325 Melrose, LLC v. Bloemendall, 2018-869 K C

• Decision Date: 18 October 2019
• Docket Number: 2018-869 K C
• Citation: 65 Misc.3d 43,110 N.Y.S.3d 880
• Parties: 325 MELROSE, LLC, Appellant, v. Joshua BLOEMENDALL and Nathaniel Schlosser, Respondents.
• Court: New York Supreme Court — Appellate Term

65 Misc.3d 43

110 N.Y.S.3d 880

325 MELROSE, LLC, Appellant,

v.Joshua BLOEMENDALL and Nathaniel Schlosser, Respondents.

2018-869 K C

Supreme Court, Appellate Term, New York.

Decided October 18, 2019

Graubard Miller (Peter A. Schwartz and Joseph H. Lessem of counsel), for appellant.

The Law Office of Walter Jennings, P.C., for respondents (no brief filed).

PRESENT: : MICHELLE WESTON, J.P., THOMAS P. ALIOTTA, DAVID ELLIOT, JJ.

ORDERED that the order, insofar as appealed from, is affirmed, without costs.

In this nonpayment proceeding, the petition alleges that the apartment is not subject to rent stabilization. Tenants answered, asserting, among other things, that the apartment is subject to rent stabilization and that it violates the certificate of occupancy, and counterclaiming for, among other things, rent overcharge. After tenants' unopposed motion to dismiss the petition based on the violation of the certificate of occupancy was granted, tenants moved for summary judgment on, among other things, their rent-overcharge counterclaim. Landlord cross-moved, insofar as is relevant to this appeal, for summary judgment dismissing the overcharge counterclaim, asserting three different theories for the premises' deregulation prior to the current tenants' possession. First, landlord asserted that the building had been substantially rehabilitated in compliance with the requirements set forth in Emergency Tenant Protection Act of 1974 § 5(A)(5), Rent Stabilization Code (9 NYCRR) (RSC) § 2520.11, and Operational Bulletin 95-2 of the New York State Division of Housing and Community Renewal (DHCR), which, if met, allow for the deregulation of the entire building. Second, landlord argued that a substantial alteration of the apartment, in compliance with RSC § 2520.11(r)(12), had occurred when the outer walls of the apartment had been moved to expand the apartment by 87 square feet and landlord changed the layout of the apartment. Finally, landlord claimed that, even had the building not been substantially rehabilitated or the apartment not been substantially altered, the apartment would have been deregulated due to high-rent vacancy deregulation (see RSC § 2520.11[r][4] ).

In an order dated March 20, 2018, the Civil Court denied both tenants' motion and landlord's cross motion, stating, "To the extent that [landlord] is alleging multiple theories of deregulation, and [tenant] is alleging that the Apartment was fraudulently removed from rent stabilization, the facts presented by both parties leave the central material issue of whether [tenants were] overcharged in dispute[,] precluding both parties from summary judgment." Landlord appeals from so much of the order as denied its cross motion.

Pursuant to RSC § 2520.11(e)(3), in order for a housing accommodation to qualify for exemption from rent stabilization based on a rehabilitation,

"the rehabilitation must have been commenced in a building that was in a substandard or seriously deteriorated condition.... Where the rehabilitation was commenced in a building in which at least 80 percent of the housing accommodations were vacant of residential tenants, there shall be a presumption that the building was substandard or seriously deteriorated at that time."

Here, landlord failed to demonstrate as a matter of law that the rehabilitation was commenced in a substandard or seriously deteriorated building. In support of the cross motion, landlord's sole member stated, "When [landlord] took title, the Building was in a substandard and deteriorated condition. The plumbing, heating, gas supply, electrical wiring, windows, interior staircase and apartments were outdated and in very poor condition. The flooring, walls, roof and Building entrance doors were in need of repairs or replacements. The apartment entrance doors were not fire-rated. There was no intercom." These allegations were conclusory and lacked the detail necessary to establish that the building was in a substandard or seriously deteriorated condition. An architect's affidavit annexed to landlord's motion, which is referred to in the concurring opinion, was prepared after an inspection of the building in 2017 and without personal knowledge as to the state of the building before the renovation. The 50 violations in the violations summary report, also annexed to landlord's motion and referred to in the concurrence, were from over a 14-year period, included a number of unverified violations, and were for specific apartments or rooms, as opposed to the entire building, and the vast majority were minor issues, such as requiring new plaster or paint in a particular room of an apartment. Further, it is unclear whether the conditions causing said violations were still in existence at the time of the renovation. The alleged emergency renovations were unspecified and unverified by anyone with personal knowledge. Finally, based upon landlord's DHCR rent registration statements, two of the eight units were occupied, and thus 75% of the building was unoccupied, so that the presumption of substandard or deteriorated condition, which applies where 80% of the units are vacant (RSC § 2520.11[e][3] ), does not apply here.

Landlord's claim of a substantial alteration of the apartment, which would allow a "first rent" to be charged, is governed by RSC § 2520.11(r)(12). That section provides that, "where an owner substantially alters the outer dimensions of a vacant housing accommodation, which qualifies for a first rent equal to or exceeding the applicable monthly rent amount qualifying for deregulation, as provided in this subdivision, exemption pursuant to this subdivision shall apply." The phrase "substantially alters" has been interpreted to mean "when the perimeter walls of the apartment have been substantially moved and changed and where the previous apartment, essentially, ceases to exist, thereby rendering its rental history meaningless" ( Matter of 300 W. 49th St. Assoc. v. New York State Div. of Hous. & Community Renewal, Off. of Rent Admin. , 212 A.D.2d 250, 253, 629 N.Y.S.2d 194 [1995] ; see Matter of Devlin v. New York State Div. of Hous. & Community Renewal , 309 A.D.2d 191, 194, 764 N.Y.S.2d 100 [2003] [defining substantial alteration to mean "reconfiguration plus obliteration of the prior apartment's particular identity"]; see also Dixon v. 105 W. 75th St. LLC , 148 A.D.3d 623, 53 N.Y.S.3d 1 [2017] ). Here, landlord failed to establish its entitlement to judgment as a matter of law with respect to this claim because it failed to submit evidence demonstrating any such reconfiguration, as the floor plans do not reflect any reconfiguration of the rooms of the unit or any apparent changes beyond potential expansion of hallway space, and landlord failed to assert any details describing the alleged reconfiguration.

Finally, landlord failed to establish its claim of high-rent vacancy deregulation. Landlord's contention that no colorable claim of fraud exists, precluding the examination of more than four years of rental history, lacks merit in view of the legislature's recent sweeping changes to the rent-overcharge statutes (L. 2019, ch. 36, part F), which changes are applicable to pending claims (see id. , § 7). Courts are...