Opinion
Index No. 157031/2015
05-15-2020
WILLIAM WEST, ELISA BEAGLEY, VERED BEHR, MATTHEW BRADSHAW, BRIDGET CASTER, FREDERICK CUCCINIELLO, JOHN FURSTE, SARA FURSTE, JAMES HARRINGTON, MELISSA HARRINGTON, HIROKO MATSUMOTO, GREGORY MONTAGNA, CHRISTIAN NIELSEN, CHISARAM NKEMERE, CLAIRE SCHLISSEL, PRESTON PRICE, ROBERTO DI CUIA, NICHOLAS ORAM, MATTHEW ORGERA, MOHAMMED SHARAF, JARED TURCO, SARA VOIGT, REGGIE UDUHIRI, APRIL UDUHIRI, RENEE WILLIAMS, MARK WILLIAMS, KATY YANG, MAI LI, JULIE D'ANCONA, SUNITA DESHRANDE, ADRIENNE EKERN, LIUDMILA FILATOVA, SHEA HOUGLAND, JUAN MEALLA, MARIA MEALLA, JEANNE MOORE, GAVIN SWEITZER, KETAN VAKIL, ELIZABETH VAKIL, DONNA VALENCIA, MICHELE ORLANDO, NANCY WALL, NORMAN YU, MARK ZAGUSKIN, LUKE O'DOWD, JENNIFER WU, PETRA KASS, Plaintiff, v. BCRE 90 WEST STREET, LLC, LEE ROSEN, Defendant.
Plaintiffs: William West, Elisa Beagley, Vered Behr, Matthew Bradshaw, Bridget Caster, Frederick A Cucciniello, John Furste, Sara Furste, James Harrington, Melissa Harrington, Hiroko Matsumoto, Gregory Montagna, Christian Nielsen, Chisaram Nkemere, Claire Schlissel, Preston B Price, Roberto Di Cuia, Nicholas Oram, Matthew D Orgera, Mohammed Sharaf, Jared Turco, Sara Voigt, Reggie Uduhiri, April Uduhiri, Renee Williams, Mark Williams, Katy Yang, Mai Li
Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP
15 Maiden Ln, Fl 17, New York, NY 10038
By: Serge Joseph, Esq. Defendants:
Belkin Burden Wenig & Goldman, LLP
270 Madison Ave, New York, NY 10016
By: William Edward Baney, Esq. and Joseph P Burden, Esq. Robert R. Reed, J.
Defendant B.C.R.E. - 90 West Street, LLC (B.C.R.E. or Owner) moves for an order: a) establishing the methodology for calculating the legal rent overcharges, if any, of plaintiffs William T. West, et al. (Tenants); or b) alternatively, granting leave to reargue/renew the prior motion and cross-motion for summary judgment which declared that Tenants' apartments were rent-stabilized and that the legal rent should be calculated based upon the default formula, and (1) upon renewal and/or reargument, modifying the court's decision regarding calculation of the legal rent and overcharge, if any, and (2) upon renewal and/or reargument, modifying the court's decision to deny Tenants' claim for treble damages; or c) alternatively, staying this action pending a determination by the Court of Appeals regarding the retroactive applicability of the Housing Stability or Tenant Protection Act of 2019 (HSTPA) to pending actions; or d) alternatively, staying the referral of this action to a Special Referee for computation pending discovery.
B.C.R.E. is the owner of the building where plaintiffs reside, located at 90 West Street, New York, New York. The complaint alleges that the building was converted from commercial to residential use, and in March 2005 was reopened for occupancy, enabling B.C.R.E. to receive tax benefits pursuant to section 421-g of the Real Property Tax Law (RPTL), and/or low interest mortgage loans, pursuant to the Private Housing Finance Law (PHFL). Receipt of such benefits renders apartments in the building subject to rent stabilization laws; Owner nonetheless has treated the apartments as non-stabilized under the high rent deregulation provisions of the rent stabilization laws.
In a decision dated January 31, 2018, this court held that the provisions of the Rent Stabilization Law governing high rent deregulation do not apply to apartments that receive RPTL § 421-g and PHFL benefits, that plaintiffs' apartments are governed by rent stabilization, and that the amount of overcharges under their respective leases, if any, should be calculated by applying what is known as the "default formula." See order language in West v B.C.R.E.-90 W. St., LLC, 65 Misc 3d 349, 362-363 (Sup Ct, NY County 2018). This court's decision was reversed by the Appellate Division, First Department, which held that high rent deregulation is applicable to apartments which are rent stabilized as a result of receiving tax benefits pursuant to section 421-g. West v B.C.R.E.-90 W. St., LLC, 161 AD3d 566 (1st Dept 2018). On June 25, 2019, however, the Appellate Division's decision was reversed by the Court of Appeals, which granted plaintiffs' motion for summary judgment seeking a declaration that their apartments were rent stabilized and remitted the case to this court for further proceedings in accordance with the Court's opinion. West v B.C.R.E.-90 W. St., LLC, sub nom Kuzmich v 50 Murray St. Acquisition LLC, 34 NY3d 84, 95 (2019). Neither the Appellate Division, nor the Court of Appeals, addressed the question of the proper methodology to be used for calculating rent overcharges, if any.
