Opinion
9422/2015
05-13-2016
Meghan Bernhardt, MATTHEW NELSON, ALLISON BAKER, ASHTON FRANKLIN, DAVID EASTON and LILY MERCOGIANO, Plaintiffs, v. 411 Clinton Street Holdings, LLC, Defendant.
Plaintiff Attorney — The Law offices of William Leavitt 305 Broadway, Suite 900 New York, New York 10007 Defendants Attorney - Wenig Saltiel, LLP 381 Park Avenue, Suite 1200 Brooklyn, New York 11242
Plaintiff Attorney — The Law offices of William Leavitt 305 Broadway, Suite 900 New York, New York 10007 Defendants Attorney - Wenig Saltiel, LLP 381 Park Avenue, Suite 1200 Brooklyn, New York 11242 Wayne P. Saitta, J.
Plaintiffs, MEGHAN BERNHARDT, MATTHEW NELSON, ALLISON BAKER, ASHTON FRANKLIN, DAVID EASTON and LILY MERCOGIANO, (hereinafter "Plaintiffs"), move this Court by Order to Show Cause enjoining Defendant from bringing summary holdover proceedings against Plaintiffs and granting further relief as this Court deems just and proper.
Upon reading the Order to Show Cause of William E. Leavitt, Esq., Attorney for Plaintiffs, MEGHAN BERNHARDT, MATTHEW NELSON, ALLISON BAKER, ASHTON FRANKLIN, DAVID EASTON and LILY MERCOGIANO, together with the Affirmation in Support, dated July 27th, 2015, together with the Affidavit of Plaintiff, DAVID EASTON, dated July 27th, 2015, together with the Affidavit of the Plaintiff, MEGHAN BERNHARDT, dated July 27th, 2015, together with the Affidavit of Plaintiff, Allison Baker, dated July 27th, 2015 and all exhibits annexed thereto; the Affirmation in Opposition of Meryl L. Wenig, Esq., Attorney for Defendant, 411 CLINTON STREET HOLDINGS, LLC, dated August 5th, 2015, together with the Affidavit in Opposition of Bude Hidra, dated August 5th, 2015 and all exhibits annexed thereto; the Reply Affirmation in Support of William E. Leavitt, Esq., dated August 7th, 2015, together with the Reply Affidavit of Plaintiff, MEHGAN BERNHARDT, dated August 7th, 2015, together with the Reply Affidavit of Plaintiff, DAVID EASTON, August 11th, 2015, together with the Reply Affidavit of Plaintiff, ALLISON BAKER, dated August 7th, 2015; the Reply Affirmation of James B. Fishman, Esq., Attorney for Plaintiffs, MEGHAN BERNHARDT, MATTHEW NELSON, ALLISON BAKER, ASHTON FRANKLIN, DAVID EASTON and LILY MERCOGIANO, dated August 12th, 2015 and all exhibits annexed thereto; and after argument of counsel and due deliberation thereon, Plaintiffs' Order to Show Cause for the continuance of a temporary restraining order and a preliminary injunction is granted for the reasons set forth below.
FACTS
Plaintiffs bring this Order to Show Cause asking the Court to enjoin the Defendant from commencing holdover proceedings against the Plaintiffs in housing court, and in their underlying complaint, Plaintiffs seek declaratory relief determining that they are protected by the rent stabilization laws, together with compensation for a rent overcharge and their attorneys fees.
Plaintiffs are tenants in three units in the building located at 666 St Johns Place in Brooklyn NY, ("the building"), owned by the Defendant. They brought this Order to Show Cause in response to receiving 30 days notices from the Defendant terminating their tenancies as of July 31, 2015 and notifying them of Defendant's intention to commence holdover actions against them. The thirty day notices do not claim that the tenancies are subject to rent regulation.
Plaintiffs BERNHARDT and NELSON reside in unit 3R, pursuant to a one year lease at a rent of $1200, which contains no indication of whether the apartment was covered by the rent stabilization laws. No renewal was offered when the lease term ended, and Plaintiffs have been paying the same monthly rent ever since.
The apartment was registered with DHCR in 2004 for $807.13. After 2008 the apartment was listed as exempt from regulation due to a substantial rehabilitation of the apartment.
Plaintiffs EASTON and MERCOGLIANO reside in unit 2R pursuant to a one year lease at a rent of $1200. The lease contains no indication of whether the apartment was covered by the rent stabilization laws. No renewal was offered when the lease term ended, and Plaintiffs have been paying the same monthly rent ever since.
The apartment was registered with DHCR in 2006 for $909.39. On July 31, 2012, DHCR registration lists the apartment as deregulated due to a substantial rehabilitation and a vacancy increase in 2008.
Plaintiffs BAKER and FRANKLIN reside in unit 2L pursuant to a one year lease at a rent of $977.35. The lease contains no indication of whether the apartment was covered by the rent stabilization laws. No renewal was offered when the lease term ended, and Plaintiffs have been paying the same monthly rent ever since.
