Opinion
25350/2009.
February 3, 2010.
MEMORANDUM
In this Article 78 proceeding petitioner, Junction Realty LLC, seeks a judgment vacating the determination of respondent State of New York Division of Housing and Community Renewal Office of Rent Administration ("DHCR"), dated July 23, 2009, which denied its petition for Administrative Review, and upheld the Rent Administrator's finding of a rent overcharge.
Petitioner, Junction Realty LLC ("Junction Realty") is the owner of a three-story building located at 94-24 Northern Boulevard, Jackson Heights, New York. Said building is a walk-up, with a commercial space on the ground floor and two residential dwellings on the upper levels. Junction Realty LLC had purchased said real property on November 5, 2004 from 94-20 Northern Boulevard Realty Corp., along with adjoining buildings located at 94-22 Northern Boulevard, 33-15 Junction Boulevard, and 33-09 Junction Boulevard. Each of these buildings contain a commercial space and two residential dwelling units.
On April 22, 2005, Jasmine Martinez, the tenant in apartment 1F located at 94-24 Northern Boulevard, Jackson Heights, New York filed a rent overcharge complaint with the DHCR. The owner submitted an answer, and additional information was submitted by both the owner and the tenant.
The Rent Administrator, in an order dated February 10, 2006, determined that the tenant had been overcharged in the amount of $13,482.00, including treble damages, of which the tenant's share was $1,596.00 and the New York City Department of Social Services ("DSS") share was $11,896.00. The owner filed a petition for administrative review ("PAR"), and the Commissioner of the DHCR, in an order dated June 27, 2006, denied the PAR, and determined that although the subject building consisted of fewer than six residential units, for over twenty years the prior owner, 94-20 Northern Boulevard Realty Corp., had managed said building and four other adjoining buildings that it owned as, in essence, a single building subject to the Rent Stabilization Law and Code. The Commissioner found that the current owner, Junction Realty, who took ownership of the subject premises pursuant to a deed dated November 5, 2004, had not identified any facts that would warrant a change in the long standing regulated status of the building, and sustained the finding that the building was under the agency's jurisdiction and that the tenant had been overcharged.
Junction Realty thereafter commenced an Article 78 proceeding in this court, and on November 6, 2006, the Hon. Augustus C. Agate issued an order, remanding the matter to the agency, without prejudice, for further consideration. On January 11, 2007, the Commissioner issued a remand order, and upon finding that the administrative record was inadequate returned the matter to the Rent Administrator for further processing. Upon remand, and in accordance with Justice Agate's order, the Rent Administrator was directed to proceed in such a manner as may be necessary, including but not limited to scheduling an on site inspection of the premises by an agency inspector for the purposes of determining whether the subject building located at 94-24 Northern Boulevard, Jackson Heights, New York, together with the four other adjoining buildings individually known as 94-20 and 94-22 Northern Boulevard, 33-07 Junction Boulevard (corner of Northern Boulevard) and 33-11 and 33-15 Junction Boulevard, satisfied the requirements of a "horizontal multiple dwelling" consisting of six or more units. The parties were also requested to submit evidence on this issue.
The tenant stated that in 1968 all of the adjoining buildings were part of a single building complex which shared one boiler and sewer system, had one Certificate of Occupancy and one MDR number. She stated that over the years the owners installed separate boilers and took other actions to separate the buildings to exempt the buildings from Rent Regulations. The tenant, however, did not submit any evidence of a single boiler or other changes to the buildings' heating system.
The owner stated that the buildings have separate Con Edison accounts, Keyspan accounts, water/sewer lines, certificates of occupancy, entrances, public hallways, interior staircases, chimneys and flues, block and lot numbers, mail boxes, and DHPD numbers. The owner in response to a request by DHCR to provide evidence regarding the issue of the separate characteristics of the building (i.e. heating system, block and lot numbers, water and sewer, electrical facilities, etc.) on the base date in May 1969, stated that the request was unreasonable as it had only purchased the building in November 2004 and submitted no evidence concerning the characteristics of the building prior to November 2004.
The DHCR inspected the building on March 31, 2007. The inspector observed that "each building has it's[sic] own water main, sewer line heating plan[sic]" and submitted photographs along with the report.