The decision directed that any overcharges will be calculated based upon "the lowest rent registered, pursuant to Rent Stabilization Code § 2528.3, for comparable apartments in the building located at 90 West Street in Manhattan, that were in effect on the date that said plaintiffs first occupied their apartments; or, if defendant did not register the rents of comparable apartments in said building, such amount to be based upon data compiled by the New York State Division of Housing and Community Renewal, using sampling methods for regulated housing accommodations." West, 65 Misc 3d at 362-363.
In this motion seeking reargument and renewal, Owner seeks to have this court reconsider the methodology set forth in its January 31, 2018 decision.
A motion for leave to reargue "shall be based upon matters of fact or law allegedly overlooked or misapprehended by the court in determining the prior motion, but shall not include any matters of fact not offered on the prior motion" (CPLR 2221 [d] [2]), and "shall be made within thirty days after service of a copy of the order determining the prior motion and written notice of its entry." CPLR 2221 (d) (3). A motion for leave to renew "shall be based upon new facts not offered on the prior motion that would change the prior determination or shall demonstrate that there has been a change in the law that would change the prior determination; and shall contain reasonable justification for the failure to present such facts on the prior motion." CPLR 2221 (e) (2) and (e) (3); Wlliam P. Pahl Equip. Corp. v Kassis, 182 AD2d 22 (1st Dept 1992).
Owner's motion to reargue was made well over a year after the prior motion was determined and, thus, is untimely.
With respect to the motion for leave to renew, no new facts have been offered to the court by Owner, but since this court's prior decision, the New York State Legislature enacted the HSTPA which has resulted in a number of changes to the Rent Stabilization Law that have substantially revised the rent stabilization scheme.
Part F of the HSTPA addresses, among other things, the method to determine whether a landlord has collected an overcharge above the rent authorized for a housing accommodation subject to rent stabilization laws and the length of the look-back period for overcharges. Under prior law, the court was generally restricted to a look-back period of four years unless fraud could be shown justifying a longer look-back period. The HSTPA, however, extended the look-back period during which a tenant can obtain damages for rent overcharges from the previous four years to six years. RSL 26-516 (a) (2). Additionally, under the HSTPA, "in investigating complaints of overcharge and in determining legal regulated rent, [the DHCR or the court] shall consider all available rent history which is reasonably necessary to make such determinations." RSL 26-516 (a)(i).
Finally, the HSTPA directs that the "legal regulated rent" may be ascertained in four ways:
1) "the rent indicated in the most recent reliable annual registration statement filed and served upon the tenant six or more years prior to the most recent registration statement, (or, if more recently filed, the initial registration statement) plus in each case any subsequent lawful increases and adjustments" ( id. );Id.
2) "[a]s to complaints filed within ninety days of the initial registration of a housing accommodation, the legal regulated rent shall be deemed to be the rent charged on the date six years prior to the date of the initial registration of the housing accommodation (or, if the housing accommodation was subject to this chapter for less than six years, the initial legal regulated rent) plus in each case, any lawful increases and adjustments" (RSL 26-516 [a][ii]);
3) "[w]here the rent charged on the date six years prior to the date of the initial registration of the accommodation cannot be established, such rent shall be established by the [DHCR]" ( id. ); or
4) "[w]here the prior rent charged for the housing accommodation cannot be established, such rent shall be established by [DHCR] provided that where a rent is established based on rentals determined under the provisions of the local emergency housing rent control act such rent must be adjusted to account for no less than the minimum increases which would be permitted if the housing accommodation were covered under the provisions of this chapter, less any appropriate penalties."
Additionally, the HSTPA specifically directs that Part F "'shall take effect immediately and shall apply to any claims pending or filed on and after such date.'" Matter of Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal, 2020 NY Slip Op 02127, *9 (Ct App, April 2, 2020)(citing, L 2019, ch 36, Part F, § 7).
On April 2, 2020, in four consolidated appeals in cases brought in the aftermath of Roberts v Tishman Speyer Props., L.P., 13 NY3d 270 (2009) , the Court of Appeals addressed certain aspects of the HSTPA in a lengthy opinion and nearly equally lengthy dissent. Matter of Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal, 2020 NY Slip Op 02127. The Court's primary focus was whether Part F of the legislation, which, among other things, increases from four to six years the period over which a tenant can recover overcharges, can be applied to pending litigation as the legislation states, or whether Part F can only be applied prospectively. In a detailed analysis of the question of retroactivity principles, the Court concluded that Part F may only be applied prospectively. Prior to examining whether Part F may be applied to pending post-Roberts cases, however, and of more relevance to the questions at issue in this motion, the Court considered, again in detail, the method of calculating rent overcharges under the statutory scheme in effect when the cases were initiated.
