly, the owner complied with all of the rent registration requirements. Accordingly, the information on which petitioner's overcharge claim is based was known to her when she moved into the apartment in 2007, at which time she was within the four-year period permitting a challenge to the rent without having to show a fraudulent predicate.

Petitioner's subjective belief that the IAIs could not have cost more than $5,000 does not satisfy her initial burden of showing that the fraud exception to the four-year statute of limitations should be applied, requiring DHCR to review a rent charged more than four years before her overcharge complaint (Thornton v Baron, 5 NY3d at 180). A conclusory claim, without more, is insufficient for the agency to disregard the four-year look-back period established in the Rent Stabilization Law, as codified in the Rent Stabilization Code, requiring that an owner retain records relating to rents for housing accommodations for four years prior to the date of the most recent registration (CPLR 213-a; Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26-516 [a] [2]; Rent Stabilization Code [9 NYCRR] § 2526.1 [a] [2] [ii]). Thus, DHCR's decision to employ the four-year look-back rule rather than the fraud exception in determining the overcharge complaint filed by petitioner had a rational basis in the record and was not arbitrary and capricious or affected by an error of law (see Matter of I.G. Second Generation Partners v New York State Div. of Hous. & Community Renewal, 284 AD2d 149 [1st Dept 2001], lv denied 98 NY2d 607 [2002]). The majority's conclusions that petitioner's letter triggered an inquiry eviscerates the four-year statutory rule whenever a tenant alleges fraud, even without any particularity. I do not believe that Grimm has such wide ranging implications.

Additionally, contrary to petitioner's argument, it was not arbitrary or capricious for DHCR to draw upon its own expertise and resources in concluding that $39,000 was not an inordinate expenditure to renovate an apartment that had become vacant for the first time in 32 years. [Prior Case History: 2012 NY Slip Op 31260(U).]

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[*1]

Decided June 26, 2014

Matter of Boyd v New York State Div. of Hous. & Community Renewal, 110 AD3d 594, reversed.

{**23 NY3d at 1000} OPINION OF THE COURT

On review of submissions pursuant to section 500.11 of the Rules of the Court of Appeals (22 NYCRR 500.11), order reversed, with costs, judgment of Supreme Court, New York County, reinstated, and certified question answered in the negative. New York State Division of Housing and Community Renewal's determination denying tenant's petition for administrative review was not arbitrary or capricious, as tenant failed to set forth sufficient indicia of fraud to warrant consideration{**23 NY3d at 1001} of the rental history beyond the four-year statutory period (see Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin., 15 NY3d 358, 366-367 [2010]).

Concur: Chief Judge Lippman and Judges Graffeo, Read, Smith, Pigott, Rivera and Abdus-Salaam.

Matter of Boyd v New York State Div. of Hous. & Community Renewal

2014 NY Slip Op 04806 [23 NY3d 999]

June 26, 2014

Court of Appeals

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, October 8, 2014

In the Matter of Kelley S. Boyd, Respondent,v

New York State Division of Housing and Community Renewal et al., Appellants.

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[*1]

Supreme Court, Appellate Term, First Department, June 1, 2011

72A Realty Assoc. v Lucas, 28 Misc 3d 585, modified.

APPEARANCES OF COUNSEL

Joel M. Zinberg, New York City and Murray Shactman, New York City, for appellant-respondent. Sokolski & Zekaria, P.C., New York City (Robert E. Sokolski of counsel), for respondent-appellant.

{**32 Misc 3d at 48} OPINION OF THE COURT

Per Curiam.

Order, dated May 25, 2010, modified to deny tenant's application for attorney's fees, and, as modified, affirmed, without costs.

Landlord commenced this holdover summary proceeding in September 2008, based upon allegations that tenant's lease agreement for the purportedly unregulated apartment expired by its own terms on August 31, 2008. Specifically, the petition alleged that the "apartment was decontrolled and became subject to the market rate because of a high rent vacancy that occurred on March 1, 2001." Upon the parties' respective cross{**32 Misc 3d

72A Realty Assoc. v Lucas

2011 NY Slip Op 21188 [32 Misc 3d 47]

Accepted for Miscellaneous Reports Publication

AT1

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, September 7, 2011

72A Realty Associates, Appellant-Respondent,v

Sandra Lucas, Respondent-Appellant, et al., Respondents.

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at 49} motions, Civil Court, among other things, dismissed the petition on the ground that the apartment was subject to rent stabilization and directed a hearing in connection with tenant's counterclaims for rent overcharges and attorney's fees.

We agree, essentially for the reasons stated by Civil Court (28 Misc 3d 585 [2010]), that [*2]landlord is precluded from relying upon the luxury decontrol provisions of the Rent Stabilization Law "by virtue of" its receipt of J-51 tax benefits (see Rent Stabilization Law of 1969 [Administrative Code of City of NY] §§ 26-504.1, 26-504.2 [a]). The holding of Roberts v Tishman Speyer Props., L.P. (13 NY3d 270 [2009]), that apartments in buildings receiving J-51 tax benefits are exempt from high rent deregulation regardless of how they became subject to rent stabilization, was properly applied retroactively (see Roberts v Tishman Speyer Props., L.P., NYLJ, Aug. 6, 2010, at 43, col 1 [Sup Ct, NY County, Lowe, III, J.]). Roberts "did not 'establish a new principle of law.' It merely construed a statute that had been in effect for a number of years . . . A judicial decision construing the words of a statute . . . does not constitute the creation of a new legal principle" (Gurnee v Aetna Life & Cas. Co., 55 NY2d 184, 192 [1982], cert denied 459 US 837 [1982]).

