Flosar Realty LLC v. N.Y.C. Hous. Auth.

• Decision Date: 10 March 2015
• Docket Number: 102799/12, 13609
• Citation: 127 A.D.3d 147,2015 N.Y. Slip Op. 01906,5 N.Y.S.3d 382
• Parties: In re FLOSAR REALTY LLC, et al., Petitioners–Appellants, v. NEW YORK CITY HOUSING AUTHORITY, Respondent–Respondent.
• Court: New York Supreme Court — Appellate Division

127 A.D.3d 147

5 N.Y.S.3d 382

2015 N.Y. Slip Op. 01906

In re FLOSAR REALTY LLC, et al., Petitioners–Appellants

v.NEW YORK CITY HOUSING AUTHORITY, Respondent–Respondent.

102799/12, 13609

Supreme Court, Appellate Division, First Department, New York.

March 10, 2015.

Tenenbaum Berger & Shivers LLP, Brooklyn (David M. Berger and Damien Bernache of counsel), for appellants.

Kelly D. MacNeal, New York (Gil Nahmias, Nancy M. Harnett and Matthew G. Dineen of counsel), for respondent.

DAVID FRIEDMAN, J.P., DIANNE T. RENWICK, KARLA MOSKOWITZ, ROSALYN H. RICHTER, SALLIE MANZANET–DANIELS, JJ.

Opinion

RICHTER, J.

In this appeal, we are asked to decide whether an article 78 mandamus proceeding can be brought to compel respondent New York City Housing Authority (NYCHA) to (i) process renewal leases requesting increases in Section 8 rent subsidies; and (ii) process requests seeking reinstatement of Section 8 subsidies that were previously suspended due to housing quality violations that were subsequently remedied. We find that although mandamus does not lie to compel NYCHA to reach any particular result with respect to these requests, the petition states a claim for mandamus relief to the extent it seeks to compel NYCHA to make a determination, because NYCHA does not have the discretion to not process petitioners' requests.

Petitioners are 19 owners of residential apartment buildings located in Brooklyn and Staten Island. Some of the units in the buildings are rented, pursuant to rent-stabilized leases, to tenants who participate in the Section 8 voucher program. Under that program, building owners are paid rent subsidies to help lower-income families afford decent, safe and sanitary housing in the private sector. NYCHA is the governmental agency that administers the Section 8 program.

For each tenancy, NYCHA and the building owner enter into a Housing Assistance Payments (HAP) contract pursuant to which NYCHA pays a monthly subsidy in an amount representing the difference between the total rent and the tenant's share of the rent, which is based on the tenant's income. At all times during a Section 8 tenancy, the rent paid to the owner cannot exceed the reasonable rent, as most recently determined by NYCHA (24 C.F.R. 982.507 [a][4] ). In addition to determining the reasonable rent for the initial lease, NYCHA must determine the reasonableness of any proposed rent increase (24 C.F.R. 982.507 [a][1], [a][2][i] ).

Building owners are required to maintain the Section 8 units in accordance with certain housing quality standards (HQS), and NYCHA is required to regularly inspect the units and notify the owner of any defects discovered (24 C.F.R. 982.401, 982.404 [a]; 982.405[a], [d] ). No subsidy payments may be made for a unit that fails to meet HQS unless the owner corrects the defect within a period specified by NYCHA and NYCHA verifies the correction (24 C.F.R. 982.404 [a][3] ).¹

Petitioners commenced this article 78 proceeding asserting three causes of action. In the first cause of action, petitioners contend that they are entitled to Section 8 subsidy increases upon the renewal of each rent-stabilized lease commensurate with the increases approved by the Rent Guidelines Board (RGB). Petitioners claim they submitted renewal leases to NYCHA requesting the subsidy increases, but NYCHA neither increased the subsidies nor even responded to their requests. In the second cause of action, petitioners allege that NYCHA failed to reinstate previously suspended subsidies for HQS violations even though the owners remedied the deficiencies and submitted certifications of repair to NYCHA. According to petitioners, NYCHA neither accepted the certifications nor reinspected the units to verify that the repairs had been made. Petitioners seek writs of mandamus compelling NYCHA to (i) process the renewal leases and pay the requested increased subsidies; and (ii) reinstate the subsidies that were previously suspended due to HQS violations that were subsequently remedied.²

NYCHA did not answer the petition, but instead cross-moved to dismiss, arguing that petitioners are not entitled to mandamus relief, that most of petitioners' claims are time-barred, and that petitioners failed to file a notice of claim. Supreme Court rejected NYCHA's notice of claim argument but dismissed the proceeding, concluding that petitioners had not demonstrated that they have a clear legal right to the relief sought. The court found that the decision to increase rent subsidies is not a purely ministerial act, but is a matter entrusted to NYCHA's discretion, and that the determination as to whether subsidies should be reinstated after the HQS violations were remedied also is discretionary. The court did not reach the statute of limitations issue. Petitioners appeal and we now modify.