On November 14, 2007, the Rent Administrator issued an order affirming the prior order of February 10, 2006, stating that the building qualified as a horizontal multiple dwelling, subject to rent regulation, and determined that the rent overcharges of $13,482.00 were properly calculated as reflected in the order of February 10, 2006. Said determination, was based in significant part, on the owner's failure to submit evidence demonstrating that the buildings had separate heating systems, separate block and lot numbers, separate water and sewer systems, and separate electrical facilities, as of the base date.
The owner thereafter commenced an Article 78 proceeding on January 3, 2008. The DHCR in its answer asserted that the owner had failed to exhaust its administrative remedies. The Hon. Frederick D. R. Sampson, in an order dated July 17, 2008, rejected the agency's contentions, and found that the agency had failed to comply with Justice Agate's determination in that it had failed to render a final determination of the prior administrative proceeding. Justice Sampson determined that the Rent Administrator's order of November 14, 2007 was not a final determination.
The DHCR thereafter determined that it would treat the owner's January 2008 Article 78 proceeding as a PAR, and afforded the tenant 20 days in which to file a response. The tenant, by her mother, Susan Martinez, the prior tenant of the subject apartment, submitted a response dated December 18, 2008, in which she asserted that there should be finality to the administrative proceedings. She also reasserted the claim that the subject building was part of a horizontal multiple dwelling, and therefore the apartment remained subject to the agency's jurisdiction and the rent regulation laws. The owner resubmitted its evidence and asserted that the building was not a horizontal multiple dwelling, and thus not subject to rent regulation.
On March 13, 2009, a DHCR inspector conducted a physical inspection of all the buildings at issue. The inspection report, supported by photographs, states that the buildings share a common facade with uniform features; that each building has separate access to the roof separated by a firewall; that the buildings have the same type of windows; that there is no access between the buildings at the cellar level; and that the sole fire escape is located at the building known as 33-11 Junction Boulevard.
The Commissioner, in an order dated July 23, 2009, set forth the prior history of the proceedings before the agency and the court, and determined that the owner's PAR should be denied. The Commissioner stated as follows:
"The relevant date for determining whether the subject building is part of a horizontal multiple dwelling is May 29, 1974, the effective date of the Emergency Tenant Protection Act of 1974, which made all buildings subject to regulation unless they satisfy one of the exceptions of Section 5 of the Act. Section 5a(4) exempts buildings containing fewer than six dwelling units, it is well settled that individual buildings containing fewer that six units do not fall within this exception if they are or were part of a `horizontal multiple dwelling' comprising, in total, at least six units at any point on or after May 29, 1974."
"New York case law holds that the standard in determining of premises constitute a horizontal multiple dwelling is whether there are sufficient indicia of common facilities, common ownership, management and operation to warrant treating the premises as an integrated unit containing six or more apartments. The number of units stated in a building's certificate of occupancy (c of o) is not dispositive in establishing whether that building is part of a horizontal multiple dwelling. Also, the standard is not whether the common facilities outweigh or predominate over the separate features of the premises. The totality of the evidence must be examined with no one factor being determinative."
"In this case, the relevant evidence shows that since 1984, the earliest year registrations were required, the subject building along with five adjoining buildings, was registered as rent stabilized. An owner would not subject its buildings to the requirements and responsibilities of rent regulation unless that facts so required. The prior owner managed the buildings in a manner consistent with their regulatory status by applying for major capital rent increases, maximum base rent increases, fuel cost adjustments for the buildings collectively. In addition, the prior owner represented in Housing Court in a proceeding to evict the tenant that the housing accommodation was subject to rent stabilization and that the rent was the legal regulated rent. This conduct by the prior owner places a heavy burden on the current owner to show why the buildings should now suddenly be considered separate unrelated structures."
"Moreover, public records confirm that the buildings were all constructed at the same time in 1923, have always had a single owner, were purchased by the current owner pursuant to a single contract of sale, and the recorded deeds merged the legal description of all five lots on a single Schedule A."
"As the physical inspection of March 13, 2009 showed, the buildings have identical windows which were installed at the same time in all buildings, and for which the owner was granted an MCI rent increase. The inspection also showed that there is one roof covering multiple buildings with the roofing material continuing over the party walls separating the buildings. The Division's records show that the owner filed two MCI applications for roof installations, one for 94-20 Northern Blvd and 33-07 Junction Blvd. and the second for 33-11 and 33-15 Junction Blvd. Both were denied because the material used did not qualify for a rent increase. Another MCI rent increase was granted for the installation of four gas boilers and four hot water heaters in 1994."