We also sustain Civil Court's ruling that, although the J-51 tax abatement period has now expired, tenant's apartment remains subject to rent stabilization, in the absence of any showing that landlord provided the applicable lease notice informing tenant that the apartment was to become deregulated at the expiration of the tax abatement period (see Rent Stabilization Law § 26-504 [c]; East W. Renovating Co. v New York State Div. of Hous. & Community Renewal, 16 AD3d 166, 166-167 [2005]; 254 PAS Prop. LLC v Gamboa, 16 Misc 3d 131[A], 2007 NY Slip Op 51429[U] [App Term, 1st Dept 2007]). We acknowledge that the strict application of the J-51 notice requirement in the circumstances here present may work a hardship on this landlord. After all, landlord, in good faith reliance on DHCR's long-standing and unambiguous interpretation of the luxury decontrol statute—codified in Rent Stabilization Code (9 NYCRR) § 2520.11 (o) and unchallenged for the better part of a decade until determined to be erroneous by the Roberts court—proceeded with the understanding that it was exempt from the notice requirement based upon a reasonable, but as it turns out mistaken, belief that respondent's tenancy was not subject to rent stabilization coverage in the first instance. However, we are constrained to strictly enforce the statutory J-51 notice{**32 Misc 3d at 50} requirement as written, without engrafting onto the regulatory framework equitable factors not specified therein.

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With respect to tenant's rent overcharge counterclaim, we agree that no basis was shown for the court to go outside the four-year look-back period (see Rent Stabilization Law [Administrative Code of City of NY] § 26-516 [a] [2]; cf. Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin., 15 NY3d 358, 364-365 [2010]), or to impose treble damages upon landlord (see generally Matter of Round Hill Mgt. Co. v Higgins, 177 AD2d 256 [1991]), tenant having failed to demonstrate a tenable claim of fraud or willfulness on the landlord's part. Nor has tenant shown any basis for application of the Thornton default formula (see Thornton v Baron, 5 NY3d 175 [2005]) to determine the legal rent for the apartment (see Matter of Cabrini Realty v New York State Div. of Hous. & Community Renewal, 6 AD3d 280, 281 [2004]; Lexford Prop., L.P. v Alter Realty Co., Inc., 31 Misc 3d 142[A], 2011 NY Slip Op 50859[U] [App Term, 1st Dept 2011]).

We part ways with the motion court only with respect to the issue of attorney's fees. Granted, landlord does not and cannot reasonably challenge tenant's status as prevailing party, and this even though tenant was unsuccessful in several of her arguments relating to her rent overcharge counterclaim (see Senfeld v I.S.T.A. Holding Co., 235 AD2d 345 [1997], lv denied 92 NY2d 818 [1998]). However, we find persuasive landlord's argument that the imposition of [*3]attorney's fees against it would be unfair under the particular circumstances of this case, where its possessory claim, albeit unsuccessful, was at least colorable at the time of commencement of the holdover proceeding (see Wells v East 10th St. Assoc., 205 AD2d 431 [1994], lv denied 84 NY2d 813 [1995]; Roxborough Apts. Corp. v Becker, 11 Misc 3d 99, 101 [2006]).

In closing, we note our recognition that the rent stabilization scheme, even without factoring in differences in interpretation between court and agency, can prove to be an "impenetrable thicket confusing not only to laymen but to lawyers" (La Guardia v Cavanaugh, 53 NY2d 67, 70 [1981], quoting Matter of 89 Christopher v Joy, 35 NY2d 213, 220 [1974]). Given this reality, and with an eye toward ameliorating any "unacceptable burdens" that may be imposed on this and other similarly situated landlords in the wake of Roberts (13 NY3d at 287), we invite the Legislature to consider amending the Rent Stabilization Law to include a "good faith reliance" defense of the type{**32 Misc 3d at 51}presently found in several federal statutes affecting various areas of the law (see e.g. Truth in Lending Act, 15 USC § 1640 [f]; Portal-to-Portal Act of 1947, 29 USC § 259 [a] [each precluding liability for acts done or omitted "in conformity" with agency interpretation of

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statute]).

Schoenfeld, J.P., Shulman and Hunter, Jr., JJ., concur.

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Matter of J.R.D. Mgt. Corp. v Eimicke148 A.D.2d 610, 539 N.Y.S.2d 667

N.Y.A.D.,1989.

148 A.D.2d 610, 539 N.Y.S.2d 667, 1989 WL26417

In the Matter of J. R. D. Management Corp., Appel-lant,

v.William Eimicke, as Commissioner of the NewYork State Division of Housing and Community

Renewal, Respondent.Supreme Court, Appellate Division, Second De-

partment, New York

March 20, 1989

CITE TITLE AS: Matter of J.R.D. Mgt. Corp. vEimicke

OPINION OF THE COURT

Mollen, P. J., Mangano, Thompson and Rubin, JJ.,concur.In a proceeding pursuant to CPLR article 78 to re-view a determination of the respondent Commis-sioner of the New York State Division of Housingand Community Renewal, dated February 26, 1987,granting a rent rollback, the petitioner appeals from(1) a judgment of the Supreme Court, Kings County(Golden, J.), dated August 24, 1987, which dis-missed the petition and (2) so much of an order ofthe same court, entered December 28, 1987, asupon reargument, adhered to its original determina-tion.

Ordered that the appeal from the judgment datedAugust 24, 1987 is dismissed, without costs or dis-bursements, as that judgment was superseded by theorder entered December 28, 1987, made upon rear-gument; and it is further,

Ordered that the order entered December 28, 1987is reversed *611 insofar as appealed from, on thelaw, without costs or disbursements, the judgmentdated August 24, 1987 is vacated, and the matter isremitted to respondent for a determination of thetenant's complaint of a rent overcharge under thelaw as it existed at the time of its determination, towit, Administrative Code of the City of New Yorkformer § YY51-6.0.5 (g) (now § 26-516 [g]).

