Sandlow v. 305 Riverside Corp.
Decision Date | 15 May 2020 |
Docket Number | 106025/2011 |
Citation | 131 N.Y.S.3d 783,69 Misc.3d 893 |
Parties | Thomas SANDLOW, Plaintiff, v. 305 RIVERSIDE CORP. a/k/a 305 Riverside Dr. Corporation, Defendant. |
Court | New York Supreme Court |
For Plaintiff, Robert E. Sokolski Esq. and Daphna Zekaria Esq., Sokolski & Zekaria, P.C., 305 Broadway, New York, NY 10007
For Defendant, Niles C. Welikson Esq., Horing Welikson Rosen & Digrugilliers, P.C., 11 Hillside Avenue, Williston Park, NY 11596
Plaintiff is the tenant of apartment 7A in a multiple dwelling at 305 Riverside Drive, New York County, owned by defendant. Plaintiff commenced this residential rent overcharge action against defendant May 20, 2011, claiming that apartment 7A has been rent stabilized since before plaintiff's tenancy began February 1, 2005, but defendant unlawfully removed the apartment from coverage under the New York Rent Stabilization Law (RSL), resulting in a rent overcharge since then.
Plaintiff bases his claim in part on Roberts v. Tishman Speyer Props., L.P. , 13 N.Y.3d 270, 890 N.Y.S.2d 388, 918 N.E.2d 900 (2009), which ruled that apartments in buildings that participated in the "J-51" real estate tax abatement program, N.Y.C. Admin. Code § 11-243 (formerly § J51-2.5), must be treated as rent stabilized for as long as the buildings received the tax abatement. The ruling prohibited landlords, while their buildings were participating in the J-51 program, from using the RSL's procedure to remove apartments' rent stabilized status when the rent reached $2,000.00 per month, whether or not the apartments were rent stabilized before entry into the program. Roberts v. Tishman Speyer Props., L.P. , 13 N.Y.3d at 286-87, 890 N.Y.S.2d 388, 918 N.E.2d 900. The ruling thus invalidated a New York State Division of Housing and Community Renewal (DHCR) opinion that had permitted that practice for those previously rent stabilized apartments. Id. at 287, 890 N.Y.S.2d 388, 918 N.E.2d 900. Plaintiff claims that defendant, while receiving a J-51 tax exemption for 305 Riverside Drive from 1999 to 2009, treated apartment 7A as deregulated.
In a decision dated March 26, 2012, the court (Kenney, J.) granted partial summary judgment declaring that apartment 7A was rent stabilized, based on defendant's admission that the apartment was rent stabilized. See Tr. of Proceedings at 7 (Jan. 30, 2019). The court denied the balance of the parties' motions for summary judgment, however, concluding that all the other "causes of action are based on what would be the lawful rent for the unit and what, if any, increases from that amount are permissible under rent regulation law," and "neither party has presented sufficient evidence for the court to make that determination." Sandlow v. 305 Riverside Corp. , Index No. 106025/2011, 2020 WL 3255140, at *1 (Mar. 26, 2012). Both before and since the court's March 2012 decision, defendant has never disputed apartment 7A's rent stabilized status.
After the parties proceeded through disclosure and a nonjury trial, on June 14, 2019, the New York Legislature enacted the Housing Stability and Tenant Protection Act (HSTPA), "making sweeping changes" to the RSL's rent overcharge provisions. Dugan v. London Terrace Gardens , 177 A.D.3d 1, 8, 110 N.Y.S.3d 3 (1st Dep't 2019). After closing arguments, but before the court rendered its decision after the trial, the court afforded the parties the opportunity to argue the HSTPA's effect on this action.
Part F of the HSTPA amended the RSL, N.Y.C. Admin. Code § 26-516, and C.P.L.R. § 213-a, which govern claims for rent overcharges and the statute of limitations for those claims. Although the legislation directed that the statutory amendments in Part F of the HSTPA "shall take effect immediately and shall apply to any claims pending or filed on or after such date," Regina Metro. Co., LLC v. New York State Div. of Hous. & Community Renewal , 35 N.Y.3d 332, 364, 130 N.Y.S.3d 759, 775, 154 N.E.3d 972, 988, op. at 24 (Apr. 2, 2020), and plaintiff's overcharge claim was pending on the effective date of Part F, Regina Metro. Co., LLC v. New York State Div. of Hous. & Community Renewal , 35 N.Y.3d 332, 386, 130 N.Y.S.3d 759, 791, 154 N.E.3d 972, 1003, op. at 54, held that applying Part F's amendments retroactively to plaintiff's claim would violate substantive due process. Therefore the HSTPA does not affect the final determination of this action. Instead, the pre-amendment version of the RSL's rent overcharge statute, N.Y.C. Admin. Code § 26-516, and the decisions that interpreted it control the outcome. No damages for an overcharge may be awarded beginning more than four years, and no penalties for a willful overcharge beginning more than two years, before the action was commenced, rather than the six years permitted by the newly enacted C.P.L.R. § 213-a and the amended RSL, N.Y.C. Admin. Code § 26-516(a)(2). See Dugan v. London Terrace Gardens , 177 A.D.3d at 8, 110 N.Y.S.3d 3.