"The inspection also showed that the buildings all share one facade with uniform architectural features, consistent with a finding that the buildings were constructed as a single complex and were intended to have been owned and managed as such. Indeed, the buildings have been treated as an integrated complex since its inception."
"Neither party has been able to establish the configurations of the buildings on the base date of May 29, 1974. The tenant, who has a longer association with the building, has asserted, without proof, that the buildings at one time shared a single heating unit and a multiple building registration number while the owner has repeatedly pointed to the various attributes of the buildings as they currently exist that indicate separate buildings."
"Based on the totality of the evidence, the Commissioner finds that the subject building is part of a horizontal multiple dwelling, and therefore, subject to rent regulation. The tenant, who moved into the building in 1985, has asserted that in recent years, changes have been made to the buildings to make them appear to be separate units, thereby a voiding the burdens of rent regulation. The physical inspections of the premises and all the evidence submitted by the owner merely reflect the current configurations of the buildings. No evidence was submitted by the owner bearing on the situation on the base date of May 29, 1974. For this reason, the Commissioner declines to endorse the owner's apparent attempt to remove the subject housing accommodation from regulation."
The Commissioner, therefore, denied the owner's PAR and affirmed the Rent Administrator's order of November 14, 2007.
Petitioner Junction Realty thereafter commenced this Article 78 proceeding and seeks to vacate the Commissioner's determination of July 23, 2009, on the grounds that it is arbitrary and capricious, an abuse of discretion, and contrary to the facts and applicable law. Petitioner asserts that the subject building is not part of a horizontal multiple dwelling. It is asserted that there are no common facilities between the buildings, except for common ownership and the alleged uniform architectural design; that each building maintains separate lot numbers, separate certificates of occupancy, separate boiler and heating systems, and separate and independent entrances; that each building has a separate public hallway, interior staircase, chimney and flue; and that each building has a separate tax designation by Block and Lot number, water and sewer account, Keyspan account, and Con Edison account. Petitioner asserts that the contract of sale specifically represented that none of the residential premises were subject to rent regulation, and that it would not have purchased the premises if it knew that it was subject to rent regulation.
Petitioner further asserts that the mere fact that the prior owner improperly registered the premises as rent stabilized, or treated them as such, does not render the premises by statute subject to stabilization as to successor tenants, and that as a matter of law rent stabilization may not be imposed by waiver or estoppel. Petitioner further asserts that the tenant Susan Martinez was evicted, and that three months later her daughter was accepted by the prior owner as an unregulated tenant. It is thus asserted that the DHCR's acceptance of the prior tenant's unsubstantiated claim was arbitrary and capricious.
Petitioner thus asserts that the DHCR does not have subject matter jurisdiction over the subject apartment, and that it improperly imposed the Rent Stabilization Law on the subject apartment. Finally, it is asserted that the owner has established that treble damages should not have been imposed.
Respondent, DHCR, in opposition asserts that the decision of July 23, 2009 is neither arbitrary nor capricious, nor an abuse of discretion, and is supported by the evidence in the record and the law. It is asserted that based upon the totality of the evidence presented to the agency, the determination that the subject premises is part of a horizontal multiple dwelling is rational and proper. It is further asserted that with regards to the issue of treble damages, the owner failed to submit any evidence which refuted the statutory presumption of willfulness in the initial overcharge proceeding.
It is well settled that the court's power to review an administrative action is limited to whether the determination was warranted in the record, has a reasonable basis in law and is neither arbitrary nor capricious ( Matter of Heintz v Brown, 80 NY2d 998, 1001; Matter of Colton v Berman, 21 NY2d 322; Matter of Tockwotten Assoc. v New York State Div. of Hous. Community Renewal, 7 AD3d 453, 454; Melendez v N.Y. State Div. of Hous. Cmty. Renewal, 304 AD2d 580, 581). Where such rational basis exists, an administrative agency's construction and interpretation of its own regulations are entitled to great deference ( see Matter of Salvati v Eimicke, 72 NY2d 784, 791; Matter of Arif v New York City Taxi Limousine Commn., 3 AD3d 345, 346). Moreover, "[j]udicial review of administrative determinations is confined to the `facts and record adduced before the agency'" ( Featherstone v Franco, 95 NY2d 550, 554, quoting Matter of Yarbough v Franco, 95 NY2d 342, 347, quoting Matter of Fanelli v New York City Conciliation Appeals Bd., 90 AD2d 756, 757, affd 58 NY2d 952).
