Recitation, as required by C.P.L.R. §2219(a), of the papers considered in review of this motion.Papers NumberedNotice of Motion and Affidavits Annexed 1Notice of Cross-Motion, Affidavits Annexed, and Memo of Law 2Resp Replying Affidavits 3-4Pet Replying Affidavits 5-6Pet Replying Memo of Law 7DECISION/ORDER Upon the foregoing cited papers, the decision and order on this motion are as follows:This is a holdover summary eviction proceeding premised on the termination of Respondent’s tenancy, which Petitioner alleges is exempt from rent stabilization by virtue of substantial rehabilitation of the building on or after January 1, 1974. Both Petitioner and Respondent have moved for summary judgment. The motions are consolidated herein for disposition.Petitioner obtained title to the building on April 3, 1972. At the time, the building comprised eight “class A” apartments and two furnished rooming units and was largely vacant. An application for alteration was filed with the Department of Buildings in May 1972, with an amended application filed shortly thereafter. A permit for the alteration was issued in June 1973. Over the next year various work was done in the building, including a reconfiguration such that after completion the building had only eight “class A” apartments and no rooming units. A new certificate of occupancy was issued May 8, 1974. The question before the court is whether, as a matter of law, Petitioner undertook such work so as to qualify the building for an exemption from rent stabilization based on substantial rehabilitation, or whether there is a factual dispute as to this work so as to require a trial.The Emergency Tenant Protection Act of 1974, while subjecting anew to rent stabilization those housing accommodations that had been exempted by the 1971 Vacancy Decontrol Act, exempted from rent stabilization those accommodations “in buildings completed or buildings substantially rehabilitated as family units on or after January first, nineteen hundred seventy-four.” The Act was signed into law on May 29, 1974. The initial version of the Act was proposed by Governor Malcolm Wilson on April 30, 1974 (Linda Greenhouse, Governor’s Rent Measure Seeks Replacement of Vacancy Decontrol Act, NY Times, May 1, 1974 at 21, col 1).1The criteria for finding that a building has been substantially rehabilitated is set forth in DHCR Operational Bulletin 95-2, which was issued after the decision of the Appellate Division, First Department, in Matter of Eastern Pork Prods. Co. v. New York State Div. of Hous. & Community Renewal (187 AD2d 320, 323 [1st Dept 1992]) (see H.M. Village Realty v. New York State Div. of Hous. & Community Renewal, 304 AD2d 346, 347 [1st Dept 2003]). The operational bulletin “conforms with the guideline regarding substantial rehabilitation of a building set by” the Appellate Division in Matter of Eastern Pork and the criteria therein has been recognized as valid by that court (id.).Specifically, the operation bulletin requires a two-part showing. First, the rehabilitation must have taken place in a building that was in a “substandard or seriously deteriorated condition.” There is a presumption that the building was in such a condition if it was 80 percent vacant of residential tenants when the rehabilitation commenced. Second, the rehabilitation must comprise complete replacement of 75 percent of specified building-wide and apartment “systems” (except for the system of the building’s exterior, for which the owner may do “pointing or exterior surface repair as needed”); replacement of all common area ceilings, flooring, and plasterboard or wall surfaces; and either replacement or the making as new of the ceilings, walls, and floor surfaces in the apartments. Certain “limited” exceptions may be made where, prior to the substantial rehabilitation, a system has recently been replaced or upgraded, or for historical or aesthetic merit.Before reaching the extent of the renovation that took place in the building, Petitioner and Respondent both make threshold arguments. Petitioner argues that, because the operational bulletin was not issued until two decades after the building renovation took place, it should not be required to meet the requirements of the operational bulletin to obtain a determination that the building has been substantially rehabilitated. Respondent argues that because some amount of the renovation took place prior to January 1, 1974, the building does not qualify for an exemption no matter whether Petitioner ultimately met the criteria in the operational bulletin. The court is no persuaded by either argument.With respect to Petitioner’s argument that the operational bulletin should not apply to an alleged rehabilitation that occurred prior to its issuance, the Appellate Division, First Department, in Matter of Woodcrest Mgt. Corp. v. New York State Div. of Hous. & Community Renewal (2 AD3d 172 [1st Dept 2003]), has already considered and rejected it (“[w]e reject petitioner’s argument that it was arbitrary of DHCR to apply a 1995 standard of proof to an alteration that was done in 1983 at a time when there were no published standards or guidelines concerning substantial rehabilitation”). And contrary to what Petitioner suggests, the allowance for “hardship” contained in the operational bulletin explicitly pertains to the documentation that may be required to prove compliance with the