This dispute arises from the decision of the re-spondent Commissioner of the New York State Di-vision of Housing and Community Renewal toaward a tenant a rent rollback after the petitionerJ.R.D. Management Corp. failed to submit leases toshow the rent history of apartment 4-D at 2701Newkirk Avenue in Brooklyn.

On March 29, 1984, the tenant filed a rent over-charge complaint against the petitioner. The re-spondent demanded complete rent records of thepremises pursuant to Code of the Rent StabilizationAssociation of New York City, Inc. (Rent Stabiliza-tion Code) § 42 (A). Upon the petitioner's failure toprovide all of the requested records, on October 4,1985, the respondent granted the tenant a rent roll-back. On February 26, 1987, the petitioner's peti-tion for administrative review was denied. Thus thepetitioner brought the instant CPLR article 78 pro-ceeding to review the respondent's determination.The Supreme Court dismissed the petition and ad-hered to its determination upon reargument.

The petitioner's principal argument on appeal is thatthe respondent erred in applying Rent StabilizationCode § 42 (A) to the case at bar. Rather, the peti-tioner contends that, consistent with its practice inother cases, the respondent should have decidedthis matter in accordance with the law at the time ofthe determination of the case. On April 1, 1984,two days after the tenant filed her complaint, Ad-ministrative Code former § YY51-6.0.5 (g) becameeffective (see, L 1983, ch 403, as amended by L1984, ch 102, hereinafter the Omnibus Housing

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Act). Insofar as relevant, Administrative Codeformer § YY51-6.0.5 (g) (now § 26-516 [g])provided that an owner who has registered its build-ing, “shall not be required to maintain or produceany records relating to rentals of [premises] formore than four years prior to the most recent regis-tration [of such premises]”.

It is well established that: “Where a statute hasbeen amended during the pendency of a proceeding,the application of that amended statute to thepending proceeding is appropriate and poses noconstitutional problem (Bucho Holding Co. v. Tem-porary State Hous. Rent. Commn., 11 NY2d 469;*612I.L.F.Y. Co. v. City Rent & Rehabilitation Ad-min., 11 NY2d 480;Matter of Taleff Realty Corp. v.Jay, 54 AD2d 423)” (Matter of St. Vincent's Hosp.& Med. Center v. New York State Div. of Hous. &Community Renewal, 109 AD2d 711, 712,affd66NY2d 959).

In Matter of St. Vincent's Hosp. & Med. Center v.New York State Div. of Hous. & Community Renew-al (supra.), as well as other cases under the Omni-bus Housing Act as amended, the respondentsought to apply the law as it existed at the time ofthe determination of the matter (see, Matter of St.Vincent's Hosp. & Med. Center v. New York StateDiv. of Hous. & Community Renewal, supra.;Cor-onet Props. Co. v. State of N. Y., Div. of Hous. &Community Renewal, NYLJ, Nov. 26, 1986, at 11,col 4 [Sup Ct, NY County], affd134 AD2d 967[case brought pursuant to Administrative Codeformer § YY51-6.05 (a) (ii), recodified as § 26-516(a) (ii)]; cf., Matter of Reichman v. New York CityConciliation & Appeals Bd., 117 AD2d 517). Nev-ertheless, in the case at bar, the respondent seeks toapply the law as it existed at the time of the com-plaint without offering a rational reason for the lackof consistency in its application of the law. Such aninconsistent application of the law is arbitrary andcapricious. Therefore, the order must be reversedand the matter remitted to the respondent for a newdetermination.

We have considered the parties' other contentions

and find that they are without merit.

Copr. (c) 2014, Secretary of State, State of NewYork

N.Y.A.D.,1989.J.R.D. MANAGEMENT CORP. V EIMICKE148 A.D.2d 610, 539 N.Y.S.2d 6676021989 WL26417999, 539 N.Y.S.2d 6676021989 WL26417999

END OF DOCUMENT

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Supreme Court, Appellate Division, First Depart-ment, New York.

In the Matter of the Application of Robert & Suz-anne LAVANANT, Petitioners–Appellants,

for a judgment under Article 78 of the Civil Prac-tice Law and Rules,

v.STATE DIVISION OF HOUSING AND COM-MUNITY RENEWAL, Manuel Mirabal, Deputy

Commissioner for Rent Administration, Respond-ents–Respondents.

July 20, 1989.

Landlords filed an Article 78 proceeding to va-cate a decision by the State Division of Housingand Community Renewal awarding treble damagesto a tenant for rent overcharges. The SupremeCourt, New York County, Glen, J., dismissed thepetition. Landlords appealed. The Supreme Court,Appellate Division, Smith, J., held that: (1) the ten-ant was entitled to treble damages for rent over-charges from the effective date of the treble dam-ages provision of the Rent Stabilization Law, eventhough he filed his complaint before that date; (2)the evidence supported the finding that the over-charges had been willful; and (3) the Division actedrationally in requiring a complete rent history,where the tenant's complaint had been filed beforethe effective date of the provision placing a four-year limitation on the calculation of rent over-charges.

Judgment affirmed.

West Headnotes

[1] Landlord and Tenant 233 1953

233 Landlord and Tenant233IX Regulated Rents

233IX(C) Prohibited Landlord Conduct233k1945 Proceedings

233k1953 k. Relief. Most Cited Cases(Formerly 233k200.73)State Division of Housing and Community Re-

newal had statutory authority to award tenant trebledamages on rent overcharges, even though tenant'scomplaint had been filed before effective date ofRent Stabilization Law provision authorizing trebledamages; treble damages provision gave landlordsnotice that treble damage penalty could be imposedfor overcharges occurring after effective date. Ad-ministrative Code, §§ 26–516, 26–516, subds. a,a(2).

