MATTER OF DWORMAN v. DHCR

• Decision Date: 21 December 1999
• Citation: 725 N.E.2d 613,94 N.Y.2d 359,704 N.Y.S.2d 192
• Parties: In the Matter of LEONA DWORMAN, Respondent, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Appellant, and 40 CENTRAL PARK SOUTH, INC., Intervenor-Appellant. In the Matter of JULIE SEYMOUR, Respondent, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Appellant. In the Matter of PETER SUDARSKY et al., Appellants, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

94 N.Y.2d 359

725 N.E.2d 613

704 N.Y.S.2d 192

In the Matter of LEONA DWORMAN, Respondent, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Appellant, and 40 CENTRAL PARK SOUTH, INC., Intervenor-Appellant.

In the Matter of JULIE SEYMOUR, Respondent, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Appellant.

In the Matter of PETER SUDARSKY et al., Appellants, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL et al., Respondents.

Court of Appeals of the State of New York.

Argued November 18, 1999.

Decided December 21, 1999.

Roderick J. Walters, New York City, and Marcia P. Hirsch for appellant in the first and second above-entitled proceedings.

Borah, Goldstein, Altschuler & Schwartz, P. C., New York City (Jeffrey R. Metz and Robert D. Goldstein of counsel), for intervenor-appellant in the first above-entitled proceeding.

Karlsson & Ng, P. C., New York City (Kent Karlsson and James Hivnor of counsel), for respondent in the first above-entitled proceeding.

Skadden, Arps, Slate, Meagher & Flom, L. L. P., New York City (Thomas J. Schwarz and Bentley Kassal of counsel), for respondent in the second above-entitled proceeding. Fishman & Neil, New York City (Steven A. Neil of counsel), for appellants in the third above-entitled proceeding.

Eliot Spitzer, Attorney General, New York City (Marion R. Buchbinder and Robert A. Forte of counsel), for New York State Division of Housing and Community Renewal, respondent in the third above-entitled proceeding.

Borah, Goldstein, Altschuler & Schwartz, P. C., New York City (Jeffrey R. Metz and Robert D. Goldstein of counsel), for Langham Mansions Company and another, respondents in the third above-entitled proceeding.

Judges BELLACOSA, SMITH, LEVINE, CIPARICK, WESLEY and ROSENBLATT concur.

OPINION OF THE COURT

Chief Judge KAYE.

At issue in these cases is whether the Division of Housing and Community Renewal (DHCR) has authority to accept late responses from rent-stabilized tenants certifying that their income is below the statutory threshold, and thus that their apartments are not subject to "luxury decontrol" under the Rent Regulation Reform Act of 1993. We hold that DHCR has authority to accept late responses, and therefore we remit Dworman and Sudarsky to the Division for consideration of the reasons for the tenants' tardiness in providing the required information. In Seymour, however, we uphold DHCR's order deregulating the apartment, because DHCR did not abuse its discretion in finding that the tenant's own neglect—the reason tendered for the late filing—did not excuse her default. The luxury-decontrol provisions of the Rent Regulation Reform Act of 1993 (L 1993, ch 253 [the Act]), amending the Rent Stabilization Law of 1969 (Administrative Code of City of NY, tit 26, ch 4), ended rent stabilization for New York City apartments renting for $2,000 or more per month, if the occupants reported a combined annual adjusted gross income in excess of $250,000 for the previous two consecutive years.¹ In order to determine which apartments qualify for deregulation, the Act sets out the following procedure:

On or before May 1 of the calendar year, the landlord sends the tenant an "income certification form" (ICF), which the tenant must return to the landlord within 30 days (Rent Stabilization Law [Administrative Code] § 26-504.3 [b]). If the tenant fails to return the form, or if the landlord disputes the income amount reflected on the completed form, the landlord may then, on or before June 30, petition DHCR to verify the tenant's income (id., § 26-504.3 [c] [1]).

Within 20 days of receiving the landlord's petition, the Act continues, DHCR sends the tenant a notice of the proceeding, requiring the tenant to provide "such information as the division and the department of taxation and finance shall require to verify whether the total annual income exceeds two hundred fifty thousand dollars in each such year" (id., § 26-504.3 [c] [1]). The notice "shall require the tenant or tenants to provide the information to the division within sixty days of service," and must include "a warning in bold faced type that failure to respond will result in an order being issued by the division providing that such housing accommodation shall not be subject to the provisions of this law" (id.). If the tenant does not provide the required information, DHCR must "issue, on or before December first of such year, an order providing that such housing accommodation shall not be subject to the provisions of this law upon the expiration of the current lease" (id., § 26-504.3 [c] [3]).

