Scott E. Mollen

Landlord-Tenant—Rent Overcharge Complaint Denied By DHCR—Article 78 Proceeding Dismissed—Apartment Had Been De-Stabilized Based on Individual Apartment Renovations—Work was Performed and Paid For—Rent Stabilization Code Does Not Require that Landlords Applying for IAI Increases Use Licensed Contractors and Obtain Required Permits—DHCR Had Discretion to Apply a Bulletin Retroactively

A petitioner tenant commenced an Article 78 proceeding, seeking to overturn an order of the New York State Division of Housing and Community Renewal (DHCR) as arbitrary and capricious. The petition was denied and the proceeding dismissed.

The tenant initially occupied the subject apartment pursuant to a non-rent stabilized lease. He thereafter researched the apartment's rent history and concluded that the apartment was “actually a rent-stabilized unit that the landlord had illicitly deregulated.” The landlord thereafter refused to offer the tenant a renewal lease. The tenant then filed a rent overcharge complaint (complaint) and continued to occupy the apartment as a month-to-month tenant. The lease had expired on May 31, 2011. DHCR denied the complaint.

DHCR had explained that where the apartment's “legal regulated rent is $2,000 per month (or greater) at the time of the vacancy which precedes a complaining tenant's occupancy, that apartment is no longer rent-stabilized.” The landlord argued that it was entitled to raise the rent above the $2,000 limit by adding a permanent “Individual Apartment Improvement (IAI) rent increase equal to 1/40 of the $55,000 total that it had expended to renovate the unit,” before the tenant's lease commenced.

With respect to the landlord's proof as to the cost of renovations, DHCR noted that the “owner gave adequate proof of the installation and costs of over $55,000 in IAI's in the…apartment prior to the…tenant's occupancy. The owner submitted…[copies of four sets of invoices from, and cancelled checks to, a contractor and three suppliers]. …contrary to the tenant's allegation that there was only some new paint and a few new appliances in the apartment when he moved in, the architect acting as the tenant's expert testified that the 'renovations that he observed would have required DOB [New York City Department of Buildings] filings including… a DOB alteration application, a plumbing filing and an electrical filing.'”

DHCR further stated that the “[s]ubmission of itemized invoices, and of proof of payment for those invoices for items and work done in…apartment prior to the…tenant's taking possession of the apartment, was sufficient evidence pursuant to OB 2016-1 to show that the IAI's referenced by such invoices were in fact performed and paid for. The owner has…proven that the IAI's were performed in the…apartment, prior to the…tenant's tenancy, at a cost of more than $55,000.”

DHCR further reasoned that the “fact that some of the…checks are not signed, and/or state that they are non-negotiable, does not render them unreliable. The important fact…is that each of the above-referenced checks was in fact deposited by the payee, as shown by the owner's evidence. This is sufficient to show that payments were in fact made by the owner, and received by the contractors/vendors—payees.”

DHCR asserted that the salient issue was whether the IAI's were in fact performed and paid for and that “issues of whether the parties who performed the IAI's were properly licensed and whether the owner obtained necessary permits to perform such IAI's, are not relevant to whether the IAI's were performed or paid for. The owner's alleged failure to hire licensed professionals, and/or to obtain relevant permits and permissions, should be addressed to the authorities overseeing these matters.”

DHCR operation bulletin 2016-1 provides, with respect to proof of payment for IAI improvements should include:

Operational Bulletin 2016-1 provides, in pertinent part, as follows:

PROOF OF PAYMENT Acceptable forms of proof

Claimed [IAIs] are required to be supported by adequate and specific documentation, which should include:

1. Cancelled check(s) (front and back) contemporaneous with the completion of the work or proof of electronic payment; 2. Invoice receipt marked paid in full contemporaneous with the completion of the work; 3. Signed contract agreement; and 4. Contractor's affidavit indicating that the installation was completed and paid in full.

This documentation requirement calls for a higher standard of proof than found in policy statement 90-10 which provided that only one of the above forms of proof was necessary unless the DHCR requested additional proof. However, actual processing has shown that more than one type of proof is the norm rather than the exception. Therefore, the owner should submit as many of the four listed forms of proof as the owner is able to provide with the initial submission/answer.

