In re Application of Monmar Plaza, L.P.

• Decision Date: 28 May 2021
• Docket Number: Index 441/2020
• Citation: 2021 NY Slip Op 31988 (U)
• Parties: In the Matter of the Application of MONMAR PLAZA, L.P., Petitioner, v. New York State Division of Housing and Community Renewal, And Beverly Lawrence-Smith, Respondents. For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules,
• Court: New York Supreme Court

2021 NY Slip Op 31988(U)

In the Matter of the Application of MONMAR PLAZA, L.P., Petitioner,

For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules,
v.
New York State Division of Housing and Community Renewal, And Beverly Lawrence-Smith, Respondents.

Index No. 441/2020

Supreme Court, Kings County

May 28, 2021

Unpublished Opinion

DECISION/ORDER

WAVNY TOUSSAINT, JUSTICE

The following e-filed papers read herein:	Doc. Nos.
Notice of Motion/Order to Show Cause/Petition/Cross Motion and Affidavits (Affirmations) Annexed	1-2
Opposing Affidavits (Affirmations)	3
Reply Affidavits (Affirmations)	4

Upon the foregoing papers in this petition pursuant to Article 78 of the Civil Practice Law and Rules, petitioner Monmar Plaza L.P., (Monmar or petitioner) moves for an order, pursuant to Civil Practice Law and Rules Section 7803(3), directing respondent, the New York State Division of Housing and Community Renewal (DHCR) to issue an order reversing the Deputy Commissioner's Order dated December 4, 2019 or, in the alternative, remanding this matter for further agency proceedings.

Background

The subject petition, filed with this court on January 31, 2020, asserts that Monmar is the owner of the building located at 814 Marcy Avenue, Brooklyn, NY, and has been the owner since purchasing the subject building from the previous owner on October 21, 2014. As pertinent to the instant proceedings, the building has, at all relevant times, been rent-stabilized pursuant to the Rent Stabilization Code (RSC). However, on or about April 7, 2004, the prior owner submitted an application to DHCR to determine whether the subject building is exempt from the Emergency Tenant Protection Act or the Rent Stabilization Law. By order dated February 28, 2007, DHCR closed the proceeding without prejudice because, despite the fact that extensive renovations had been undertaken, a new Certificate of Occupancy had not been issued.

In July of 2015, respondent Beverly Lawrence-Smith (Lawrence-Smith or Tenant), who resides in unit 3L or 3G (both are stated on the DHCR's Rent Administrator's order dated March 28, 2019), commenced a DHCR proceeding pursuant to Section 2202.22 of the NYC Rent and Eviction Regulations. Lawrence-Smith alleged that in 2004, the prior owner "changed the status of the apartment from rent controlled to exempt due to a substantial rehabilitation of the subject building." Lawrence-Smith also claimed that she had resided in the subject unit continuously since 1968 (first, with her mother). She argued that her mother was entitled to rent-control protection as a resident of the unit, and, after her mother vacated the unit, she succeeded to whatever rent-control rights her mother had as a tenant.

In response, Monmar first asserted it has since, completed a substantial rehabilitation of the subject building and, unlike the prior owner, has caused an updated certificate of occupancy to be issued, the building should be declared exempt from rent-stabilization.

In an order dated March 28, 2019, the DHCR's Rent Administrator determined that, 1) with respect to rent stabilization, "this Agency never issued an order stating that the subject building is exempt from rent regulations due to a substantial rehabilitation[, ]" and 2) with respect to whether the Tenant is entitled to rent-control protection, "since the record indicates that the tenant has lived in the subject apartment continuously from 1968, the Rent Administrator finds that the tenant is a rent controlled tenant of the subject apartment and is entitled to the rights and protections afforded under rent control."