[2] Landlord and Tenant 233 1950(4)

233 Landlord and Tenant233IX Regulated Rents

233IX(C) Prohibited Landlord Conduct233k1945 Proceedings

233k1950 Evidence233k1950(4) k. Weight and suffi-

ciency. Most Cited Cases(Formerly 233k200.76)Evidence supported finding by State Division

of Housing and Community Renewal that landlords'rent overcharges had been willful, despite land-lords' claim that overcharges were due to the land-lords' belief that they were entitled to increases forimprovements, for purposes of granting tenant inrent-stabilized apartment treble damages on over-charges. Administrative Code, §§ 26–516, 26–516,subds. a, a(2).

[3] Landlord and Tenant 233 1948

233 Landlord and Tenant233IX Regulated Rents

233IX(C) Prohibited Landlord Conduct233k1945 Proceedings

233k1948 k. Time to sue and limita-tions. Most Cited Cases

(Formerly 233k200.72)State Division of Housing and Community Re-

newal acted rationally when it decided that com-

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plete rent history was necessary for rent overchargecomplaints filed before April 1, 1984, even thoughOmnibus Housing Act established new four-yearlimitation on calculation of rent overcharges; ef-fective date of four-year limitation was delayed inorder to enable tenants in rent-stabilized apartmentsto file claims for overcharges that had accrued morethan four years before enactment. AdministrativeCode, § 26–516(g).

**332 *186 Robert H. Berman, of counsel(Finkelstein, Borah, Schwartz, Altschuler & Gold-stein, P.C., attorneys), New York City, for petition-ers-appellants.

Richard Hartzman, of counsel (Dennis B. Hasher,attorney) for respondents-respondents.

Before MURPHY, P.J., and SULLIVAN, KAS-SAL, ELLERIN, and SMITH, JJ.

SMITH, Justice.Petitioner-landlords Robert and Suzanne

Lavanant appeal from a judgment of the SupremeCourt, New York County, which dismissed theirpetition seeking review of a determination by re-spondent State Division of Housing and Com-munity Renewal (the “Division”) granting trebledamages to a tenant on rent overcharges collectedby petitioners after April 1, 1984.

The issue here is whether the respondent Divi-sion properly imposed treble damages upon peti-tioner-landlords pursuant to Title 26 of The NewYork City Administrative Code upon a finding of arent overcharge where the complaint was filed bythe tenant prior to April 1, 1984, the effective dateof Section YY51–6.0.5 (now § 26–516) of saidCode. Petitioners do not challenge the Division'sdetermination that their tenant was in fact over-charged both before and after April 1, 1984.

Petitioners are the owners of an apartmentbuilding at 228 *187 East 75th Street in Manhattanwhich is subject to New York City's Rent Stabiliza-

tion Law. In November 1981, G. Duane Peters, thetenant of apartment 2A, filed a rent overchargecomplaint with the Conciliation and Appeals Board(“CAB”), the predecessor agency to the Division.The complaint was based in part on an allegationthat petitioners had signed two leases on the samedate for two different tenants, one at $370.00 andthe other at $422.00 per month, and that subsequentincreases were based upon the higher rent eventhough the first tenant had never occupied theapartment. In answer to the complaint petitionerssubmitted the leases of prior tenants of the apart-ment from 1976, when the apartment became sub-ject to the Rent Stabilization Law, and copies ofbills for new equipment and improvements to theapartment made immediately prior to Mr. Peters'occupancy. Petitioners indicated that the first leasereferred to by Peters was an accommodation for thethen tenant-in-occupancy who wished to remain inthe apartment for an additional month. This leasewas for one year. The subsequent tenant executed atwo year lease covering that same period **333since she was willing to wait a month for the apart-ment to be vacated. The District Rent Administratorof the Division requested additional informationand in a “Final Notice of Pending Default” sent topetitioners on September 12, 1986, stated:

Treble damages will be imposed on any over-charge occurring after April 1, 1984 for whichthe owner fails to satisfy the Division that theovercharge was not willful.

On February 3, 1987, some five years after theinitial complaint, the District Rent Administrator is-sued an order finding that since December 15, 1979the tenant had been overcharged in rent by$1,645.47 and in security deposits by $22.27, anddirecting a refund of the overcharges with interest.

On February 11, 1987 the tenant filed a“Petition for Administrative Review,” claiming thatthe District Rent Administrator's order should bemodified to award him treble damages pursuant tothe Rent Stabilization Law § YY51–6.0.5 [now §26–516] since petitioners had not established by a

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preponderance of the evidence that the overchargeswere not willful. Petitioners responded, claiming,inter alia, that the tenant's complaint was filed priorto April 1, 1984, the effective date of §YY51–6.0.5; that they had not received notice ofthe possible imposition of treble damages; and thattheir responsiveness to the original complaint, *188the nominal amount of the overcharge and the dis-allowance of certain claimed improvements, allsupport a finding that the overcharge was not will-ful.

Based upon these submissions and a review ofthe entire record, the Division, on June 26, 1987, is-sued an order directing treble damages as to thepost-April 1, 1984 overcharge of $696.81, stating inpart:

... on September 12, 1986 the Division sent acorrectly addressed Final Notice of Pending De-fault to the owner. This notice stated, in part:“Treble damages will be imposed on any over-charge occurring after April 1, 1984 for whichthe owner fails to satisfy the Division that theovercharge was not willful.”

... Nothing in the record or in the owner's an-swer to this Petition indicates that the owner hasmet its burden of proving the overcharges werenot willful.... Accordingly, the Administrator'sOrder is hereby modified by replacing the$696.81 post-April 1, 1984 actual overcharge(without interest) by three times that amount,$2,090.43, and by subtracting the $49.46 in in-terest which the Administrator imposed in lieu oftreble damages ...