The court further noted that qualified costs for an IAI improvement include costs related to “the demolition or removal of the items being replaced” when “the removal or demolition is necessary and is performed contemporaneous with the work.” Further, “[a]rchitectural or engineering services which are directly related to an IAI are considered part of the allowable costs eligible to be included in calculating a rent increase when the work requires approval by a registered architect or a professional engineer for the issuance of a permit by the DOB.”

The DOB had issued Operational Bulletin 2016-1 as an update to its prior “Policy Statement 90-10.” The tenant argued that DHCR was required to determine the tenant's complaint “under the laws existing at the time of the determination and not at the time the complaint is filed.” An Appellate Division, First Department decision held that DHCR had the “option of choosing retroactive application of the less stringent requirements of the earlier rule, if it had seen fit… but was not obliged to do so.”

The tenant had cited an Appellate Division, Second Department decision for the principle that the law at the time the complaint was filed must be applied. This case was within the First Department and thus, the court held that DHCR had the discretion to apply the revised operational bulletin. However, the tenant had argued in the alternative, that it did not matter which bulletin applied, since the owner had not submitted “any” of the “acceptable forms of proof.”

The court found that the record “contains copies of the invoices and cancelled checks from the landlord's contractor and vendors.” The landlord had supported its IAI application “with several of the regulation-approved forms of proof of payment (since several of the invoices appear to take the form of 'paid in full' contracts).” Thus, the court held that the DHCR had a rational basis for its determination. The court emphasized that the record included “as many of the four listed forms of proof as the owner is able to provide,” which satisfied both of the aforementioned DHCR Bulletins.

The tenant did not cite case law to support its argument that the landlord's IAIs required “licensed contractors and permits.” DHCR contended that the Rent Stabilization Code (RSC) “does not require landlord applying for an IAI increase to demonstrate that it used licensed contractors to perform the work.”

The tenant had cited RSC § 2522.4(a)(15) which referred to permits and licensed architects and engineers. However, that code provision only applies where “[t]enants interpose answers complaining of defective operation of the major capital improvement (MCI).” Here the landlord had applied for an IAI rent increase, not an MCI increase and there was no allegation that the IAI work was “defective.” The tenant argued that the landlord had not done the work. The tenant had not specified which items of work required a “municipal sign-off.” The court held that RSC § 2522.4(a)(15) was inapplicable and that the tenant's reference to a certain provision of Operational Bulletin 2016-1 was irrelevant since that provision involved architectural or engineering work which had not been included in the IAI application.

Accordingly, the court dismissed the Article 78 petition.

Kostro v. NYS Div. of Housing and Cmty. Renewal, Supreme Court, New York Co., Case No. 158174/18, decided March 7, 2019, Edmead, J.

Landlord-Tenant—Disabled Person Who Occupied an Apartment for More Than 30 Years Awarded Succession Rights—Mother Had Attempted to Add Child's Name to the Lease and Have Lease Issued to the Child

A disabled occupant appealed from a judgment of the New York City Civil Court, which, following a non-jury trial, awarded the landlord possession of the rent stabilized apartment.

The occupant had moved into the apartment in 1985, at the age of 15, with his mother (tenant). He lived in the apartment since 1985 and was “declared to be occupant of the apartment on all available lease renewal documents executed by his mother.” The court found that the landlord had been on notice of the child's occupancy for many years, especially since the mother had made “multiple requests…to add her son to the lease.”

The tenant had stopped residing in the apartment in 2003, but had continued to sign renewal leases and pay rent. The court found that the occupant had resided in the apartment “for some 30 years with knowledge of landlord, including the requisite period prior to the permanent vacatur of his mother” and therefore, the occupant was entitled to succession rights.

Unlike a prior case cited by the landlord, the subject landlord knew of the child's occupancy and had not been prejudiced in any way. Since the occupant “would have been entitled to succession if he had sought it immediately after his mother moved, and neither tenant nor (occupant) had anything to gain by representing that tenant was still residing there.” Additionally, the tenant's “continued visits to the apartment and payment of rent are consistent with her son's fragile health and inability to work, and her own new residence just blocks away.”

The court reasoned that “[p]roper application of the broad remedial purpose of the rent stabilization succession rule (RSC) § 2523.5(b)(1)…cannot require the eviction of a disabled individual from his home of 33 years, because of the actions of his mother who attempted for years to secure succession rights for her vulnerable son, but was unable to navigate the 'impenetrable thicket [of the rent laws], [which are] confusing not only to lay [persons] but to lawyers…, particularly given the absence of any demonstrable prejudice to the landlord….”

