Allerton Coops Tenants Ass'n v. Biderman
| Decision Date | 01 April 1993 |
| Parties | ALLERTON COOPS TENANTS ASSOCIATION, Janice Walcott and Minnie Rhem, individually and on behalf of all those similarly situated, Plaintiffs-Respondents, v. Abraham BIDERMAN, Commissioner of the Department of Housing Preservation and Development of the City of New York, and the Allerton Associates, and the 2700 Bronx Park East Corporation, Defendants-Appellants. |
| Court | New York Supreme Court — Appellate Division |
Fay Ng, New York City, of counsel (Pamela Seider Dolgow and Susan Shapiro, with her on the brief, O. Peter Sherwood, Corp. Counsel, atty.), for defendant-appellant Abraham Biderman.
Gerald Goldstein, New York City, of counsel (Matthew Feigenbaum, with him on the brief, Davidoff & Malito, attorneys), for defendants-appellants Allerton Associates and 2700 Bronx Park East Corp.
John D. Gorman, New York City, for plaintiffs-respondents.
Before CARRO, J.P., and MILONAS, ELLERIN, KUPFERMAN and RUBIN, JJ.
Plaintiffs, the tenants of six five-story buildings renovated under a loan program administered by the New York City Department of Housing Preservation and Development (HPD), commenced this action for declaratory and injunctive relief, alleging that they were not accorded constitutionally adequate notice of the determination that the work was complete nor given an opportunity to challenge that determination and comment on the prospective rent increases.
The underlying facts are undisputed. In September of 1985, Allerton Associates applied to HPD for a participation loan pursuant to Private Housing Finance Law 800 et seq., which authorizes loans to be made to owners of multiple dwellings by private investors and the city to rehabilitate deteriorating housing accommodations. Under this program, the owner, prior to beginning the renovation, must obtain a financial commitment from both the city and a participating lender, and, after the work is completed, the city and participating lender will pay off the construction loan procured for the rehabilitation and take mortgages on the property. Section 804 of the act requires HPD to restructure the rents when the refurbishment has been achieved. In that regard, the rents are initially established at levels deemed sufficient to pay for the work done and to permit the dwelling to be properly maintained. Rent controlled apartments are decontrolled, and the entire building is placed in the rent stabilization system. Any rent adjustments thereafter are made in accordance with the rent stabilization guidelines.
The subject buildings, comprising a 698-unit housing complex located in the Pelham Parkway section of the Bronx, were clearly in need of extensive rehabilitation. Defendant Commissioner of HPD states that the application by Allerton Associates was approved because its proposal was economically feasible for the tenants, as well as the owners, and, in addition, federal funds would be available for the renovation and as subsidies to approximately 300 tenants. The existing rents averaged $57.48 monthly per room for rent controlled occupants and $81.65 per room each month for those under rent stabilization, but HPD's analysis indicated that the anticipated improvements would result in an average monthly rent of $114.55 per room.
Private Housing Finance Law 803 mandates that tenants be advised of the proposed rehabilitation and the expected rent increases. Moreover, a representative of the agency is required to meet at least once with the tenants or to have offered to do so. Therefore, in a letter dated December 2, 1985, Allerton Associates advised the tenants of the renovation, the status of the loan commitments and the expected rent rises. The tenants were also apprised that they could discuss the matter at a meeting scheduled on December 10, 1985 with a representative of HPD. A follow-up letter dated February 3, 1986 confirmed the information that had been provided at the meeting and stated that the tenants had twenty-one days to comment, but HPD received no responses.
In December of 1987, the construction inspector certified that the rehabilitation had been substantially completed. Defendant Commissioner of HPD claims that the unfinished work consisted primarily of some painting, missing or loose fixtures, window insulation, caulking and minor leaking. Consequently, HPD's Division of Engineering and Architectural Services agreed with the assessment by the construction inspector, and the tenants were notified in a letter dated February 5, 1988 that the rehabilitation was substantially complete and that the restructured rents, as announced in December of 1985, would become effective on March 1, 1988. The tenants were also told that they had seven days in which to submit comments.
Notwithstanding plaintiffs' contention that such a short time constituted a due process violation, the tenants' association sent two letters to HPD, and about forty individual tenants replied to HPD's solicitation. All of these responses were forwarded for review to the agency's Division of Engineering and Architectural Services. The tenants were advised that if the unfinished work described in their communications was found to be within the scope of the Participating Loan Program, HPD would withhold in escrow funds twice the amount of the estimated uncompleted work in order to ensure performance.
However, plaintiffs instituted this action on May 3, 1988 to annul the determination that the rehabilitation was substantially complete. They also seek to bar any rent increases imposed as a result of the work and to restrain HPD from exempting the rent restructuring process from the provisions of the rent control and rent stabilization laws. It is their position that not only were their due process rights abridged but that section 804 of the Private Housing Finance Law is unconstitutional to the extent that it directs HPD to set the initial rent for each unit after the renovation, thereby depriving them of the protection of the rent control and rent stabilization laws. Plaintiffs also assert that the new rents are arbitrary and capricious since there is no correlation between the renovations and the new rents.
The Commissioner of HPD subsequently moved jointly with Allerton Associates for summary judgment dismissal. Although defendants originally requested unsuccessfully that the complaint be dismissed in its entirety, another judge permitted them to move to dismiss the first two causes of action, and it is the latter denial that is being appealed herein. In the opinion of the Supreme Court, Further, the court perceived "questions as to whether the rehabilitation has been completed."
It is first necessary to consider whether the rent control and rent stabilization laws create a property interest such as would enable plaintiffs to complain of a due process violation. In Morillo v. City of New York, 178 A.D.2d 7, 582 N.Y.S.2d 387, app. dismd. 79 N.Y.2d 1039, 584 N.Y.S.2d 448, 594 N.E.2d 942, lv. denied 80 N.Y.2d 752, 587 N.Y.S.2d 904, 600 N.E.2d 631, this court declared that "[i]t is well-settled law that property interests are created by State law" (178 A.D.2d at 12, 582 N.Y.S.2d...
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