... although the complaint was filed prior to theeffective date of the Act (April 1, 1984), the DH-CR (Division) served the owner with the ... FinalNotice of Pending Default, which clearly advisedthe owner of the penalty of treble damages unlesswillfulness was disproved.

The Commissioner notes that this Order is notbased on the tenant's assertion that the fact that

the owner signed two leases on one day provesthe willfulness of the overcharges. The recordsupports the owner that the first lease was a re-newal lease to the then-current tenant who wasplanning to vacate and the second lease was a va-cancy lease to a new tenant.

Finally, the Commissioner notes that since bothof the above-mentioned leases began in a singleguideline period the possibility of“piggybacking” (compounding rent increases in asingle guideline period) arises and it is the gener-al rule that no treble damages are imposed if thatis the sole source of the overcharge ... However,in the present case no piggybacking occurred. In-deed, there was a greater overcharge in the firstof the two leases in question than in the secondlease. *189 This proves that piggybacking wasnot the source of the overcharges.

Thereafter, the Lavanants commenced a pro-ceeding pursuant to CPLR, Article 78 to vacate theDivision's award of treble damages. In the judg-ment appealed from, the IAS court denied the peti-tion, finding that the Division's determination had arational basis and that treble damages may be awar-ded to a tenant for overcharges accruing on or afterApril 1, 1984 even though the tenant's complaintwas filed prior to **334 that date. The court alsonoted that willfulness is “knowing,” not necessarilymalicious, conduct and that since the petitionersfailed to supply the Division with “any evidencewhatsoever on the issue” of willfulness, there wasno need to hold a hearing.

This appeal followed.

[1] Petitioners' assertion that the Division lacksthe statutory authority to impose treble damagesupon them because their tenant's complaint wasfiled prior to April 1, 1984, the effective date of §YY51–6.0.5 of the N.Y.C.Admin.Code (now §26–516), is without merit. Cenpark Realty Com-pany v. State Division of Housing and CommunityRenewal, 131 A.D.2d 980, 515 N.Y.S.2d 941 (1stDept.1987), lv. to appeal den. 70 N.Y.2d 609, 522

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N.Y.S.2d 109, 516 N.E.2d 1222. In Cenpark, theState Division of Housing and Community Renewaldetermined that a tenant had been overcharged anddirected a refund, including treble damages for theperiod after April 1, 1984. Although informed thatshe could file a Petition for Administrative Reviewof the said order, the landlord failed to do so. In-stead she sought relief by means of an ArticleCPLR 78 proceeding in the Supreme Court. Thatcourt denied relief for failure to exhaust adminis-trative remedies and this court affirmed.

Section 26–516(a) of the Code provides that alandlord who has been found by the Division tohave collected rent overcharges “shall be liable tothe tenant for a penalty equal to three times theamount of such overcharge.” However, “if the land-lord establishes by a preponderance of the evidencethat the overcharge was not willful,” the penalty isto be assessed at only the amount of the overchargeplus interest. Moreover, § 26–516(a)(2) proscribesthe award of treble damages “based upon an over-charge having occurred more than two years beforethe complaint is filed or ... which occurred prior toApril first, nineteen hundred eighty-*190 four.”FN1 Thus, as notice to petitioners was given, theDivision could impose a treble damage penalty forovercharges occurring after April 1, 1984.

FN1. Prior to the enactment of § YY51.6.5(§ 26–516) a tenant could commence acivil action for treble damages against anovercharging landlord. The burden ofproving non-willfulness was on the land-lord. Such civil remedy is still available. §26–413(d)(2) [formerly § Y51–11.0(d)(2)].

[2] Next, petitioners contend that the respond-ents erroneously determined that the overcharge toPeters was “willful,” since such overcharge wasdue to their belief that they were entitled to in-creases for certain improvements[N.Y.C.Admin.Code § 20C(1) ], which improve-ments were eventually disallowed by respondents.However, petitioners' contention is belied by the re-

cord. The Division specifically found that the over-charges originated in October 1978 with the first ofthe aforementioned two prior leases for the apart-ment and was not due, as claimed by petitioners, toan increase based upon the cost of lumber, a newlock and an air conditioner charge, added with otherallowed improvements at the time of petitioners'lease to Mr. Peters. The origin of the overcharge in1978 is made obvious by the record; it was carriedthrough subsequent leases and was modifiedthrough deductions for allowable improvements, fi-nally leading to an overcharge of $9.80 per monthin the first lease to Mr. Peters in December 1979.Petitioners offered no evidence that the overchargesin the prior leases were not willful, nor do they doso now.

Willfulness is “intentionally doing an act andknowing that the act is being done.” Matter of OldRepublic Life Insurance Co. v. Thacher, 12 N.Y.2d48, 234 N.Y.S.2d 702, 186 N.E.2d 554 (1962). Peti-tioners have not disproven that commencing in1978 they consciously and knowingly charged theirtenants the improper rent. A rational basis supportsrespondents' award of treble damages which, there-fore, must stand. [Matter of Pell v. Board of Educa-tion, 34 N.Y.2d 222, 356 N.Y.S.2d 833, 313 N.E.2d321 (1974).]

[3] For the first time, in their reply brief beforethis court, petitioners contend that the prior leasesshould not have been **335 considered by the Divi-sion because the law has changed and no longer re-quires a landlord to produce a complete rent his-tory. The old law, Section 42(a) of the New YorkCity Rent Stabilization Code, promulgated pursuantto former Section YY 51–6.0 of the AdministrativeCode, provided in relevant part as follows:

... It shall be the *191 duty of an owner to re-tain all leases in effect May 31, 1968 or thereafterand produce them on demand of the Association(Real Estate Industry Stabilization Association),the CAB (Conciliation and Appeals Board), theHousing and Development Administration or anew purchaser for as long as the Rent Stabiliza-

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tion Law or any extension thereof is in effect.