Roberts and its progeny considered whether provisions governing luxury decontrol under the rent stabilization laws apply to apartments receiving tax benefits under New York State's J-51 program (Real Property Tax Law § 489; Administrative Code of City of NY § 11-243).
Re-examining its earlier post-Roberts decisions, the Court concluded that:
"[t]he rule that emerges from our precedent is that, under the prior law, review of rental history outside the four-year lookback period was permitted only in the limited category of cases where the tenant produced evidence of a fraudulent scheme to deregulate and, even then, solely to ascertain whether fraud occurred — not to furnish evidence for calculation of the base date rent or permit recovery for years of overcharges barred by the statute of limitations. In fraud cases, this Court sanctioned use of the default formula to set the base date rent. Otherwise, for overcharge calculation purposes, the base date rent was the rent actually charged on the base date (four years prior to initiation of the claim) and overcharges were to be calculated by adding the rent increases legally available to the owner under the RSL during the four-year recovery period. Tenants were therefore entitled to damages reflecting only the increases collected during that period that exceeded legal limits."Matter of Regina Metro. Co., LLC New York State Div. of Hous. & Community Renewal, 2020 NY Slip Op 02127, *5 (citation omitted).
The Court went on to state, "We . . . decline to create a new exception to the lookback rule and instead clarify that, under pre-HSTPA law, the four-year lookback rule and standard method of calculating legal regulated rent govern in Roberts overcharge cases, absent fraud." Id., at *7.
Thus, here, where plaintiffs have not alleged a fraudulent scheme, under the principles recently established by the Court of Appeals in Matter of Regina Metro. Co., in order to determine rent overcharges, if any, the base date is the rent in effect four years prior to the filing of this action, plus any increases legally available under the formulas established by the Rent Stabilization Law and regulations. This formula must apply, even if the base date rent was a market rent. For, as the Court further noted, "[t]hat Roberts revealed particular conduct to be illegal does not mean that tenants must be able to recover a certain measure of monetary damages for associated rent increases despite their failure to seek recovery within the limitations and lookback periods." Id. at *7. As the Court further noted, however, even if the tenants in Roberts and its progeny did not recover rent overcharges because of the method of calculating the base rent, those cases did result in the return of a large number of apartments to the rent stabilization scheme. Id. Here, too, the case results in return of apartments to the rent stabilization scheme and the protections it affords, at least while defendant is receiving tax benefits pursuant to section 421-g of the RPTL or low interest mortgage loans pursuant to the PHFL.
With respect to that aspect of B.C.R.E.'s motion relating to treble damages, the court notes that, in its prior decision, it did not reach that issue; thus, it is not the proper subject of a motion to renew. In any case, since the availability of treble damages depends on the calculation of rent overcharges, which has not yet occurred, the question of treble damages is premature. Additionally, B.C.R.E.'s request for a stay pending the decision of the Court of Appeals concerning retroactivity of the HSTPA is, of course, moot.
Finally, plaintiffs request that their rent be frozen until corrected rent registrations are filed by Owner. The rent stabilization code provides that an owner who fails to file a proper rent registration bars the owner from "applying for or collecting any rent in excess of: the base date rent, plus any lawful adjustments allowable prior to the failure to register." 9 NYCRR 2528.4; see also Nolte v Bridgestone Assoc LLC, 167 AD3d 498 (1st Dept 2018). Plaintiffs contend that, even after the Court of Appeals ruled that their apartments are subject to rent stabilization, Owner has sought to raise their current rents. In Matter of Regina Metro. Co., the Court of Appeals rejected the applicability of the rent-freezing provision to Roberts-type cases where the failure to file a proper rent registration resulted from a misunderstanding of the law, rather than from a fraudulent scheme to avoid rent stabilization. Matter of Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal, 2020 NY Slip Op. 02127, *6, n 9. Therefore, plaintiffs' request for an interim rent freeze is denied.
Accordingly, it is hereby
ORDERED that the motion of plaintiff B.C.R.E.-90 West Street, LLC, is determined as follows: the motion to reargue is denied, and it is further
ORDERED that the motion to renew is granted, and on renewal, so much of the court's previous order, dated January 31, 2018, as referred the calculation of rent overcharges, if any, to a Special Referee based upon the default formula is withdrawn, and it is further
ORDERED that the determination of rent overcharges, if any, will be determined in conformity with the decision of the Court of Appeals in Matter of Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal, 2020 NY Slip Op. 02127 (April 2, 2020); and it is further
ORDERED that counsel for the parties are directed to confer with one another by telephonic or electronic means, within 15 days of the entry of this order, and promptly thereafter to send a joint e-mail message to the Clerk of Part 43 advising: (a) whether a status conference is necessary to schedule additional discovery for completion upon an expedited basis; or (b) whether the parties are prepared, without additional discovery, to have the court determine the question of damages for rent overcharges, if any, by review of attested written submissions, supported with appropriate documentation, analyzing in detail all claimed rent overcharges, based upon a four year lookback period, for each plaintiff. Date: 5/15/2020