151st & Walton, LLC v. Visnauskas

Full title: In the Matter of the Application of 151st AND WALTON, LLC, Petitioner, v…

Court: Supreme Court, Bronx County

Date published: Jan 24, 2022

2022 N.Y. Slip Op. 32517 (N.Y. Sup. Ct. 2022)

Opinion

Index No. 802802/2021E

01-24-2022

In the Matter of the Application of 151st AND WALTON, LLC, Petitioner, v. RUTHANNE VISNAUSKAS, as Commissioner/CEO of Housing and Community Renewal; and DIVISION OF HOUSING AND COMMUNITY RENEWAL (DHCR) Respondent,VICTORIA BAILEY, Co-Respondent For A Judgment Pursuant to Article 78 of the Civil Practice Law and Rules,

MARY ANN BRIGANTTI, J.

Unpublished Opinion

DECISION AND ORDER

MARY ANN BRIGANTTI, J.

Upon the foregoing papers, the petitioner 151^st and Walton LLC ("Petitioner") seeks an order pursuant to CPLR Article 78, revoking and annulling the respondent New York State Division of Housing and Community Renewal's Order and Opinion Denying Petition for Administrative Review issued on February 18, 2021, and/or an order rescinding the respondent New York State Division of Housing and Community Renewal's May 28, 2020 order reducing rent, and for such other and further relief as this Court deems just and proper. The respondent Ruthanne Visnauskas, as Commissioner/CEO of Housing and Community Renewal, and the New York State Division of Housing and Community Renewal ("Respondent") oppose the petition. The petition has been transferred to the undersigned for disposition due to the unavailability of Justice Mary Ann Brigantti.

Petitioner owns the apartment building located at 175 East 151^st Street in the Bronx (the "Property"). Co-respondent Victoria Bailey ("Bailey") is a tenant and occupant of Apartment 5-N located at the Property. On October 16, 2019, Bailey applied for an order reducing rent due to an alleged decrease in required services. On May 28, 2020, the Rent Administrator ("RA") issued a Rent Reduction Order ("RRO"). According to the RRO, an inspection was conducted on the Property on February 25, 2020. During that inspection, it was determined that Bailey did not have access to the laundry room. The inspector observed that the laundry room was closed due to a fire that occurred inside of it. The RA thus issued an order reducing rent. Petitioner thereafter filed a Petition for Administrative Review ("PAR") challenging the findings of the RRO. On February 28, 2021, Respondent issued an order denying the PAR. Petitioner thereafter filed this petition.

"It is a long-standing, well-established standard that the judicial review of an administrative determination is limited to whether such determination was arbitrary or capricious or without a rational basis in the administrative record" (Partnership 92 LP v. State Div. of Housing and Community Renewal, 46 A.D.3d 425, 428 [1^st Dept 2007]; Matter of Pell v. Board of Educ. Of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 N.Y.2d 222, 230-231 [1974]; CPLR 7803[3]). To determine whether a determination is arbitrary and capricious, Courts will test "whether a particular action should have been taken or is justified" and "whether the administrative action is without foundation in fact" (Pell, 34 N.Y.2d at 230-231, quoting 1 N.Y. Jur., Administrative Law, s 184, p. 609 [internal quotation marks omitted]). "Arbitrary action is without sound basis in reason and is generally taken without regard to the facts" (id.). Still, agency determinations are "entitled to deference" and "even if different conclusions could be reached as a result of conflicting evidence, a court may not substitute its judgment for that of the agency when the agency's determination is supported by the record" (Partnership 92 LP, 46 A.D.3d at 428-29).

Rent Stabilization Code [9 NYCRR] §2523.4[a][l] provides that a tenant may apply for a reduction of the legal regulation rent to the level in effect prior to the most recent guidelines adjustment, and Respondents "shall so reduce the rent for the period for which it is found that the owner has failed to maintain required services." "Required services" are defined as:

That space and those services which the owner was maintaining or was required to maintain on the applicable base dates set forth below, and any additional space or services provided or required to be provided thereafter by applicable law. These may include, but are not limited to, the following: repairs, decorating and maintenance, the furnishing of light, heat, hot and cold water, elevator services, janitorial services and removal of refuse.

(Rent Stabilization Code [9 NYCRR] §2520.6[r][1]). Required "ancillary services" are defined as:

That space and those required services not contained within the individual housing accommodation which the owner was providing on the applicable base dates set forth below, and any additional space and services provided or required to be provided thereafter by applicable law. These may include, but are not limited to, garage facilities, laundry facilities, recreational facilities, and security.

(Rent Stabilization Code [9 NYCRR] §2520.6[r][3]).