Under Section 26–516(g) of the New York CityAdministrative Code, which was the relevant law ineffect on February 3, 1987, the date of the Divi-sion's order, the petitioners were not required toproduce rent records further back than April 1,1980. In this regard Section YY51–6.0.5(g) (now §26–516(g)), effective April 1, 1984, provides:

Any owner who has duly registered a housingaccommodation ... shall not be required to main-tain or produce any records relating to rentals ofsuch accommodation for more than four yearsprior to the most recent registration or annualstatement for such accommodation.

In their reply brief the petitioners also rely onMatter of J.R.D. Management Corp. v. Eimicke,148 A.D.2d 610, 539 N.Y.S.2d 667 (2ndDept.1989). There, the Commissioner of the NewYork State Division of Housing and CommunityRenewal had awarded a rent roll-back to a tenantafter the landlord failed to submit a complete renthistory for the apartment pursuant to Rent Stabiliz-ation Code § 42(A). The Second Department re-versed a determination, made in an Article 78CPLR proceeding, which upheld the Commission-er's action and remitted the matter to the Commis-sioner. The Second Department ruled that the de-cision of the Commissioner to apply the law in ef-fect at the time of the filing of the rent overchargecomplaint [Rent Stabilization Code § 42(A) whichrequired the landlord to submit complete rent re-cords] rather than the law in effect at the time of thedetermination [Section YY51–6.0.5(g), now Sec-tion 26–516(g), which requires the landlord to sub-mit rent records for only the four year period priorto the most recent registration] was arbitrary andcapricious since it was not based upon any rationalreason.

Respondents in a supplemental surreply brieffiled upon leave by this court argue that, contrary tothe holding in Matter of J.R.D. Management Corp.,its application of the law as it existed at the time of

the complaint, under these circumstances, was ra-tional, and consistent with both the legislative in-tent of the Omnibus Housing Act (Chapter 403,Laws of 1983) and with the established policies ofthe Division and of its predecessor *192 agency.Respondent contends that the holding in Matter ofJ.R.D. Management Corp. v. Eimicke, supra, over-looked not only controlling case law and legislativeintent but the disastrous effects that the holdingwould have on some five thousand cases pendingbefore the Division.

We find that the administrative determinationthat complete rent histories should be required forcases filed prior to April 1, 1984 has a rationalbasis.

First, the policy appears to accord with legislat-ive intent. The Omnibus Housing Act (the “Act”)which created what is now § 26–516(g) was en-acted on June 30, 1983. The Act established for thefirst time a four year limitation on the calculation ofrent overcharges and, concomitantly, on the numberof years for which rental records were required. Theeffective date of Section 26–516(g) was delayeduntil April 1, 1984 in order to enable tenants whoseclaims for overcharges had accrued more than fouryears prior to the enactment time to file claims un-der the existing law. Widespread publicity, includ-ing a “Press Advisory of the Attorney GeneralRobert Abrams” encouraging tenants to file prior tothe April 1, 1984 “deadline,” resulted in some30,000 filings.

**336 Prior to that time, the policy of the Con-ciliation and Appeals Board, adopted August 18,1982, was to require that all landlords supply acomplete rental history. Section 20 of the OmnibusHousing Act provides for the continuation of pro-ceedings by the Division “in the same manner ... asif conducted and completed by ... (the) conciliationand appeals board.” Similarly, Section 19 providesfor the continuance of rules and regulations “untilduly modified or abrogated by the division ...” Pur-suant to Sections 19 and 20, the Conciliation andAppeals Board on February 16, 1984 voted to con-

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tinue the policy of requiring that complete recordsto 1974 be produced in connection with all over-charge complaints filed prior to April 1, 1984. Thispolicy finds support in Matter of 61 Jane Street v.New York City Conciliation and Appeals Board,108 A.D.2d 636, 486 N.Y.S.2d 694 (1st Dept.1985)aff'd. 65 N.Y.2d 898, 493 N.Y.S.2d 455, 483N.E.2d 130 (1985). There this court upheld a de-termination by the motion court that an owner whohad purchased a building at a relatively recent datewas obliged to supply a total rent history to theConciliation and Appeals Board on an issue in-volving a rent overcharge and that failure to do socould result in a lowering of the rent to the lowestrent in the same line of apartments and a substantialback-rent payment.

*193 On May 1, 1987, the Division promul-gated Section 2526.1(a)(4) of the Rent StabilizationCode which provides:

Complaints filed prior to April 1, 1984 shall bedetermined in accordance with the Rent Stabiliza-tion Law and Code provisions in effect on March31, 1984, except that an overcharge collected onor after April 1, 1984 may be subject to trebledamages pursuant to this section.

Thus, respondents requirement that leases dat-ing back to 1974 be provided was rational and findssupport in both the law and legislative history ofthe Act.

Second, the interpretation by an administrativeagency of the statutes it administers and of its ownrules and regulations should be given deference ifnot unreasonable. Salvati v. Eimicke, 72 N.Y.2d784, 537 N.Y.S.2d 16, 18, 533 N.E.2d 1045, 1047(1988), recon. den. 73 N.Y.2d 995, 540 N.Y.S.2d1006, 538 N.E.2d 358 (1989).

Accordingly, the judgment of the SupremeCourt, New York County (Glen, J.), entered May 2,1988, should be affirmed, without costs.

Judgment, Supreme Court, New York County,

entered on May 2, 1988, unanimously affirmed,without costs and without disbursements. Applica-tion granted only to the extent of supplementing re-cord.

All concur.

