8200 Realty Corp. v. Lindsay

• Citation: 261 N.E.2d 647,313 N.Y.S.2d 733,27 N.Y.2d 124
• Parties: , 261 N.E.2d 647 8200 REALTY CORPORATION et al., Respondents, v. John V. LINDSAY, as Mayor of the City of New York, et al., Appellants.
• Decision Date: 01 July 1970
• Court: New York Court of Appeals

Page 733

313 N.Y.S.2d 733

27 N.Y.2d 124, 261 N.E.2d 647

8200 REALTY CORPORATION et al., Respondents, v. John V. LINDSAY, as Mayor of the City of New York, et al., Appellants.

Court of Appeals of New York.

July 1, 1970.

J. Lee Rankin, Corp. Counsel (Norman Redlich, New York City, Stanley Buchsbaum, Brooklyn, Eric J. Byrne, Harry Michelson, James Nespole, New York City, and Phyllis J. Roberts, of counsel), for appellants.

Arthur Richenthal, David Abrams and Irving M. Moss, New York City, for respondents.

Bernard Botein, Howard L. Weinreich, New York City, Abraham M. Lindenbaum, Brooklyn, Arther Kramer, Martin A. Schwartz and Eve H. Goldstein, New York City, for The Rent Stabilization Assn., amicus curiae.

Maurice A. Reichman, New York City, for Citizens' Housing and Planning Council of New York, Inc., amicus curiae.

Louis J. Lefkowitz, Atty. Gen. (Samuel A. Hirshowitz, David Clurman, New York City, and Sheldon Horowitz, New York, City, of counsel), amicus curiae.

Joseph Gaier and Martin A. Luster, New York City, amicus curiae.

BERGAN, Judge.

The New York City Rent Stabilization Law of 1969 (Local Laws, 1969, No. 16 of City of New York) has been held invalid by the Appellate Division because, in the opinion of the court, it does not represent a valid exercise of the legislative authority of the city. ^*

The court was of opinion that the authority given to the Real Estate Industry Stabilization Association, a private corporation, to play an effective part in public rent control administration under the statute, is an unconstitutional delegation of power and also exceeds the terms of the State statute under which the city undertook to enact the 1969 statute.

The court ruled that the differences between scope and form of rent regulation authorized by the 1969 statute and the continuing regulation of older housing accommodations (pre-1947) under the preexisting statutory scheme of 1962 deprived the parties affected by the 1969 statute of equal protection of the laws.

Rent control of housing accommodations completed before February, 1947 is in pursuance of title Y of chapter 51 of the Administrative Code, enacted by the city in 1962. This local law as amended vests in the Housing and Development Administration, a city agency, authority to administer rent control under title Y. It expressly limits rentals that may be charged, in the accommodations to which it applies, to 6% Net annual return plus 2% Annual depreciation.

It is administered, as it has been noted, by a public agency of the city. The validity of this statute and its method of control have been sustained (Plaza Mgt. Co. v. City Rent Agency, 25 N.Y.2d 630, 306 N.Y.S.2d 11, 254 N.E.2d 227; Matter of Hartley Holding Corp. v. Gabel, 13 N.Y.2d 306, 247 N.Y.S.2d 97, 196 N.E.2d 537).

The 1969 local law, here involved, known as the Rent Stabilization Law, added title YY to chapter 51 of the Administrative Code and undertook to provide rent control for housing accommodations completed between February 1, 1947 and March 10, 1969. Until the enactment of the 1969 statute, rental of housing accommodations becoming available during this 22-year period was uncontrolled.

The main difference between the Rent Stabilization Law of 1969 and its predecessor is that while the 1962 statute is administered entirely by a city agency, the 1969 law is administered in part by an association made up of apartment owners, but under close and detailed supervision and control of official city agencies.

A somewhat larger permissible return on investment is possible under the 1969 act. Consistently with guidelines required to be prescribed, increases over the May 31, 1968 rent may be allowed on renewed leases or new leases not exceeding 10% For a two-year lease or 15% For a three-year lease (Administrative Code, § YY51--5.0, subd. d). Certain other kinds of vacancies result in smaller percentage increases (subd. e). These limitations continue until July 1, 1970. In vacancies occurring after that date, increases may be fixed by administrative action at levels other than those prescribed in the statute.

