Opinion
87287/17
11-20-2019
Shlomo KARPEN, Petitioner, v. Manuel CASTRO and Miriam Andrade, Respondents. Shlomo Karpen, Petitioner, v. Juan Pablo Arevalo and Guadalupe Romero, Respondents. Shlomo Karpen, Petitioner, v. Julio Andrade, Respondent.
For Petitioner: Wenig & Saltiel LLP, 26 Court Street, Suite 1200 Brooklyn, NY 11242 For Respondents: Communities Resist, Inc., 109 South 5th Street, Brooklyn, NY 11249
For Petitioner: Wenig & Saltiel LLP, 26 Court Street, Suite 1200 Brooklyn, NY 11242
For Respondents: Communities Resist, Inc., 109 South 5th Street, Brooklyn, NY 11249
Kevin C. McClanahan, J.
The Decision/Order on these motions is as follows:
The subject premises is a six-unit building comprised of two units each on the first, second and third floors. In June of 2018, petitioner served combined notices of non-renewal and notices of termination upon respondents stating his intention to recover the subject apartments in order to combine them to create a four-bedroom apartment for his son. In October 2018, petitioner commenced three other owner's use proceedings against other tenants in the same building. These proceedings were consolidated for joint trial on consent of the parties.
Respondents move to dismiss the instant proceedings pursuant to CPLR Section 3211(a)(7) based on the failure to state a cause of action. Petitioner opposes the motion asserting the Housing Stability and Tenant Protection Act violates his due process rights and protections pursuant to the Fifth and Fourteenth Amendments to the United States Constitution and Article I, Section 6 of the New York State Constitution.
On June 14, 2019, the governor signed into law the Housing Stability and Tenant Protection Act of 2019 (hereinafter, the "HSTPA"). Section 2 of Part I of the HSTPA amends Section 26-511(c)(9) of the Rent Stabilization Law to read:
"(9) ...an owner shall not refuse to renew a lease except:
(b) where he or she seeks to recover possession of one dwelling unit because of immediate and compelling necessity for his or her own personal use and occupancy as his or her primary residence or for the use and occupancy of a member of his or her immediate family as his or her primary residence...."
Section 5 of Part I of the HSTPA addresses the date upon which the amendments were to take effect:
This act shall take effect immediately and shall apply to any tenant in possession at or after it takes effect, regardless of whether the landlord's application for an order, refusal to renew a lease or refusal to extend or renew a tenancy took place before this act shall have taken effect.
The Court's analysis begins with Dugan v. London Terrace Gardens, L.P. , 177 A.D.3d 1, 110 N.Y.S.3d 3 (1st Dept. 2019). The First Department ruled that applying the HSTPA's overcharge provisions to already-pending proceedings did not pose due process concerns:
"To begin, the legislature expressly made the amendments applicable to pending claims, and legislative enactments carry "an exceedingly strong presumption of constitutionality. ( Barklee Realty Co. v. Pataki , 309 A.D.2d 310 (1st Dept. 2003)...Further, it is well settled that absent deliberate or negligent delay, "[w]here a statute has been amended during the pendency of a proceeding, the application of that amended statute to the pending proceeding is appropriate and poses no constitutional problem. Citations omitted."
The Appellate Division cited Matter of Schutt v. New York State Div. Of Housing & Community Renewal , 278 A.D.2d 58, 717 N.Y.S.2d 565 (1st Dept. 2000), which held that a similar amendment to the rent stabilization law posed no due process infirmity because "rent regulation does not confer vested rights." Trial courts are bound to follow this holding. In Mountain View Coach v. Storms , 102 A.D.2d 663, 476 N.Y.S.2d 918 (2nd Dept. 1984), the Appellate Division Second Department held: "[t]he doctrine of stare decisis requires trial courts in this department to follow precedents set by the Appellate Divisions of another department until the Court of Appeals or this court pronounces a contrary rule."
This Court is constrained to follow the First Department precedent which forecloses consideration of petitioners' due process challenge. The language of Section 5 of Part I of the HSTPA is almost identical to the language of Part F of the HSTPA which amended RSL Section 26-516 and CPLR 213-a, which govern claims of a rent overcharge and the statute of limitations for bringing such claims. Because petitioner's owners-use proceedings were pending on the effective date of Section 5 of Part I of the HSTPA, the statutory amendments prohibiting recovery of more than one rent-stabilized unit are applicable to the instant proceedings.
Petitioner argues that even if the HSTPA provision is constitutional, it is being unconstitutionally applied to petitioner because petitioner "...bought the building in reliance on the RSL as then enacted...Karpen relied on the RSL to refuse renewal leases to rent-stabilized tenants...." See Paragraphs 31 and 32 of Wenig Affirmation dated August 30, 2019 .