To determine whether defendant overcharged rent under the law applicable to this action, the court first must determine the legal regulated rent, defined as the rent charged on the base date plus any subsequent lawful increases and adjustments. 9 N.Y.C.R.R. §§ 2520.6(e), 2526.1(a)(3)(i). The base date is May 20, 2007, the date four years before plaintiff's overcharge complaint. 9 N.Y.C.R.R. § 2520.6(f) ; Gordon v. 305 Riverside Corp. , 93 A.D.3d 590, 592, 941 N.Y.S.2d 93 (1st Dep't 2012).
C.P.L.R. § 213-a and the RSL, N.Y.C. Admin. Code § 26-516(a), in effect until June 2019 and the Rent Stabilization Code (RSC), 9 N.Y.C.R.R. § 2526.1(a)(2), all expressly provided that no determination, calculation, or award of any overcharge may be based on an overcharge more than four years before commencement of the overcharge action. Both the prior C.P.L.R. § 213-a and the RSC, 9 N.Y.C.R.R. § 2526.1(a)(2)(ii), also precluded examination of the rental history of an apartment more than four years before commencement of the overcharge action. The intent behind the limitation of four years was to "alleviate the burden on honest landlords to retain rent records indefinitely, not immunize dishonest ones from compliance with the law." Thornton v. Baron , 5 N.Y.3d 175, 181, 800 N.Y.S.2d 118, 833 N.E.2d 261 (2005).
The RSC was amended in 2014 to add exceptions to this limitation on examination of rental history that the Court of Appeals had carved out, including to determine whether an owner engaged in a fraudulent scheme to destabilize an apartment. 9 N.Y.C.R.R. § 2526.1(a)(2)(iii) ; Conason v. Megan Holding, LLC , 25 N.Y.3d 1, 16, 6 N.Y.S.3d 206, 29 N.E.3d 215 (2015) ; Grimm v. State of NY Div. of Hous. & Community Renewal Off. of Rent Admin. , 15 N.Y.3d 358, 366, 912 N.Y.S.2d 491, 938 N.E.2d 924 (2010). To justify examining an apartment's rental history more than four years retroactively, plaintiff must make more than "a mere allegation of fraud alone" against defendant, as such a claim, "without more, will not be sufficient" for the court to inquire further. Conason v. Megan Holding, LLC , 25 N.Y.3d at 16, 6 N.Y.S.3d 206, 29 N.E.3d 215 ; Grimm v. State of NY Div. of Hous. & Community Renewal Off. of Rent Admin. , 15 N.Y.3d at 367, 912 N.Y.S.2d 491, 938 N.E.2d 924.
Only actual evidence of fraud will warrant examination of apartment 7A's rental history beyond four years before plaintiff's overcharge complaint May 20, 2011. Therefore the threshold question is whether, based on the evidence adduced at trial, defendant's conduct reveals sufficient evidence of fraud. 9 N.Y.C.R.R. § 2526.1(a)(2)(iv) ; 333 E. 49th Partnership, LP v. New York State Div. of Hous. & Community Renewal , 165 A.D.3d 93, 106, 83 N.Y.S.3d 461 (1st Dep't 2018).
Grimm v. State of NY Div. of Hous. & Community Renewal Off. of Rent Admin. , 15 N.Y.3d at 366-67, 912 N.Y.S.2d 491, 938 N.E.2d 924, delineates three categories of factors that in combination warrant the court's review of an apartment's rental history beyond the statutory period of four years. (1) The landlord violated the RSL and RSC in addition to charging an illegal rent. (2) The evidence indicates a fraudulent scheme to remove the apartment from rent regulation. (3) The rent registration history is inconsistent with the lease history. The evidence at trial demonstrates all these factors. As set forth below, defendant's failure to register rents for apartment 7A, failure to provide rent stabilization riders to leases, and setting of rents in derogation of the J-51 tax abatement requirement to treat the apartment as rent stabilized throughout the abatement, 1999-2009, Roberts v. Tishman Speyer Props., L.P. , 13 N.Y.3d at 286-87, 890 N.Y.S.2d 388, 918 N.E.2d 900, together warrant examination of apartment 7A's rental history before May 20, 2007.
Defendant's officer Richard Eisenberg testified that defendant received a J-51 real estate tax abatement from June 1999 to June 2009. Tr. at 48-50 (Apr. 8, 2019). As set forth above, Roberts v. Tishman Speyer Props., L.P. , 13 N.Y.3d at 286-87, 890 N.Y.S.2d 388, 918 N.E.2d 900, held that apartments in buildings that received J-51 real estate tax abatements are rent stabilized for as long as the buildings continue to receive those benefits. Thus, by law, apartment 7A was rent stabilized May 20, 2007, four years before plaintiff filed his rent overcharge action.
Defendant insists that, while a building may be rent stabilized by virtue of the Roberts holding, an already deregulated apartment in the building would not necessarily regain rent stabilization. Tr. at 6, 8-11 (June 17, 2019); tr. at 14 (Nov. 21, 2019). None of defendant's witnesses, however, testified to any such rationale for failing to treat apartment 7A as rent stabilized during the 1999-2009 period when 305 Riverside Drive received J-51 tax benefits. Only when plaintiff filed his complaint in 2011 did defendant attempt to cover its tracks...
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