In the proceedings before the DHCR, Junction Realty maintained that the prior tenant Susan Martinez, Jasmine's mother, had been evicted, and therefore Jasmine was not entitled to successor status. However, despite multiple requests from the agency, Junction Realty failed to submit documentary evidence which established that Susan Martinez had been evicted from the subject apartment. The owner submitted a non-payment petition by the former owner against Susan Martinez, and a request for a warrant of eviction. As regarding Jasmine Martinez, the owner submitted a copy of a 2005 settlement it entered into with her regarding the amount of rent, and the payment of rent by Jasmine Martinez and the DSS. Susan Martinez submitted a response in which she stated she had occupied the subject apartment with her daughter Jasmine since 1984; that Jasmine's son Joshua was born in 1998; and that after she moved out in 2003, Jasmine and Joshua continued to occupy the apartment. Jasmine Martinez submitted a letter to the DHCR stating that she had received a marshal's notice; that her mother had made a cash payment to the prior owner; and that neither she nor her son ever removed their belongings or moved out of the subject apartment.
The Rent Administrator, in the order of November 14, 2007, made no determination of Jasmine Martinez's status as a successor tenant, and only addressed the issue of whether the subject building is part of a horizontal multiple dwelling. In determining the owner's PAR (the prior Article petition) the Commissioner reviewed the evidence as to whether the subject building is part of a horizontal multiple dwelling, and did not address the issue of whether Susan Martinez had been evicted and Jasmine Martinez's status as a successor tenant.
In the within proceeding, Junction Realty reiterates its claim that Susan Martinez was evicted and has submitted copies of the documents that were previously submitted to the DHCR. It is beyond the scope of judicial review to consider the facts de novo and the court may not substitute its judgment for that of the agency ( Matter of CK. Rehner, Inc. v City of New York, 106 AD2d 269). The court notes, however, that Junction Realty never provided the DHCR with an order of eviction as requested, or a warrant of eviction, and thus never established that the prior tenant had been evicted. In addition, the owner never provided the DHCR with proof that Jasmine Martinez ever vacated the apartment. Therefore, to the extent that the Commissioner, in the order of July 23, 2009, implicitly acknowledged that neither the prior tenant, nor the current tenant had been evicted, this conclusion is supported by the evidence in the record, has a reasonable basis in law and is neither arbitrary nor capricious.
It is well settled that "coverage under a rent regulatory scheme is governed by statute and cannot be created by waiver or equitable estoppel" ( Gregory v Colonial DPC Corp. III, 234 AD2d 419; see also Ruiz v Chwatt Assoc., 247 AD2d 308). In the proceedings before the DHCR, the current owner was not prevented from presenting evidence in support of its claim that the prior owner mistakenly registered the subject buildings and treated them as rent regulated. Moreover, it is axiomatic that an owner claiming that a premises is exempt from rent regulation has the burden of proving that claim. Here, the Commissioner properly determined that the current owner has the burden of establishing that the premises are exempt from rent regulation.
In determining the existence of a regulated horizontal multiple dwelling, the crucial factor is whether there are sufficient indicia of common facilities, common ownership, management and operation to warrant treating the housing as an integrated unit and multiple dwelling subject to regulation ( Matter of Salvati v Eimicke, supra at 792).
Here, the subject building and adjoining buildings were all purchased by Junction Realty on the same date, pursuant to a single contract of sale and were described in a single schedule attached to the deed, and thus share common ownership. Prior to petitioner's acquisition of these buildings, they were owned and managed by the prior owner for over 20 years. The Commissioner, in his determination, stated that the building's single facade with common architectural features is "consistent with a finding that the buildings were constructed as a single complex and were intended to be owned and managed as such." However, "common ownership is not determinative to establish that separate buildings constitute a horizontal multiple dwelling" ( Matter of Bambeck v State Div. of Hous. Community Renewal, 129 AD2d 51, lv denied 70 NY2d 615; see also 721 Ninth Ave, LLC v N.Y. State Div. of Hous. Cmty. Renewal, 8 AD3d 41).
