Langham Mansions, LLC v. N.Y. State Div. of Hous. and Cmty. Renewal

• Citation: 908 N.Y.S.2d 10,76 A.D.3d 855
• Parties: In re LANGHAM MANSIONS, LLC, Petitioner-Appellant, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent-Respondent, 135 Central Park West Tenant's Association, Intervenor-Respondent.
• Decision Date: 14 September 2010
• Court: New York Supreme Court — Appellate Division

908 N.Y.S.2d 10

76 A.D.3d 855

In re LANGHAM MANSIONS, LLC, Petitioner-Appellant,

v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent-Respondent,135 Central Park West Tenant's Association, Intervenor-Respondent.

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

Sept. 14, 2010.

Borah, Goldstein, Altschuler Nahins & Goidel, P.C., New York (Robert D. Goldstein of counsel), for appellant.

Gary R. Connor, New York (Jeffrey G. Kelly of counsel), for municipal respondent.

Himmelstein McConnell Gribben Donoghue & Joseph, New York (David S. Hershey-Webb of counsel), for 135 Central Park West Tenant's Association respondent.

ANDRIAS, J.P., SAXE, CATTERSON, FREEDMAN, ABDUS-SALAAM, JJ.

Order and judgment (one paper), Supreme Court, New York County (Marilyn Shafer, J.), entered February 6, 2009, denying the petition and dismissing the proceeding brought pursuant to CPLR article 78 to annul so much of a determination of respondent New York State Division of Housing and Community Renewal (DHCR) as revoked a major capital improvement rent increase for four apartments in petitioner's building, reversed, on the law, without costs, the proceeding reinstated, the petition granted to the extent of annulling DHCR's determination, and the matter remanded to DHCR for further proceedings consistent with this decision.

In this article 78 proceeding, petitioner Langham Mansions LLC ("the owner") undertook an extensive project to replace more than 860 oversized and non-standard windows in its landmark apartment building located at Central Park West, between 73rd and 74th Streets, Manhattan. The building comprises 59 apartments, 19 of which are subject to rent regulation.

The owner received approval from the Landmarks Preservation Commission to replace the existing windows. In June 2005, the owner filed an application with the DHCR pursuant to the Rent Stabilization Code (9 NYCRR § 2522.4) for a major capital improvement rent increase based on the owner's expenditure of more than $1.5 million to replace the windows in the building.

On December 14, 2005, in opposition to the rent increase, 135 Central Park West Tenants Association (the "tenants' association") submitted an answer to the owner's application, asserting that some of the new windows were defective. The tenants' association attached a report from a licensed engineer who had inspected the windows in 10 of the building's 19 rent-regulated apartments in November 2005. The report stated the new windows were difficult to open and close and they required "undue force in pulling up and pushing down the sash."

The owner responded that all windows were functioning properly. By order dated May 19, 2006, the DHCR approved the major capital improvement increase of $39.16 per room per month for the rent-regulated units, effective June 2006. The DHCR also approved a retroactive charge.

In response to the rent increase, the tenants' association filed a petition for administrative review ("PAR"). Contesting the PAR, the owner disagreed with the engineer's report, and attached the report of an independent contractor who had visited11 ofthe 19 rent-regulated units, and stated that minor repairs were required in some of the units.

DHCR itself inspected the units in question in early 2008. It found no defects in four units, one unit was vacant. Of the remaining units, one had windows that were missing some moldings, and four units had some windows that were difficult to open and close. Of the more than 860 windows replaced in the building, the DHCR found defects affecting 6 windows out of a total of 50 windows in the four units. Subsequently, DHCR granted the PAR in part, annulling and permanently revoking the rent increases for the four units. ¹

The owner commenced this article 78 proceeding in August 2008, seeking annulment of the DHCR's determination. The owner claimed that its initial request for a major capital improvement rent increase was properly granted, and that the DHCR acted arbitrary and capriciously in revoking the increase where only 6 of a total of 50 windows in the four subject units had problems, and the problems were minor and could be repaired.

The owner argued that, in similar cases DHCR had not revoked a rent increase but had simply suspended the effective date of the increase until the agency determined that proper repairs had been made. Furthermore, the owner asserted that DHCR had failed to explain why it had reached a different result in this case.

By order and judgment, entered February 6, 2009, the court confirmed the determination on the PAR and dismissed the petition. As to the owner's contention that the window problems in the four apartments were minor, the court found that an evaluation of the problems' severity involved the agency's expertise, which was entitled to deference. The court further found that DHCR's decision to revoke the rent increase rather than suspend it was not arbitrary and capricious because the owner when provided with the opportunity to fix windows, had not done so.

We now reverse for the reasons set forth below. It is well settled that "[j]udicial review of administrative determinations is limited to whether the determination was affected by an error of law or was arbitrary and capricious or an abuse of discretion." (Matter of City of New York v. Plumbers Local Union No. 1 of Brooklyn & Queens, 204 A.D.2d 183, 184, 612 N.Y.S.2d 128 [1994], lv. denied 85 N.Y.2d 803, 624 N.Y.S.2d 373, 648 N.E.2d 793 [1995]; CPLR 7803(3). See also Matter of Peckham v. Calogero, 12 N.Y.3d 424, 431, 883 N.Y.S.2d 751, 911 N.E.2d 813 [2009], citing Matter of Pell v. Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 N.Y.2d 222, 231, 356 N.Y.S.2d 833, 313 N.E.2d 321 [1974] ) Further, the Court of Appeals has held that an administrative agency's determination is arbitrary and capricious when it " 'neither adheres to its own prior precedent nor indicates its reason for reaching a different result on essentially the same facts' " ( Matter of Lantry v. State of New York, 6 N.Y.3d 49, 58, 810 N.Y.S.2d 729, 844 N.E.2d 276 [2005], quoting Matter of Charles A. Field Delivery Serv. [Roberts], 66 N.Y.2d 516, 517, 498 N.Y.S.2d 111, 488 N.E.2d 1223 [1985] ).

On appeal, DHCR argues that its determination is rational because it is consistent with other decisions where the agency revoked an increase. However, the ownercorrectly asserts that the determination is arbitrary and capricious because the DHCR neither indicated a reason for its drastic penalty nor adhered to prior rulings in similar cases where only a few units were affected.

Indeed, the record contains copies of DHCR rulings that directly support the owner's assertions. Specifically, in Matter of Little & Breslow (DHCR Admin. Review Pocket No. NC430029RP [August 2, 1999] ), the DHCR order and opinion denying a petition for a PAR stated the Department's policy in terms that could not be clearer:

"The Commissioner notes that it is Division Policy to suspend a [major capital improvement] rent increase for individual...