Against this statutory background, we turn to the cases before us, none of which met the prescribed timetables for tenant response or agency action.

Dworman v DHCR

In the first case, Leona Dworman and her husband, both retired, have not filed income tax returns since 1993. In March 1995, Dworman's landlord sent her an ICF, which Dworman timely returned, certifying that her income was below $250,000 for the previous two tax years (1993 and 1994). The landlord filed a petition with DHCR challenging the ICF, and Dworman timely responded to DHCR's notice, stating that neither she nor her husband had sufficient income to file New York State tax returns for 1993 or 1994. More than a year later, on November 1, 1996, DHCR dismissed the landlord's petition.

In March 1996, while the 1995 petition was still pending before DHCR, the landlord sent Dworman a second ICF. Once again, Dworman timely responded, stating that neither she nor her husband had sufficient income in the relevant tax years (1994 and 1995) to file an income tax return. In a petition received by DHCR on June 13, 1996, the landlord once again contested Dworman's certification. On August 13, 1996, DHCR sent Dworman notice of the petition and a request for verification. At that time, however, Dworman and her husband were vacationing in Europe, and they did not return until on or about October 1, 1996. Dworman sent the verification form back to DHCR on October 23, 1996-71 days after the notice had been sent—again affirming that she had no taxable income for 1994 or 1995. Dworman alleges that she returned the form immediately after discovering it among three months of accumulated mail, which the doorman had collected for her while she was in Europe.

On November 1, 1996, DHCR entered an order dismissing the landlord's 1995 petition. The order bore the docket number assigned to the 1995 petition (ZJF-410691-LD), but did not otherwise state that it related to the 1995 petition, rather than the 1996 petition, also pending at that time. One week later, on November 8, 1996, DHCR sent Dworman a letter requesting "proof of timely filing" of her answer to the 1996 petition. Like the November 1 order, however, the November 8 letter did not specify which petition it concerned, although it bore the docket number of the 1996 petition (KF-410275-LD). Confused about which petition the November 8 letter concerned, Dworman on November 11 responded that she did not understand the November 8 letter because the petition had just been dismissed. On January 6, 1997, DHCR sent Dworman a "final request" for additional information, explaining that the November 1, 1996 dismissal order applied to the 1995 petition. Dworman promptly responded that her financial condition had not changed since the previous year and that she and her husband had no income aside from Social Security. On February 27, 1997, the Rent Administrator issued an order of deregulation, stating that Dworman "did not answer the owner's petition or has failed to provide certain information required to verify household income."

Dworman filed a Petition for Administrative Review (PAR), which DHCR denied on October 23, 1997. The Division ruled that the Act required Dworman to respond to its notice within 60 days, that this limit was "statutory in nature" (emphasis in original), and that it was "outside the discretion and purview of DHCR to change this statutory time-limit." Thus, the Division concluded, because Dworman did not respond to its August 13, 1996 notice until October 23, 1996-71 days later—her response was untimely, and the Division was required to issue an order of deregulation.

Dworman then filed the instant CPLR article 78 petition, which Supreme Court dismissed, noting that Dworman had responded to DHCR's petition "eleven days late." The Appellate Division reversed, holding that DHCR's ruling was arbitrary and capricious because Dworman had responded to the notice "a mere 11 days late but months before DHCR's determination," Dworman's income had been "verified as being below the statutory threshold," and "the landlord and DHCR suffered no prejudice from the brief delay." The Appellate Division remanded the case to DHCR for a "determination on the merits" (261 AD2d 139, 140). We granted DHCR leave to appeal.

Sudarsky v DHCR

On April 19, 1994, Peter Sudarsky's landlord sent him an ICF, advising him that he was required to return the completed form within 30 days of service. On June 9, 1994, the landlord filed a petition for deregulation with DHCR, stating that Sudarsky had failed to return the ICF. The Division sent Sudarsky a notice on August 4, 1994, informing him of the petition and stating that he was required to provide income verification information within 60 days. On January 31, 1995, the Rent Administrator issued an order of deregulation, on the grounds that Sudarsky "did not answer" the petition and "failed to provide income verification information."

Sudarsky filed a PAR on February 21, 1995, alleging that he had sent the income verification information to DHCR "several weeks ago," and that he and his wife had a combined income of "about $20,000." The landlord opposed the PAR, arguing that Sudarsky had defaulted by not timely supplying the information. In response, Sudarsky stated that he had returned the ICF to the landlord with a rent payment in May 1994...