The Commissioner's finding that "there is one roof covering multiple buildings with the roofing material continuing over the party walls separating the building," is supported by the inspector's photographs. The Commissioner, in concluding that the totality of the evidence supported a finding that the buildings are a horizontal multiple dwelling relied upon the following: the prior owner had registered the buildings for over 20 years; the buildings were constructed in 1923 and have always had a single owner; the current owner purchased the buildings pursuant to a single contract of sale and the recorded deed merged the descriptions of all five lots on a single Schedule A; the prior owner had applied for and received MCI rent increases for the installation of new windows and the installation of four gas boilers and four hot water heaters, but did not receive an increase for roof installations; that the inspection showed one roof covering multiple buildings with the roofing material continuing over the party walls separating the buildings; that the buildings have a common facade with uniform architectural features; that neither the owner nor the tenant were able to establish the configurations of the building on the base date of May 29, 1969.
The Commissioner was entitled to rely upon its inspector's report and photographs ( see generally Sherman v DHCR, 210 AD2d 468; Matter of Howard-Carol Tenant's Assn. v New York City Conciliation and Appeals Bd., 64 AD2d 546, affd 48 NY2d 768; Matter of Aguayo v New York State Div. of Hous. and Community Renewal, 150 AD2d 565, 566). As noted by the Commissioner, the DHCR's records established that the prior owner was granted a major capital rent increase for the installation of four gas boilers and four hot water heaters, and the installation of new windows in all the buildings.
It is for the Commissioner, and not the court to weigh the evidence in the record ( see Jane Street Co. v DHCR, 165 AD2d 758, lv to appeal denied 77 NY2d 801). In the proceeding before the DHCR the owner presented evidence that the buildings had their own Con Ed accounts, Keyspan accounts, water/sewer lines, certificates of occupancy, entrances, public hallways, interior staircases, chimneys and flues, block and lot numbers, mail boxes, and DHPD numbers.
The Commissioner, however, found that the owner had failed to submit proof of the configurations of the buildings on the base date of May 1974, and that the inspection and owner's submissions only reflected the current configuration of the buildings. As the owner claims that the subject premises is exempt from rent regulation, it is the burden of the owner to establish that the building's separate characteristics existed as of May 29, 1974, the effective date of the Emergency Tenant Protection Act, and not merely as of the date it acquired these buildings ( see Triades v Mirabel, 172 AD2d 541).
The court recognizes that there have been other cases where the DHCR has held that certain contiguous buildings were separate and did not constitute a horizontal multiple dwelling, notwithstanding that they shared a uniform facade and common ownership and operation (721 Ninth Ave., LLC v N.Y. State Div. of Hous. Cmty. Renewal, 8 AD3d 41, 43-45; O'Reilly v New York State Div. of Hous. Community Renewal, 291 AD2d 252; see also DeLorenzo v Krizman, 125 AD2d 1015). Although petitioner brought these cases to the Commissioner's attention, the fact that the Commissioner did not specifically distinguish these cases from the matter before it, does not necessarily render the determination arbitrary and capricious. The Commissioner considered the factors raised by the owner and determined that the owner failed to meet its burden of proof, as it could not establish what conditions prevailed as of the effective date of the statute. The Commissioner made a determination based upon the evidence in the record, and was not required to speculate as to whether the factors listed by the owner existed from the time the buildings were constructed in 1923 or had been altered over time.
Finally, it is well within the DHCR's scope of authority to determine the lawful rent for rent-stabilized housing accommodations, to decide whether there has been an overcharge, to direct a refund of overcharges and excess security deposits and to impose an award of interest or treble damages (Administrative Code of the City of New York §§ 26-511 [a]; 26-516; 9 NYCRR 2526.1 [a][1]). As petitioner failed to prove, by a preponderance of the evidence, that the overcharge was not willful, treble damages were properly imposed ( see Condo Units, LP v N.Y. State Div. of Hous. Cmty. Renewal, 4 AD3d 424, 425; Bauer v New York State Div. of Hous. Community Renewal, 225 AD2d 410; Matter of Gattiboni v Aponte, 188 AD2d 434). Section 2526.1(f)(2) of the Rent Stabilization Code provides that "for complaints filed or overcharges collected on or after April 1, 1984, a current owner shall be responsible for all overcharges and penalties, including penalties based upon overcharges collected by any prior owner." Petitioner's assertion that it would not have purchased the buildings had it known that they were subject to rent regulation, does not shield it from the imposition of treble damages.
In view of the foregoing, petitioner's request to vacate the Commissioner's order of July 23, 2009, is denied and the petition is dismissed.
Settle judgment.