The apartment was registered with DHCR in 1986 at a rent of $362.73. It was registered as exempt from rent regulation from 1987 through 2004 as occupied by a prior landlord, May Clark. The next registered rent was filed in 2004 at $2,000, as exempt from regulation. The subsequent registration was for a preferential rent of $977.35, when BAKER took occupancy. There is no tenant listed from the prior rent paid in 1986 of $362.73 through 2004 when the rent was listed at $2,000.
The Plaintiffs' underlying complaint seeks declaratory relief that they are rent stabilized tenants and entitled to leases, a permanent injunction preventing the Defendant from denying them rent stabilized renewal leases, Plaintiffs seek a judgment for the overcharge in rent they claim they have paid since February 27, 2011, they seek treble damages for the rent overcharge pursuant to the rent Stabilization Law, and they seek to be compensated for their attorney's fees in having to commence this action.
Plaintiffs now seek a preliminary injunction enjoining Defendant from commencing or prosecuting summary eviction proceedings against the Plaintiffs.
POSITIONS
Plaintiffs argue that their apartments are subject to rent regulation, and that the 30 day notices they received are improper as the apartments were not properly deregulated. They argue that the apartment renovations did not justify the increases in the rent which Defendant claims gave it the right to deregulate the units.
Plaintiffs BERNHARDT and NELSON contend that in order for the apartment to have reached the deregulation threshold in 2011 of $2000, the apartment renovation would have had to have cost, at a minimum, assuming there had been an intervening tenant, $32,800. Plaintiffs argue that the renovations completed did not cost the landlord $32,800 and that the apartment is still subject to rent regulation.
Plaintiffs EASTON and MERCOGLIANO contend that in order for the apartment to have reached the deregulation threshold in 2011 of $2000, the apartment renovation would have had to have cost, at a minimum, assuming there had been an intervening tenant, $27,000. Plaintiffs argue that the renovations completed did not cost the landlord $27,000 and that the apartment is still subject to rent regulation.
Plaintiffs further argue they are entitled to a preliminary injunction as they will suffer irreparable harm if Defendant is permitted to commence summary proceedings because they will be liable to be included on a blacklist which results from the New York State Office of Court Administration Office of Court Administration's (OCA) policy of selling the names of tenants who have been sued in Housing Court.
Defendant argues that the Plaintiffs signed leases which were not stabilized leases, and that because of the substantial renovations made in the apartments, they are entitled to reach the $2000 threshold for deregulation.
Defendant argues that Plaintiffs' claims are speculative and therefore the motion for a preliminary injunction must be denied.
DISCUSSION
To obtain a preliminary injunction, a movant must demonstrate, by clear and convincing evidence, (1) a likelihood of success on the merits, (2) irreparable injury absent a preliminary injunction, and (3) a balancing of the equities in the movant's favor. In re Rice, 105 AD3d 962, 963 NYS2d 327 (2nd Dept 2013).
Likelihood of success on the merits
To show a likelihood of success on the merits, conclusive evidence is not required, McNeil v Mohammed, 32 AD3d 829, 821 NYS2d 225 (2nd Dept 2006); Ruiz v Meloney, 26 AD3d 485, 810 NYS2d 216 (2nd Dept 2006). The mere fact that there may be questions of fact for trial does not preclude a court from exercising its discretion in granting a preliminary injunction. Even where there are facts in dispute, a court can find plaintiff has a likelihood of success, even though the evidence is not conclusive. Ying Fung Moy v Hohi Umeki, 10 AD3d 604, 781 NYS2d 684 (2nd Dept 2004); Ma v Lien, 198 AD2d 186, 604 NYS2d 84 (1st Dept 1993). The rent regulations in place at the time that Defendant purportedly deregulated the apartments provided that the cost of individual apartment improvements completed in buildings containing 35 or fewer units could be passed along to the tenant at 1/40th of the cost of improvements. Also in effect at that time was that apartments could be deregulated upon vacancy if the legal monthly regulated rent reached $2,000. 9 NYCRR 2520.11, Compilation of Codes, Rules and Regulations of the State of New York. The Plaintiffs offer the affidavit of Christopher J. Leahy, who states he is the Vice President and Chief Estimator for Major Renovation Management, Inc., and an expert in construction cost estimating, sales and management. Leahy's affidavit is based upon his inspection of the apartments. He states that the cost of the renovations made to the apartments was substantially less than the amount he is advised would have been required to legally deregulate the apartments.
Apartment 3R
Leahy testified that he inspected unit No.3R at the request of Plaintiff MEGHAN BERHARDT. He opined as to the age of each of the renovations in the apartment, and estimated their cost. He concluded that the renovations completed from 2002-2010 in apartment 3R cost $2000-$4000 (if paint stripping were included). 1/40th of the high end of his estimate of $4000 would result in a rent increase of $100.
The DHCR registrations reflect that a substantial renovation to the unit took place in 2008, at which time there was a preferential rent of $925.
Apartment 2R
Leahy testified that he inspected unit #2R at the request of Plaintiff DAVID EASTON. He opined as to the age of each of the renovations in the apartment, and estimated their cost. He concluded that the renovations completed between 2002-2009 cost $2300-$4300 (if paint stripping were included). In 2009, the rent was registered as $1300. 1/40th of the high end of his estimate of $4300 would result in a rent increase of $107.50.