criteria for exemption, not to the criteria itself.With respect to Respondent’s argument, it is useful to consider the other basis for exemption as to the date of January 1, 1974: that a building completed “on or after” January 1, 1974 is exempt from regulation. Construction of a residential building takes months, if not longer, to be constructed. While the time frame may differ depending on the size of the building and other factors, no building can be completed in a single day. Accordingly, by exempting buildings “completed on” January 1, 1974, the statute clearly contemplates the actual construction of the building having taken place in the months (and even years) prior to that date. The same exact language applies to the exemption for substantial rehabilitation, and there is no basis for drawing a different conclusion for that exemption. Just as construction of an exempt building may occur during the months and years prior to January 1, 1974, some of the “substantial rehabilitation” of a building may take place prior to that date, so long as the rehabilitation is not completed until that date or after.The operation bulletin lists seventeen building-wide and apartment systems. Of these seventeen systems, the parties agree that the building contained only thirteen of them prior to the renovation. Petitioner must therefore have replaced ten of the systems (13 x .75 = 9.75).Petitioner alleges complete replacement of the plumbing, gas supply, electrical wiring, roof, kitchens, bathrooms, and pointing and new brickwork on the building exteriors (seven systems).2 With respect to the remaining six systems, Petitioner does not allege complete replacement. Instead, as to the heating system, the boiler was not replaced but “upgraded” and “made as new.” Although some windows were replaced, others were repaired and made as new Interior stairways were not replaced but instead were upgraded to be made structurally sound and as new. The floors in the common area were made as new, not replaced. The ceilings and wall surfaces in the apartments were “either replaced and/or made as new.”3 All but two apartment entrance doors and door frames were replaced with fireproof self-closing doors, except for the doors to apartments numbered five and six, whose doors were kept for “aesthetic merit.”The exemption from rent stabilization based on substantial rehabilitation is to be “strictly construed” (Cassorla v. Foster, 2 Misc 3d 65 [App Term, 1st Dept 2004], citing Pape v. Doar, 160 AD2d 213, 215 [1st Dept 1990]). Assuming for the sake of argument that there is no factual question as to the seven systems for which Petitioner alleges complete replacement, Petitioner’s admitted failure to replace four of the remaining six systems4 (the boiler, stairways, the common area floors, and all ceiling and wall surfaces in the apartments) makes it impossible for Petitioner to demonstrate that it has met the criteria of the operational bulletin.Nor is Petitioner saved by the operational bulletin’s allowance for “limited exceptions” on a “case-by-case basis” for “good cause shown.” The operational bulletin may permit an accommodation where “the owner demonstrates that a particular component of the building or system has recently been installed or upgraded so that it is structurally sound and does not require replacement,” that is not the case here. Petitioner does not allege that the its upgrades to, for example, the boiler and stairways were made prior to the renovation, but that they were made as part of the renovation instead of replacement. The operational bulletin does not provide for an exception to replacement on that basis.Accordingly, Petitioner is not entitled to an exemption from rent stabilization for the subject apartment and Respondent’s tenancy is rent-stabilized.With respect to Respondent’s counterclaim for rent overcharge, based on the court’s decision with respect to the rent-stabilized status of Respondent’s tenancy, if Respondent paid rent above the amount at which the rent should be set, he would be entitled to judgment on his counterclaim (see Butterworth v. 281 St. Nicholas Partners, LLC, 2018 NY Slip Op 02395 [1st Dept 2018] [affirming judgment for rent overcharge and setting of rent at the last registered rent, which was more than four years prior to the date of the complaint]). However, upon a review of the record, Respondent did not establish that he paid rent above the amount at which the rent should be set. Although there are what appear to be copies of backs and fronts of checks payable to Petitioner by Respondent, no foundation is laid for their admissibility nor are they otherwise addressed or described in Respondent’s motion.Accordingly, as Respondent’s tenancy is subject to rent stabilization and the petition fails to plead a ground for eviction under the Rent Stabilization Code, Respondent is awarded summary judgment dismissing the petition. The proceeding is restored to the calendar for a settlement conference on May 10, 2018, 9:30 AM, at which time the parties shall confer on a date for trial on Respondent’s counterclaims if they cannot otherwise be settled. In this procedural posture, although Respondent is the prevailing party because of the court’s decision herein, a hearing on the amount of reasonable attorney’s fees to be recovered would be premature.Petitioner’s cross-motion is denied.Dated: April 19, 2018