An article 78 mandamus proceeding may be brought to compel an agency “to perform a duty enjoined upon it by law” (CPLR 7803[1] ). It is well-settled that a mandamus to compel “applies only to acts that are ministerial in nature and not those that involve the exercise of discretion” (Matter of Maron v. Silver, 14 N.Y.3d 230, 249, 899 N.Y.S.2d 97, 925 N.E.2d 899 [2010] ). Thus, “the petitioner must have a clear legal right to the relief demanded and there must exist a corresponding nondiscretionary duty on the part of the administrative agency to grant that relief” (Matter of Anonymous v. Commissioner of Health, 21 A.D.3d 841, 842, 801 N.Y.S.2d 302 [1st Dept.2005] [internal quotation marks omitted] ).

Supreme Court properly found that the determination of the amount of any increase in the Section 8 subsidy is not purely ministerial but a matter entrusted to NYCHA's discretion. An owner cannot receive a rent increase unless NYCHA first determines the reasonable rent (24 C.F.R. 982.507 [a][2] [i] ). In doing so, NYCHA is required to compare the unit's rent to comparable unassisted units and must consider a myriad of discretionary factors, including location, quality, size, type and age of the unit, and any services, utilities and amenities provided (24 C.F.R. 982.507 [b] ). Because the determination of the amount of any rental increase involves the exercise of discretion, it is not subject to mandamus.

Petitioners counter that rental increases are governed by 24 C.F.R. 982.519, not 24 C.F.R. 982.507. As NYCHA points out, however, section 982.519 does not apply to the Section 8 voucher program at issue here (see 24 C.F.R. 982.501 [c] [section 982.519 applies only to tenancies under the (distinct, and now-defunct) Section 8 certificate program] ). Petitioners nevertheless argue that NYCHA should be judicially estopped from disclaiming reliance on section 982.519 because it relied, in part, on that regulation in its dismissal motion below. We need not decide the issue of estoppel because even if this regulation is applicable, the result would be the same because it too has a discretionary component (see 24 C.F.R. 982.519 [b][1] [ii] [requiring NYCHA to determine the reasonable rent in considering an owner's request for an increase] ).

There is no merit to petitioners' argument that NYCHA is required to accept as presumptively reasonable the rental increase percentages adopted by the RGB for rent-stabilized leases. The determination of rent reasonableness is governed by the Section 8 regulations set forth above, which make no mention of the RGB percentage increases. Moreover, the analysis conducted by the RGB is entirely different from the determination of rent reasonableness contained in the Section 8 regulations. The RGB sets maximum allowable rent increases for leases citywide based, inter alia, on the economic condition of the residential real estate industry, real estate taxes, operating maintenance costs and the availability of financing (see Administrative Code of City of N.Y. § 26–510[b] ). In contrast, the Section 8 regulations require analysis of unit-specific factors, such as location, quality and size (see 24 C.F.R. 982.507 [b] ). Furthermore, the RGB-approved increases are not mandatory but merely set a maximum allowable ceiling, which an owner cannot exceed. Put simply, the maximum rent an owner may lawfully charge under rent stabilization is not the same as rent reasonableness under the Section 8 regulations (see 24 C.F.R. 982.509 [recognizing that in addition to rent reasonableness under the regulations, the amount of rent to owners may also be subject to state and local rent regulation] ).³

Although the eventual determination of reasonable rent will be the product of NYCHA's judgment, the agency does not enjoy similar discretion to not make a decision at all on the rent increase requests. The applicable regulation, relied upon by NYCHA, provides that before any rent increase is allowed, NYCHA “must redetermine the reasonable rent” (24 C.F.R. 982.507 [a] [2][i] [emphasis added]; see also 24 C.F.R. 982.519 [a] [under regulation relied upon by petitioners, NYCHA must annually adjust rent at owner's request] ). Upon the proper submission of a request for rent increase, NYCHA must process the request and come to a determination, whether adverse to petitioners' position or not. NYCHA cannot leave petitioners in limbo, neither granting nor denying their requests, many of which have been pending for a significant amount of time. Thus, the petition states a claim for mandamus relief to the extent it seeks an order directing NYCHA to make a determination with respect to the rent increase requests (see Klostermann v. Cuomo, 61 N.Y.2d 525, 541, 475 N.Y.S.2d 247, 463 N.E.2d 588 [1984] [“to the extent that plaintiffs can establish that defendants are not satisfying nondiscretionary obligations to perform certain functions, they are entitled to orders directing defendants to discharge those duties”]; Matter of Utica Cheese v. Barber, 49 N.Y.2d 1028, 1030, 429 N.Y.S.2d 405, 406 N.E.2d 1342 [1980] [although statute did not define the “reasonable time” within which agency had to render its decision on the...