N.Y.A.D. 1 Dept.,1989.Lavanant v. State Div. of Housing and CommunityRenewal148 A.D.2d 185, 544 N.Y.S.2d 331

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Matter of 590 W. End Assoc. v State Div. of Hous.& Community Renewal

166 A.D.2d 184, 564 N.Y.S.2d 77N.Y.A.D.,1990.

166 A.D.2d 184, 564 N.Y.S.2d 77, 1990 WL253891

In the Matter of 590 West End Associates, Appel-lant,

v.State Division of Housing and Community Renew-

al, Respondent.Supreme Court, Appellate Division, First Depart-

ment, New York

(October 4, 1990)

CITE TITLE AS: Matter of 590 W. End Assoc. vState Div. of Hous. & Community Renewal

Judgment, Supreme Court, New York County(Martin Stecher, J.), entered on November 1, 1989,which dismissed petitioner's CPLR article 78 pro-ceeding, challenging a determination by respondentfinding a rent overcharge and granting a rate reduc-tion, unanimously affirmed, without costs andwithout disbursements.

Petitioner owner invites this court to overrule itsdetermination *185 in Matter of Lavanant v StateDiv. of Hous. & Community Renewal (148 AD2d185), holding that the respondent agency may ra-tionally require a complete rental history for rentovercharge cases filed prior to April 1, 1984, andurges adoption of the Second Department's contraryholding in Matter of J.R.D. Mgt. Corp. v Eimicke(148 AD2d 610). We decline to do so, as we havein several recent cases (see, e.g., Matter of East55th St. Joint Venture v Division of Hous. & Com-munity Renewal, 162 AD2d 305;Matter of 3505Broadway Realty Corp. v New York State Div. ofHous. & Community Renewal, 158 AD2d 347). TheDivision of Housing and Community Renewal

would have had the option of choosing retroactiveapplication of the less stringent requirements of the1983 Omnibus Housing Act, if it had seen fit (see,Matter of St. Vincent's Hosp. & Med. Center v NewYork State Div. of Hous. & Community Renewal,109 AD2d 711, 712,affd66 NY2d 959), but it wasnot obliged to do so. An administrative agency isbound by prior determinations only where “the ex-istence of sufficient factual similarity” between thetwo cases requires it (Matter of Field Delivery Serv.[Roberts], 66 NY2d 516, 521). Such is not the casehere.

We have considered petitioner's other argumentsand find them to be without merit.

Concur--Murphy, P. J., Carro, Ellerin, Wallach andSmith, JJ.

Copr. (c) 2014, Secretary of State, State of NewYork

N.Y.A.D.,1990.Matter of 590 W. End Assocs. v State Div. of Hous.& Community Renewal166 A.D.2d 184, 564 N.Y.S.2d 776021990 WL253891999, 564 N.Y.S.2d 776021990 WL253891999

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Faculty Biographies

Magda L. CruzBELKIN BURDEN WENIG & GOLDMAN, LLP

270 Madison AvenueNew York, New York 10016-0601

Phone: (212)867-4466 E-mail: mcruz@bbwg.com

Fax: (212) 867-0709(212) 297-1859

Website: http://www.bbwg.com

Magda L. Cruz is a partner at Belkin Burden Wenig & Goldman, LLP. She joined the firm in 1989and specializes in appeals and complex litigation matters.

Ms. Cruz has argued appeals before New York state and federal courts involving all types of residential and commercial real estate disputes. Ms. Cruz counsels clients on matters concerning rent regulation, cooperative and condominium law, tax incentive law, and contractual and statutory construction issues.

Prior to joining the firm, Ms. Cruz held positions with the New York County District Attorney’s office, The Washington Lawyers’ Committee for Civil Rights Under Law, Morgan, Lewis & Bockius in Miami, Florida, and Rosenberg & Estis, P.C., in New York.

In 2007, Mayor Michael Bloomberg appointed Ms. Cruz to the New York City Rent Guidelines Board, where she represents the interests and concerns of the real estate community. Ms. Cruz is also an active member of the Association of the Bar of the City of New York, and the Association of Real Estate Women (AREW). She has also served on the Housing Court Advisory Councilreviewing applicants for judicial positions; on the board of two cooperative apartment corporations; and as the Chair of After School Programming at a Brooklyn public school.

Ms. Cruz is a licensed Real Estate Instructor and has lectured at the New York State Bar Association, the Association of the Bar of the City of New York, New York County Lawyers Association, and the Rent Stabilization Association.

Ms. Cruz received her law degree from Georgetown University Law Center, and graduated magna cum laude from Pace University in New York City with a Bachelor of Business Administration.

MCRUZ/999.0001/509648

Jamie Heiberger Harrison, Esq. President & Founder, Heiberger & Associates, P.C.