Apartment 2L
Leahy testified that he inspected unit #2L at the request of Plaintiff ALLISON BAKER and he opined that no improvements were made to the apartment during BAKER's tenancy, after the 1990s. While he stated a repair was made to retiling bathroom walls, he stated retiling constituted a repair and not an improvement. He said there were no improvements made during BAKER's tenancy between 2002-2005. Defendant argues that Leahy ignored the majority of the renovations done. Defendant also challenges Leahy's qualifications as an expert, noting Plaintiffs failed to annex Leahy's resume. Defendant offers the affidavit of Bude Hidra, the building manager for the property. Hidra's affidavit is based upon an inspection of units #3R and #2R. Hidra did not inspect apartment #2L. Hidra attested to observing new appliances, cabinets, countertops, floors, fixtures and sheetrock in the units and attested that the renovations were made around 2008. Hidra states that based upon "observations and discussions with the Plaintiffs and others", that the apartments were substantially renovated at a cost of $45,000 to $55,000 each". Defendant does not attach a resume or basis for the qualification of Bude Hidra, other than being a property manager for more than ten years, with experience in costs of building renovations. Hidra does not claim to have overseen the renovations of the apartments which are the subject of this action. The wide disparity between the estimates of the Plaintiffs' expert and the Defendant's manager of the cost of the renovations to the apartments indicates there is a question of fact as to whether the renovations, in fact, justified the amount of the increases, which will have to be determined by a trier of fact after discovery. However, Plaintiffs' expert's affidavit establishes a likelihood of success on the merits as it appears to be more consistent with the photographs Defendant submitted in support of its opposition.
Irreparable harm
The purpose of the preliminary injunction is to preserve the status quo during the court of the litigation. Plaintiffs claim that they will be irreparably harmed by Defendant commencing holdover proceedings against them as they will appear in reports of housing court data which OCA furnishes to tenant screening bureaus (TSBs). They argue that appearing as parties in housing court proceedings may result in their being blacklisted from future housing rentals in New York City, or that they will be subjected to heightened burdens in renting apartments in the future. Further, once Plaintiffs are put on a TSB blacklist, there is no practical way to remove them even if they ultimately prevail in a housing court proceeding. New York Courts have found that because of OCA's practice of selling the names of tenants sued in Housing Court, irreparable harm may result from being named in a housing court proceeding. In Weisent v Subaqua Corp., 16 Misc 3d 1115(A) [Sup Ct NY Cty 2007], the Court opined that tenant screeneing bureaus, ("TSBs"), "have seized upon the ready and cheap availability of electronic records to create and market a product that can be, and probably is, used to victimize blameless individuals", citing White v First Am. Registry, Inc., 04 CIV. 1611 (LAK), 2007 WL 703926 (SDNY 2007). "The problem is compounded by the fact that the information available" from the Housing Court "is sketchy in the best of cases and inaccurate and incomplete in the worst." Id.; see also, Note, Tenant Screening Thirty Years Later: A Statutory Proposal to Protect Public Records, 116 Yale L.J. 1344 (April 2007). The Court concluded that the damage done by being named in a housing court action, whether or not the tenant prevails, results in potentially extreme hardship for the tenant in obtaining housing in the future. See also Denza v Indep. Plaza Assoc., LLC, 17 Misc 3d 1122(A) (Sup Ct NY Cty 2007), where the Court held that plaintiffs demonstrated that they would be subject to blacklisting that could make finding a new rental apartment difficult, based on the court administration practice of selling Housing Court eviction case data. See also DeCastro v Bhokari, 201 AD2d 382, 383 (1st Dept 1994), Pultz v Economakis, 8 Misc 3d 1022(A) (Sup Ct NY Cty 2005), reversed on other grounds. In addition to the possibility of being blacklisted by prospective landlords, in this action, Plaintiffs run the risk of losing their homes, which they allege are rent stabilized. The fact that Plaintiffs signed standard leases, and not stabilized leases, is immaterial as the stabilized status of the apartments is not altered by the signing of a lease which fails to specify the stabilized status of the apartment. In addition, the determination as to whether Defendant was entitled to the rent increases will depend chiefly upon how much the landlord actually spent in the alleged renovations of the two apartments. Discovery is ill suited to a summary proceeding. Plaintiffs will be irreparably harmed if Defendant is permitted to prosecute summary proceedings before Plaintiffs have had an opportunity to conduct discovery in this action.
Equities in the favor of the party seeking the injunction
In this case, the Defendant is not without recourse as to recovering possession of the apartments in the event it prevails on its claim that the units are destabilized, and the harm to the Plaintiffs without the injunction will be greater than the harm to the Defendant if the injunction is granted. Wherefore, the Plaintiffs' Order to Show Cause seeking a preliminary injunctions barring the Defendant from commencing or prosecuting summary holdover proceedings is granted, pending the determination of this action, and it is hereby ORDERED that Defendant and its agents are hereby enjoined from commencing summary proceedings to evict the Plaintiffs and it is further, ORDERED that Plaintiffs each post an undertaking of $1,000. This shall constitute the decision and order of this Court. ENTER, ____________________ J S C