Consequently, petitioner herein sought administrative review of the Rent Administrator's order, which resulted in the DHCR's order dated December 4, 2019, affirming the Rent Administrator's order. That order states:

. . . '"Accordingly, the Commissioner finds no error in the Administrator's finding that the current owner must refile a complete Form RS-3 Application, along with the new Certificate of Occupancy and an updated tenant list as was required of the prior owner in Docket No. SD210004UC, in order for all current parties to be properly served and for the Division to determine whether the building is exempt from rent regulation. The Commissioner notes the owner currently has an application pending pursuant to Docket No. HT210003UC wherein a Rent Administrator will determine if the subject premises is exempt from regulation

'The owner's claims regarding the rent controlled status of the subject tenant are also without merit. The Commissioner notes that succession claims in rent controlled matters are determined pursuant to Section 2204.6 (d) (1) of the Rent & Eviction Regulations, which states that the city rent agency shall not issue an order granting a certificate of eviction, and any member of the tenant's family, as defined in paragraph (3) of this subdivision shall not be evicted under this section where the tenant has permanently vacated the housing accommodation and such member has resided with the tenant in the housing accommodation as a primary residence for a period of no less than two years immediately prior to the permanent vacating of the housing accommodation by the tenant....

'During the proceeding below, the tenant of Apartment 3L submitted multiple documents in support of her claim that the subject premises has been her primary residence for several years, including marriage licenses, a death certificate, voter registration data, a birth certificate for the tenant's daughter, and mail addressed to the tenant. Said documents date back to as early as 1981, and each lists the subject apartment as the tenant's place of residence. The owner does not dispute that the current tenant is the daughter of the former rent controlled tenant of Apartment 3L or that the current tenant's mother vacated the subject premises in or around 2002. The owner-petitioner's claim that the tenant of Apartment 3L failed to provide adequate documentation indicating that she met the succession claim requirement of '[residing] with the tenant in the housing accommodation as a primary residence for a period of no less than two years' is therefore unsupported by the record. The owner's statement that the tenant should be time barred from claiming rent control status because she signed a rent stabilized lease in 2003 is also without merit."'

Consequently, petitioner commenced the instant Article 78 petition, challenging the December 4, 2019 order, against both DHCR and the Tenant, who have both interposed answers.

Petitioner's Arguments

In support of the instant petition, Monmar claims that DHCR acted in an arbitrary and capricious manner, and the underlying order issued was contrary to considerations of equity and fair dealing. More specifically, petitioner asserts that DHCR erred when it determined that it (or its predecessor-in-interest) did not complete a substantial rehabilitation of the subject building and is therefore not exempt from rent regulation. Monmar claims that it submitted, in the underlying hearing, sufficient evidence to establish that it completed a substantial rehabilitation of the subject building. Petitioner also notes that the prior owner applied for an agency order determining that the subject building is exempt from the Emergency Tenant Protection Act or the Rent Stabilization Law; however, that proceeding was closed without prejudice because the prior owner could not show that a new certificate of occupancy was issued for the subject building. Monmar points out that there is now a valid certificate of occupancy issued for the building, and, as such, the substantial renovation (entitling petitioner to a determination that the building is exempt from rent stabilization) is complete. For this reason, petitioner concludes that DHCR's decision to deny rent stabilization exemption lacked a rational basis and was thus arbitrary and capricious.

Next, petitioner claims that it was erroneous for DHCR to require it (or its predecessor-in-interest) to have applied for approval of a substantial renovation project. Monmar asserts that the Rent Stabilization Law defines what constitutes a substantial renovation of a rent-stabilized building and adds that the subject statute also contains a "presumption of substantial renovation" if certain conditions exist. Monmar argues that DHCR has no authority to ignore the presumption or the remaining text of the statute. Petitioner further claims that DHCR has no authority to require anything (such as an application for approval) that is not mandated by the statute. Monmar maintains that the Rent Stabilization Law provisions concerning substantial renovation cannot be modified by waiver, estoppel or private agreement. Therefore, to the extent that DHCR based its determination on the record's absence of a prior application for approval of a substantial rehabilitation, the determination lacked a rational basis and is thus arbitrary and capricious.

Alternatively, Monmar claims "it is not clear why the DHCR did not hold the underlying proceeding in abeyance, pending a determination by the DHCR on the same issue... whether or not the subject premises is exempt from regulation." Monmar contends that, if DHCR later rules that the subject building is not rent-stabilized, but the Tenant was already entitled to rent-control protection, "there would be two conflicting Orders on the same exact regulatory issue." Therefore, it was arbitrary and capricious for DHCR to fail to hold the proceedings commenced by the Tenant in abeyance until the rent-stabilization issue was resolved.

In support, petitioner proffers that Lawrence-Smith signed a vacancy lease as a rent stabilized tenant in 2003. Monmar reasons that, therefore,...