BPP ST Owner LLC v Nichols, Appellate Term, 1st Dept., Case No. 570021/18, decided March 7, 2019, Shulman, P.J., Gonzalez, Cooper, JJ.

Landlord-Tenant—Nuisance Claim Dismissed—One Incident, if Extremely Serious, Could Constitute a Nuisance—Here, the One Incident Did Not Constitute a Nuisance

A landlord commenced a summary holdover proceeding, alleging that a tenant was committing a “nuisance.” The premises are subject to the Rent Stabilization Law. The tenant had moved to dismiss the petition for failure to state a cause of action.

The court explained:

[u]nder the RSC, a landlord may evict a tenant who: is committing or permitting a nuisance in such housing accommodation or the building containing such housing accommodation; or is maliciously, or by reason of gross negligence, substantially damaging the housing accommodation; or the tenant engages in a persistent and continuing course of conduct evidencing an unwarrantable, unreasonable or unlawful use of the property to the annoyance, inconvenience, discomfort or damage of others, the primary purpose of which is intended to harass the owner or other tenants or occupants of the same or an adjacent building or structure by interfering substantially with their comfort or safety. RSC §2524.3(b). A nuisance is a use of property that interferes with another's use and enjoyment of the land… The phrase “use and enjoyment” entails the pleasure and comfort derived from occupying land free from annoyance. (Id.) Not every annoyance or interference constitutes a nuisance…, nor are “things merely disagreeable, which simply displease the eye, or offend the taste, or shock an oversensitive or fastidious nature, no matter how irritating or unpleasant.”… Rather, the condition must threaten the comfort and safety of others on the premises,… and be continuous or recurring…. There is no general rule regarding what conditions constitute a nuisance; each alleged annoyance must be examined on its own set of facts…. Also, a nuisance is a “continuous invasion of rights—a patter of continuity or recurrence of objectionable conduct.”

The court found that the subject predicate notice failed to allege a nuisance. It stated:

1. You were arrested on January 26, 2018 at 3:45pm in the…building. You were charged with Violation of 1) PL 120.00 01 MA: Assault with intent to cause Physical Injury and 2) PL 240.26 01 V: Harassment in the 2^nd degree: Physical Contact. 2. Other residents consider you a threatening presence in the…building. 3. Management has received numerous complaints regarding your behavior from other residents in the…building. 4. These incidents adversely effect the quality of life in the…building. 5. The HAP contract allows for the termination of the tenancy if you are charged with a crime. Your lease may be terminated regardless of whether or not you have been convicted of the crime.

The court explained that items 2, 4, and 5 in the predicate notice were “not facts supporting an allegation of nuisance.” Rather, they are “opinion statements or conclusions of law that do not provide respondent with any fact that would provide respondent with notice of the allegations against her.” Moreover, item 3 was a “generic statement that petitioner has received complaints regarding respondent's behavior from other residents of the building.” That item did not include “any names, dates, times or details of the nature or severity of the behavior that petitioner is alleging.”

Thus, the predicate notice embodied “one specific incident where respondent was arrested at the premises.” That item did not disclose “whether the behavior that resulted in respondent's arrest was directed at another resident of the building or building's employees.” The court held that the allegations failed to “establish the 'pattern of continuity or recurrence of objectionable conduct'” that is required by decisional precedent.

The landlord argued “one dangerous act is enough to substantiate a claim of nuisance.” The landlord cited a case involving a “single incident of a shooting in an apartment” and asserted that courts must “weigh both the quantitative and qualitative aspects of the alleged conduct in determining where the petitioner has stated cause of action for nuisance.”

The court reasoned that such judicial precedent was “not remotely similar” to the subject incident. Here, the criminal charges involved a misdemeanor and a violation of the penal code. The court reasoned that “assuming arguendo that one incident could rise to the level of a nuisance, petitioner has failed to establish such grounds here.” Accordingly, the court dismissed the petition.

711 Seagirt Ave. Holdings v. Harris, Civil Court, Queens Co., Case No. 60144/18, decided March 6, 2019, Kullas, J.

Scott E. Mollen is a partner at Herrick, Feinstein.