The association which is authorized by the act to play a part in rent control is precisely prescribed (§ YY51--6.0) as a 'Real Estate Industry Stabilization Association'. This group may be either a corporation or an association and shall have as members the owners of not less than 40% Of the dwelling units affected by the 1969 statute. It shall be registered with the Housing and Development Administration, a city agency which was in existence before the enactment of the 1969 act.

But this city agency may accept an industry association for registration only if it is satisfied that certain preconditions have been met: (a) that membership in the association is open to any owner of a multiple dwelling covered by the act; (b) that the association has adopted a code covering related terms and conditions of occupancy which has been approved by the Housing and Development Administration; (c) that the association has established a Conciliation and Appeals Board, the members of which, however, are all to be appointed by the Mayor with the approval of the City Council; (d) that each member has agreed in writing to abide by the orders of the Conciliation and Appeals Board and by the code; and (e) that the association is of such a character that it can carry out the purposes of the statute.

The statute also establishes a Rent Guidelines Board of nine members, all appointed by the Mayor and paid by the city, no member of which may be a person who owns real estate covered by the statute or is an officer of a tenants' organization (§ YY51--5.0). Its function is to prescribe guidelines for rent increases within the prescribed limits before July 1, 1970, and to review the problem of rent increases once annually and to establish different levels thereafter (subd. d).

Membership by owners of multiple dwellings in the Real Estate Industry Association is voluntary, but if an owner does not join an association the dwelling becomes subject to normal rent control under title Y of chapter 51, in which case the City Rent Agency shall establish the maximum rent on the basis of the rent charged May 31, 1968 (§ YY51--4.0, subds. a, b).

It is thus to be seen that members of the industry play a part closely interrelated with official agencies in rent control by mechanisms designed to protect both owners and tenants during the emergency. The over-all supervision of the regulatory process is vested in the Housing and Development Administration which is expressly authorized to enact rules and regulations for the implementation of the statute (§ YY51--4.0, subd. c); to approve the code of an association (§ YY 51--6.0, subd. b, par. (2)), and to discipline an association (subd. d).

The members of an association must also adhere to the limitations on rent increases fixed, as it has been noted, by the Rent Guidelines Board, and the Conciliation and Appeals Board has the power to hear complaints by tenants against landlords and requests by landlords for hardship increases above fixed rentals. Although the association establishes this board as part of the condition of approval and provides the funds for its operation, the Mayor appoints the members of the board.

The main thrust of plaintiffs' attack on the statute is that this important role in rent control played by apartment owners in association is both 'an invalid delegation of legislative authority' and 'an illegal delegation of powers'. With almost equal stress it is argued that the statute vests the 'administration of controls on rents and evictions' in a group or unit other than a city agency, thus exceeding the delegation of power by the State to the city for the enactment of rent control legislation.

That members of a complex industry play a part in guiding government to a fair regulation of the industry is an obvious advantage as long as government keeps the ultimate controls in its own hands. The knowledge and experience of the industry may be of valuable assistance to administration.

The co-operation of the industry is more likely when the industry plays a responsible part in the regulation itself than when it stands outside and takes the prescriptions of public authority when handed down, as the real estate industry does in the regulations under title Y.

The ultimate success, or even the utility of the statutory mechanism which brings an industry association into an active role of regulative responsibility, may be arguable one way or another. But fair latitude should be allowed by the court to the legislative body to generate new and imaginative mechanisms addressed to municipal problems. 'Novelty is no argument against constitutionality' (People ex rel. Durham Realty Corp. v. La Fetra, 230 N.Y. 429, 446, 130 N.E. 601, 607).

Whatever delegation may be said to have come down to the Real Estate Industry Association described in this statute, closely circumscribed and regulated as this is, no one could seriously entertain a fear that government has yielded any real sovereign power. Certainly no 'legislative power' has been passed on under any possible conception of that term.

In an affidavit filed with the court at Special Term by Jason R. Nathan, the Administrator of the Housing and Development Administration, which pre-existed the 1969 statute and which continues to play an over-all supervisory role in city rent control, the underlying utility and the legal precedent for the role played by the industry under this statute is carefully developed.

He stated: 'The new rent Stabilization Law departs from the standard residential rent control system in which a government administrative agency enforces the law. Under the new law, each landlord of previously uncontrolled residential property has the option to place it under standard rent control, or under a real estate industry self-regulation organization which is permitted, within...