Jamie Heiberger is widely recognized as a leading female attorney in the Greater New York City real estate industry, having achieved unprecedented success while still in her mid-30s. That success derives from her ability to simultaneously think like a businessperson and a lawyer. Born and raised in Jericho, New York, her interest in the legal intricacies of the real estate market began at an early age. In 1990, after graduating with honors from the University of Michigan with a Bachelor of Arts in political science, she attended Brooklyn Law School, where she earned her Juris Doctorate in 1993. She was admitted to the New York State Bar in 1994. While still in law school, Jamie joined Lindenbaum & Young in Brooklyn Heights, a longstanding, well-respected landlord-tenant firm, where she assisted both in court and in the office, translating the vast scope of legal knowledge she had amassed into practical, hands-on experience in the complex New York real estate market. Jamie then moved with one of the firm's partners to his successor firm in Manhattan, Sperber, Denenberg and Barany, where she was a senior associate, handling heavy court work and where she started handling both contracts and closings. In 1996, at just 27 years old, having developed a strong passion for commercial and residential real estate, Jamie embraced the challenge of striking out on her own. That year, she founded Heiberger & Associates, P.C., a real estate law firm focusing on two major areas; 1-representation of commercial and residential building owners and management companies in all landlord-tenant legal needs; and 2- representation of lenders, Purchasers and Sellers of multifamily properties as well as individual cooperative & condominium units. Founding her firm on the fundamental principle that—in both business and life—the ability to quickly assimilate and act on new information is essential to growth, Jamie has expanded Heiberger & Associates over the last decade into a full-service real estate, litigation and transactional law firm. Nine full-time lawyers and 15 support-staff employees are separated into two Divisions; Landlord/Tenant and Transactional. To date, Heiberger & Associates has achieved significant success conducting litigation and providing legal advice for a wide variety of real estate transactions for residential and commercial properties. The firm has also represented major owners and developers, assisting them in the negotiation and eviction processes to remove both commercial and residential tenants to make way for new developments and condominium conversions. In 2008, Jamie set up a separate closing division to represent the sponsor in the sell-out of a large downtown Manhattan condominium. Jamie believes it is important to stay active and involved outside of the office as well. She demonstrates her commitment to the Greater New York City community through membership in the Community Housing Improvement Program, a trade association representing more than 2,500 apartment-building owners. CHIP has been a leading voice in city and state housing policy for nearly four decades on issues such as lead paint, property taxes, water rates, and rent regulation. Jamie is also a member of the Real Estate Board of New York (REBNY), the Association of Real Estate Women (AREW), the New York State Bar Association (NYSBA), and NYCREW. Additionally Jamie is also a good member of The Ruby Peck Foundation which supports children's education. Jamie recently became a State Court Appointed Receiver and Attorney for Receivers. After residing in New York City for over 20 years where she raised her twins, son Gavin and daughter Morgan, Jamie and her Husband Todd Harrison together with their daughter Ruby have moved to Port Washington on Long Island. As busy as she is helming a major metropolitan law firm, Jamie's family is her number one priority. While she's accessible to her clients round the clock, modern technology allows her to always be available for clients and family without missing a beat.

• Joshua G. Losardo

Bar Admissions: o New York, 1999 o U.S. District Court Southern District of New York, 2002 o U.S. District Court Eastern District of New York, 2002

Education: o JD, Brooklyn Law School, Brooklyn, New York, 1998 o BA, Binghamton University, Binghamton, New York

JOSHUA G. LOSARDO joined Belkin Burden Wenig & Goldman, LLP in August 2000. Mr. Losardo was promoted to Partner in 2008, and represents our clients in both Administrative and Bankruptcy proceedings.

Mr. Losardo's specialization concerns the regulation of real property, including rent stabilization, rent control and property tax exemption/abatement programs, such as 421a and J-51. Since joining BBW&G, Mr. Losardo has represented owners in hundreds of administrative proceedings before the New York State Division of Housing and Community Renewal, New York State Department of Law, and New York City Commission on Human Rights. He has successfully challenged many administrative decisions by bringing Article 78 special proceedings in State Supreme Court. In addition, Mr. Losardo represents both buyers and sellers of multiple family dwellings by conducting due diligence review and analysis of a building's rent history.

Mr. Losardo also effectively defends creditors' rights in bankruptcy proceedings in both the Southern and Eastern Districts of New York by bringing various motions, including those seeking relief from the automatic stay, the payment of administrative rent and the conversion or dismissal of a bankruptcy case.

Mr. Losardo's experience has enabled him to provide clients with efficient solutions to a diverse array of legal issues.

Mr. Losardo earned a Juris Doctorate from Brooklyn Law School in 1998, and a Bachelor of Arts degree from Binghamton University in 1994.

Areas of Practice: o Real Estate Administrative Proceedings o Bankruptcy & Creditors Rights

HOME ABOUT PRACTICE AREAS ATTORNEYS FIRM NEWS CONTACT

JAMES R. MARINO

EDUCATION• Brooklyn Law School      Juris Doctor• Gettysburg College        Bachelor of Arts

ADMISSIONS• New York State Courts

James is a partner at Kucker & Bruh, LLP, and a senior attorney whose practice areas include representing commercial and residential landlords in the City of New York. He specializes in rent control law,rent stabilization, residential real estate, and cooperative housing law. His expertise includes rent regulation including rent overcharge and service complaints, as well as luxury deregulation and demolition applications. All of the proceedings are before the Division of Housing and Community Renewal (DHCR). He also handles court appeals against the DHCR. In addition, James oversees the Major Capital Improvement (MCI) rent increase application process for clients. He handles all administrative violation matters that the firm's clients may face at the Environmental Control Board and the Department of Health.

Jim Marino joined Kucker & Bruh, LLP in 1987 and has been a partner since 1993.  For more than two decades, he has been advising landlords on New York City regulatory laws.  Jim handles hundreds of rent overcharge and service complaints, luxury deregulation, demolition and Major Capital Improvement (MCI) rent increase applications. Jim also regularly handles administrative violation matters before State Agencies.

Jim regularly advocates for landlords in the five boroughs of New York before the DHCR, Environmental Control Board, Department of Health and Department of Housing Preservation and Development. Landlords also benefit from Jim’s extensive leasing experience which includes commercial and residential space. Further, he is able to organize and manage the due diligence lease reviews often required for real estate financing transactions.

Jim is a regular contributor to the publication Landlord v. Tenant, has conducted lectures at the Rent Stabilization Association, the Community Housing Improvement Program (CHIP) and has been an instructor at New York University's Real Estate Institute, conducting a course entitled "Rent Control/Rent Stabilization: Procedures and Forms." Jim was also an instructor in the HPD's Housing Education series for property owners, conducting a course titled: "Introduction to DHCR."

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