This argument is unavailing. Petitioner knowingly bought property in a heavily-regulated industry within the New York City housing market. The laws related to Rent Stabilization have been historically subject to the winds of changing legislative priorities. The Rent Regulation Reform Act of 1993 and the Rent Regulation Act of 1997, for example, made sweeping changes to the laws governing rent-stabilized apartments and the rights of landlords and tenants. In 2019, the Dugan court was still addressing the fall-out from a ruling of the Court of Appeals which overturned the DHCR's long-standing interpretation of the laws and regulations related to the deregulation of rent-stabilized units in buildings receiving J-51 tax benefits. See Roberts v. Tishman Speyer Props., L.P. , 13 N.Y.3d 270, 890 N.Y.S.2d 388, 918 N.E.2d 900 (2009). Petitioner could not reasonably rely on the status quo since "rent regulation does not confer vested rights", I.L.F.Y. Co. v. Rent & Rehabilitation Admin. , 10 N.Y.2d 263, 219 N.Y.S.2d 249, 176 N.E.2d 822 (1961), and basic legal due diligence prior to the purchase of the subject premises would have placed petitioner on notice that the laws governing the building were subject to change while he was the owner.
Regarding the Takings Clause, the Fifth Amendment to the United States Constitution guarantees that private property shall not "be taken for public use without just compensation." Agins v. Tiburon , 447 U.S. 255, 100 S.Ct. 2138, 65 L.Ed.2d 106 (1980). Statutes regulating the economic relations of landlords and tenants are not per se takings. See FCC v. Florida Power Corp. , 480 U.S. 245, 107 S.Ct. 1107, 94 L.Ed.2d 282 (1987) ; Kraebel d/b/a Barklee Realty Company v. N.Y.C. Dep't of Hous. Pres. & Dev. , 959 F.2d 395 (2nd Cir. 1992). The Supreme Court has held that "states have broad power to regulate housing conditions in general and the landlord-tenant relationship in particular without paying compensation for all economic injuries...." Kraebel Barklee, d/b/a Realty Company at p. 402. A regulation denying an owner the most profitable, preferred or intended use of his property does not violate the Takings Clause unless it truly eliminates all economically viable use. Goldblatt v. Hempstead , 369 U.S. 590, 82 S.Ct. 987, 8 L.Ed.2d 130 (1962).
Nothing in the record suggests that the application of the HSTPA would violate these constitutional concerns. Petitioner does not provide an affidavit attesting to the alleged constitutional injury or the actual impact on his property interest. Moreover, the building is a six- unit multiple dwelling that is currently inhabited by a number of rent-paying tenants and is commercially viable. While petitioner may argue that the optimum use of the subject premises is to convert the building into a two-family home, the impediment to reaching that goal created by the HSTPA does not rise to the level of an impermissible taking. The new law does not deny petitioner all economically beneficial or productive use of the subject premises. Instead, it reflects the legislative priorities which adjusted "the benefits and burdens of economic life to promote the common good." Kraebel Barklee, d/b/a Realty Company at p. 402
Finally, Section 2 of Part I of the HSTPA does not constitute an unconstitutional impairment of the contractual relations between petitioner and respondents herein. The Court must consider whether the HSTPA has, in fact, operated as a substantial impairment of a contractual relationship and, if so, whether a significant and legitimate public purpose exists to justify the regulation. Energy Reserves Grp. v. Kan. Power & Light, Co. , 459 U.S. 400, 103 S.Ct. 697, 74 L.Ed.2d 569 (1983). This consideration necessarily includes whether the industry the complaining party has entered has been regulated in the past. Allied Structural Steel Co. v. Spannaus , 438 U.S. 234, 98 S.Ct. 2716, 57 L.Ed.2d 727 (1978). When a party purchases into an enterprise already regulated, he purchases subject to further legislation. Veix v. Sixth Ward Bldg. & Loan Assn. , 310 U.S. 32, 60 S.Ct. 792, 84 L.Ed. 1061 (1940).
As noted earlier, petitioner purchased a building subject to regulation. Prior to the recent amendments, petitioner's right to recover apartments for his personal use was limited by the application of the rent stabilization laws. Section 2 of Part I of the HSTPA did not enact a new law but expanded laws already in effect. In these circumstances, petitioner did not have a reasonable expectation that the legislature would not change these laws and that such changes could possibly place even more restrictions on the use of his property. The history of rent regulation is a cautionary tale of varying and often vying legislative priorities. The pendulum swings have benefitted landlords in the past. Now it appears, the pendulum has swung in the opposite direction. This Court cannot say that the new law is without significant and legitimate public purpose. The legislature apparently determined that the policy of restricting the flow of residential units out of the rent stabilization system is valid and necessary. The amendment limiting owners to the recovery of only one apartment and only after establishing immediate and compelling necessity for the personal use is one of the tools employed by the legislature to stem this flow and preserve affordable housing for New Yorkers.
Based on the foregoing, the Court grants the motions and hereby dismisses these consolidated proceedings with prejudice. The Court shall mail courtesy copies of its Decision/Order to counsel.