Opinion
27991/04.
Decided August 25, 2005.
Petitioner, Arthur J. Pierce II seeks judicial review, pursuant to article 78 of the CPLR, of an order issued by respondent Division of Housing and Community Renewal ("DHCR") which denied his petition for administrative review ("PAR") and affirmed a decision of the Rent Administrator ("RA") finding a rent overcharge.
Petitioner is the owner of the premises located at 988 Bergen Street in Brooklyn. On July 20, 1990, Arthur Robinson, a tenant in petitioner's building (the "tenant"), filed a rent overcharge complaint wherein he alleged that the previous tenant paid a rent of $228.20 while he was charged a substantially higher rent of $450. Petitioner responded by answer, dated August 17, 1990, stating that he and his sister purchased the building on March 20, 1989 from the estate of their father; that petitioner received no rental records from the estate with the exception of some current leases, and, that he believed the subject tenant was the first rent stabilized tenant to occupy the apartment, which would explain the rent disparity with the prior rent-controlled tenant. Petitioner submitted a supplemental answer to the DHCR, on August 11, 1992, wherein he stated that there were no rent increases based on additional services or equipment. Rather, the increases in rent were the result of the first rent stabilized tenancy in 1986 and on the guidelines increment for a renewal lease in 1989.
Since the tenant took occupancy of a vacant apartment which was previously rent-controlled, the overcharge proceeding was converted to a fair market rent appeal ("FMRA"). Petitioner received notice of the FMRA on February 20, 1997, though he alleges that he never received a copy of the actual application. Petitioner responded to the FMRA on April 17, 1997, stating that the former owner had timely served and filed an initial registration which the tenant never timely challenged, and that the rent increase was based not only upon comparable fair market rents but also took into consideration extensive improvements to the apartment during the vacancy. In addition, petitioner submitted copies of an amended initial registration form, dated August 21, 1990, a contractor's affidavit, sworn to on October 9, 1997, and work proposals made during the vacancy period (June through August, 1986). Curiously, petitioner also submitted copies of what appear to be sample invoices bearing the heading "Your Company Name," dated September 23, 1997 and stating the DHCR docket number (EG210334-R) for the invoice number, as substantiation of the improvements alleged. These invoices are notarized and bear the name of the contractor and the statement "paid in full." Petitioner also submitted a "Repair Sign-off Sheet," dated March 12, 1991, indicating that bathroom fixtures and sink tubing were replaced. The tenant stated in a letter to the DHCR, dated October 28, 1997, that as far as he knew there has never been a complete renovation of the apartment; that there was some work done, but not as stated in the contractor's affidavit; and, that "some of the work was done in 1991 and most of the work was done between 1995 1996."
On December 23, 1997, the RA issued an order establishing the fair market rent of $248.90 as of November 1, 1986, the date of the commencement of the first rent stabilized lease, and found an aggregate overcharge of $25,389.19. The RA rejected petitioner's evidence of individual apartment improvements and determined that the fair market rent was established based on the DHCR's Special Guidelines Order Number 18. On January 2, 1998, petitioner filed a PAR stating that he was "filing the appeal to meet the 35 day deadline but will seek consultation with an attorney to give a more detailed explanation at a later date." On November 18, 1999, the DHCR issued an order denying petitioner's PAR on the ground that he had not provided any supplemental information to the petition and had not raised any ground that would warrant reversal/modification of the RA's order. A request for reconsideration and a supplemental PAR were filed with the DHCR on December 17, 1999, and an article 78 proceeding was commenced in January 2000. By stipulation of settlement signed by the Hon. Margaret Cammer on April 13, 2000, the matter was remitted to the DHCR for determination of petitioner's supplemental PAR.
By order, dated July 28, 2000, the DHCR again affirmed the RA's order, noting that there was no evidence that the tenant was served with a copy of the initial registration, thereby, making the FMRA timely, and that the documents offered to substantiate an individual apartment improvement rent increase mostly indicate ordinary repairs and maintenance for which no rent increase is warranted. This order was appealed by way of article 78 proceeding and the DHCR again stipulated to have the matter remanded for reconsideration. On July 6, 2004, the DHCR issued an order granting the PAR in part and reduced the amount awarded to the tenant to $21,010.34. In the order, the DHCR took into account the amendments to section 2522.3 of the Rent Stabilization Code, effective December 20, 2000, and reestablished the fair market rent at $275.26, averaging the comparability data from its own database and the comparability data submitted by petitioner. The DHCR further rejected as inadequate petitioner's evidence of improvements and credited the tenant's denial that the work was performed as alleged. The instant article 78 petition ensued.
Rent Stabilization Code 2522.3 (e) provides: "In determining fair market rent appeals, filed pursuant to paragraph (a)(1) of this section, consideration shall be given to the applicable guidelines promulgated for such purposes by the Rent Guidelines Board and to rents generally prevailing for housing accommodations in buildings located in the same area as the housing accommodation involved. In addition, consideration of the rental history of the subject housing accommodation for the period prior to the four-year period preceding the filing of the fair market rent appeal is precluded. The rents for these comparable housing accommodations may be considered where such rents are: (1) unchallenged rents in effect for housing accommodations subject to this Code on the date the tenant filing the appeal took occupancy; or (2) at the owner's option, market rents in effect for other comparable housing accommodations on the date the tenant filing the appeal took occupancy, as submitted by the owner."