In this case, Petitioner failed to establish that the laundry facility at issue was not a required ancillary service. The relevant statute provides that laundry facilities may be included in "ancillary services," which are services that the owner was providing on the applicable base date, "and any additional space and services provided or required to be provided thereafter by applicable law" (id.) ¹ Indeed, it has been held that laundry facilities could be deemed required ancillary services where the services induced a tenant into signing her initial lease and were continuously provided by the landlord or their agents during the tenant's occupancy (Matter of Llorente v. New York State Div. of Hous. & Community Renewal, 16 A.D.3d 105 [ 1^st Dept. 2005]). In this case, Petitioner did not submit any evidence before the RA or in support of its PAR establishing that it did not provide laundry services to the tenant on the "base date," or as of the date Bailey made her initial complaint. Petitioner submitted no evidence in support of its PAR, or in support of the instant petition, establishing that Respondent "was fully aware that the laundry room service was never a registered service." Petitioner thus failed to show that Respondent's determination denying the PAR was arbitrary or capricious.

1 Petitioner contends that Respondent did not follow its own policy statement which provides that a required service is one that was provided on a "base date" or required to be provided "by any state law or local law, ordinance or regulation applicable to the premises" (Pet. At Par. 48-50). However, Petitioner misstates the text of the policy. The policy states: "A 'required service' is one that was furnished on the base date or subsequently, or one required to be furnished by any state law or local law, ordinance or regulation applicable to the premises" (Policy Statement 90-2 [February 21,1990][emphasis added]).

Petitioner contends that Respondent failed to consider its contention that the laundry room was exempt from consideration as a required ancillary service pursuant to RSC §2520.6(r)(4)(xi). That section provides:

A service as defined in paragraph (3) of this subdivision for which there is or was a separate charge, shall not be subject to the provisions of this Code where no common ownership between the operator of such service and the owner exists or existed on the applicable base date, or at any time subsequent thereto, and such service is or was provided on the applicable base date and at all times thereafter by an independent contractor pursuant to a contract or agreement with the owner. Where, however, on the applicable base date or at any time subsequent thereto, there is or

was a separate charge, and there is or was common ownership, directly or indirectly, between the operator of such service and the owner, or the service was provided by the owner, any increase, other than the charge provided in the initial agreement with a tenant to lease, rent or pay for such service, shall conform to the applicable rent guidelines rate. However, notwithstanding such common ownership, where such service was not provided primarily for the use of tenants in the building or building complex on the applicable base date or at any time subsequent thereto, such increases shall not be subject to any guidelines limitations.

Here, contrary to Petitioner's contentions, it is evident that Respondent considered the argument that the laundry room was exempt because nonparty contractor Hercules Corp. ("Hercules") rented the basement space of the building, and erected, maintained, and installed laundry facilities and charged fees, and paid rent to Petitioner in exchange for this use of the space. Respondent's decision denying the PAR clearly states: "[t]he petitioner's attorney's contention that the landlord entered into a lease agreement with a third party to provide laundry service at the subject building is unavailing as the copy of the lease agreement provided in the PAR shows that the lease agreement is dated February 11^th, 2020, after the filing date of the tenant's rent reduction application." Petitioner does not explain the relevance of the lease agreement that post-dated Bailey's complaint. In addition, as pointed out by Respondent, the "Laundry Facility Proposal" letter submitted by Petitioner (which is dated February 4, 2020 - after Bailey's complaint was filed), indicates that Hercules intended to "continue to operate your laundry facility" for "your building's residents." This suggests that laundry services at the building were provided even before Petitioner entered into the lease agreement with Hercules, and further solidifies the conclusion that Respondent's denial of the PAR was not arbitrary or capricious. Furthermore, this letter refutes Petitioner's contention that "all costs associated to use of the laundry equipment in the basement at the subject building was paid directly to Hercules, and not to the Landlord." The letter proposes that, based on a ten-year operating agreement, Hercuies would offer a commission of 50% of all gross receipts each month.

Petitioner argues that it was deprived of due process because it never received Bailey's reply to Petitioner's PAR. The Court finds this contention unavailing. Petitioner was aware of Bailey's application for a rent reduction in October 2019, alleging that Petitioner failed to provide a required ancillary service. Despite having a full opportunity to address that contention, Respondent did not challenge the application, and a RRO was issued. At the time it filed its PAR, Petitioner was fully aware of Bailey's contentions, and the RA's reasoning for issuing the RRO, and aware of its defenses to her contentions -that the laundry room was not a required ancillary service. Petitioner nevertheless failed to provide any affirmative proof demonstrating that the laundry facility was not provided on the base date or any subsequent date during Bailey's tenancy. Under the circumstances, Petitioner's alleged failure to receive Bailey's reply to its PAR did not violate its due process rights (see, e.g., Matter of Terrace Ct., LLC v. New York State Div. Of Hous. & Community Renewal, 79 A.D.3d 630, 633 [1^stDept. 2010], aff'd, 18 N.Y.3d 446 [2012], citing Matter of Empress Manor Apts. v. New York State Div. of Hous. & Community Renewal, 147 A.D.2d 642, 643 [2d Dept. 1989]).

Accordingly, it is hereby

ORDERED, that the petition is denied, this proceeding is dismissed, and the Clerk of this Court is hereby directed to enter judgment accordingly.

This constitutes the Decision and Order of this Court.