This court is limited by CPLR article 78 to a review of the record before the DHCR and to the question of whether its determination was arbitrary and capricious ( Matter of Windsor Place Corp. v. DHCR, 161 AD2d 279, 280; Mazel Real Est. v. Mirabal, 138 AD2d 600; Matter of Bambeck v. DHCR, 129 AD2d 51, 55, lv denied 70 NY2d 615; Villas of Forest Hills v. Lumberger, 128 AD2d 701, 703). If a rational basis exists for its determination, the decision of the administrative body must be sustained ( Matter of Pell v. Board of Educ., 34 NY2d 222, 230; Matter of Tener v. DHCR, 159 AD2d 270). Stated simply, this court cannot substitute its judgment for that of the agency, so long as the agency's decision is rationally based in the record ( Colton v. Berman, 21 NY2d 322).
Petitioner makes two essential arguments in the instant article 78 petition. First, that the underlying FMRA was untimely; and, second, that the DHCR was arbitrary and capricious in rejecting his evidence of individual apartment improvements.
Rent Stabilization Law § 26-513 (d) requires that the initial registration notice be served on the tenant "by certified mail." Service of the initial registration notice triggers a 90-day period within which tenants have to file an FMRA (Rent Stabilization Law § 26-513 (e); Rent Stabilization Code 2522.3 [a]). Both the DHCR and the courts have long held that this period does not begin to run until the notice is properly served ( Perry v. DHCR, 281 AD2d 629, 631; McKenzie v. Mirabal, 155 AD2d 194, 199; Rent Stabilization Code § 2522.3 [a] ["where the first tenant taking occupancy after December 31, 1973, of a housing accommodation previously subject to the City Rent Law, was served with the notice required by section 26 of the former code of the Rent Stabilization Association of New York City, Inc., the time within which such tenant may file a fair market rent appeal is limited to 90 days after such notice was mailed to the tenant by the owner by certified mail."]) There is no evidence in the record to demonstrate that the initial registration was ever served on the tenant, by certified mail or by any other means, which would trigger the 90-day limitations period. Therefore, the DHCR acted rationally in considering the tenant's FMRA as timely. Moreover, the four-year limitations period imposed by Rent Stabilization Code § 2522.3 [e], which provides that "consideration of the rental history of the subject housing accommodation for the period prior to the four-year period preceding the filing of the fair market rent appeal is precluded," does not prohibit the DHCR from requiring petitioner to submit records establishing that the tenant was properly served with the initial registration notice when he took occupancy in November 1986 or anytime thereafter. Contrary to petitioner's argument, the four-year period is not measured from the time the underlying proceeding was converted to an FMRA in 1997, but from the time the tenant filed the original overcharge complaint on July 24, 1990 ( see One Three Eight Seven Assoc. v. DHCR, 269 AD2d 296). There is no merit to petitioner's claim that the FMRA was untimely.
With respect to petitioner's claim that he was entitled to a rent increase for performing improvements to the apartment, the Rent Stabilization Code establishes the circumstances under which an owner can increase the rent for an apartment (Rent Stabilization Code § 2520 [f]). Section 2522.4 (a) (1) of the Code permits an owner, without application to the DHCR, to recover the full cost of an improvement to an individual unit, over time, by increasing the base rent by 1/40 of the cost of the improvement. However, the burden is upon the owner to justify the increase sought by presenting documentary support therefor, and it must submit all relevant invoices, bills, cancelled checks and/or other material to the RA ( see 985 Fifth Ave. Inc. v. DHCR, 171 AD2d 572, 574-575). In this matter, the DHCR was not arbitrary or capricious in finding that petitioner failed to establish entitlement to an individual apartment improvement rent increase. None of the documents submitted by petitioner to the agency demonstrates that any of the improvements alleged were performed during the vacancy period prior to the tenant's occupancy as required to entitle an owner to a rent increase without the tenant's consent (Rent Stabilization Code § 2522.4 [a] [1]). Petitioner and his contractor maintain that the claimed improvements were paid for in cash. Thus there is no evidence presented in the form of cancelled checks or money order that would substantiate that payments were contemporaneous with the alleged work performed.
Moreover, the court finds that the DHCR acted rationally in its rejection of the peculiar invoice documents submitted by petitioner. The three invoices, while baring the dates 6/30/86, 7/3/86 and 8/5/86 under the heading "DATE SHIPPED" also bear the date of September 23, 1997. Thus they are insufficient to establish that the work was, in fact, performed in the summer of 1986, prior to the tenant's occupancy. Likewise, the "Repair Sign-off Sheet" is dated March 12, 1991, and does not bear any indicia that improvements were performed during the vacancy period.
The court has considered petitioner's remaining contentions and finds them to be without merit. As a result, the instant article 78 petition is denied and this proceeding is dismissed.
The foregoing constitutes the decision, order and judgment of the court.