Recitation, as required by CPLR §2219(a), of the papers considered in the review of Respondent Asia Williams’ motion for discovery pursuant to CPLR §408: Papers Numbered Notice of Motion & Affirmation/Exhibits Annexed 1 Affirmation in Opposition & Exhibit Annexed 2 Reply Affirmation & Exhibits Annexed 3 Upon the foregoing cited papers, the decision and order on Respondent’s motion for discovery is as follows: PROCEDURAL HISTORY In this nonpayment proceeding, the Petition alleges that the subject apartment, located at 94-25 57th Avenue, Apt No.5X, Elmhurst, New York 11373, is subject to the Rent Stabilization Law (RSL) of 1969, as amended, and that the rent does not exceed the legal regulated rent determined in compliance with the RSL. Initially, Petitioner moved by order to show cause to amend the body of the Petition to include Charles Whitfield and for a default judgment. On the return date of the order to show cause, June 4, 2019, Respondents Asia Williams and Charles Whitfield appeared pro se and entered into a stipulation of settlement with Petitioner, who was represented by counsel. According to the terms of the June 4th stipulation, the body of the Petition was amended to include Charles Whitfield, nunc pro tunc. In addition, Respondents agreed to a judgment in the amount of $5,700.00, all rent due at the time following a $1,700.00 payment in court, and issuance of a warrant of eviction. In July 2019, after receiving a marshal’s notice of eviction, Charles Whitfield filed an Order to Show Cause seeking additional time to pay the rents due. On the return date of the Order to Show Cause, the Court granted it to the extent of staying execution of the warrant for payments on July 30th, August 15th, and August 30th. Thereafter, on August 12, 2019, Respondent Asia Williams, through counsel (Queens Legal Services, appearing through the Universal Access to Counsel program), filed an order to show cause to vacate the June 4, 2019 stipulation, to vacate the judgment and warrant, and to interpose an answer (which includes a rent overcharge defense). After the order to show cause was fully briefed and argued, the Court rendered a Decision/Order on November 1, 2019, which granted the order to show cause to the extent of vacating the June 4, 2019 stipulation, vacating the judgment and warrant, and permitting interposition of the answer. The proceeding was restored to the Part A calendar on December 3, 2019. Prior to this date, Ms. Williams, through counsel, moved for discovery. On December 3rd, the parties executed a stipulation whereby Ms. Williams agreed to vacate the premises by December 6, 2019 and the matter was adjourned to January 15, 2020 for service of opposition to the motion for discovery and reply. On January 15, 2020, the Court heard argument on the motion for discovery and reserved decision. ANALYSIS Under CPLR §408 (which applies to special proceedings), “leave of court shall be required for disclosure except for a [notice to admit].” The standard that has developed for obtaining leave of court is “ample need,” which is predicated on the demonstration of the six factors first set out in New York University v. Farkas, 121 Misc 2d 643, 468 N.Y.S.2d 808 (Civ. Ct. NY County 1983). The factors are as follows: (1) whether the party seeking discovery has asserted facts to establish a cause of action; (2) whether there is a need to determine information directly related to the cause of action; (3) whether the requested disclosure is carefully tailored and is likely to clarify the disputed facts; (4) whether prejudice will result from the granting of an application for disclosure; (5) whether the prejudice can be diminished or alleviated by an order fashioned by the court for this purpose; and (6) whether the court, in its supervisory role can structure discovery so that pro se tenants, in particular, will be protected and not adversely affected by discovery requests. Farkas, 121 Misc 2d at 647, 468 N.Y.S.2d at 811-812. Respondent’s motion seeks production of documents grouped into two categories. The documents are sought in connection with her overcharge defense. The first category calls for “[a]ll leases and lease riders, annual rent registrations, and rent breakdowns for the subject apartment for the years 2011 to present, including a complete copy of the prior tenant’s leases and documents executed in connection therewith.” According to Respondent’s motion, the need for documents dating to 2011 is justified because of alleged inconsistencies in the DCHR rent registration history for the subject premises. Specifically, multiple tenants, with varying rents, are registered for lease periods spanning from 2011 through 2013. Carmen Colmenares is registered with a legal rent of $886.47 for a lease term of January 1, 2011 through December 31, 2012. Natalia Moreno and Socorro Barona are then registered with a legal rent of $1,100.00 and a preferential rent of $100.00 for a lease term of January 1, 2011 through December 31, 2012; thereafter, Moreno and Barona are registered with a legal rent of $1,100.00 and a preferential rent of $1,000.00 for a lease term of October 1, 2011 through September 30, 2013. As this Court previously noted in its Decision/Order deciding Ms. Williams’ earlier order to show cause, the Housing Stability and Tenant Protection Act (HSTPA) of 2019 included an amendment of NYC Admin. Code §26-516(h), which requires that DHCR and the courts “consider all available rent history which is reasonably necessary to make such determinations [of overcharge and determination of legal regulated rents], including but not limited to: (i) any rent registration or other records filed with the state division of housing and community renewal, or any other state, municipal or federal agency, regardless of the date to which the information on such registration refers; (ii) any order issued by any state, municipal or federal agency; (iii) any records maintained by the owner or tenants; and (iv) any public record kept in the regular course of business by any state, municipal or federal agency.” This amendment was included in Part F of the HSTPA, which was to apply “to any claims pending or filed on or after” the effective date of the statute (June 14, 2019). See Laws 2019, ch 36 at Part F, §7. However, the Court of Appeals, in Matter of Regina Metro. Co., LLC v. New York State Div. of Hous. & Community Renewal, 2020 NY Slip Op 02127 (2020), recently held that retroactive application of the Part F overcharge provisions is unconstitutional (under the Due Process clauses of the US and New York constitutions).1 Since the overcharges that are alleged to have occurred between 2011 and 2013 are outside the 4-year statute of limitations2 that has been effectively reinstated as a result of the Matter of Regina Metro. Co., LLC decision, the Court must assess whether Respondent has asserted facts to establish a “fraudulent scheme to deregulate the apartment.” See Matter of Regina Metro. Co., LLC, 2020 NY Slip Op 02127, at *5; see also former Rent Stabilization Law (RSL) §26-516(a)(2); former CPLR §213-a; Conason v. Megan Holding, LLC, 25 NY3d 1 (2015); Matter of Grimm v. State of NY Div. of Hous. & Community Renewal Off. of Rent Admin., 15 NY3d 358 (2010). Respondent seeks discovery for the 2011-2013 period solely on the basis of irregularities in the DHCR rent registration history for the subject apartment. Respondent does not specifically allege that a fraudulent scheme to deregulate the apartment occurred. In Matter of Boyd v. New York State Div. of Hous. and Community Renewal, 23 NY3d 999, 1000-1001 (2014), the Court of Appeals reversed the Appellate Division, First Department, holding that “tenant failed to set forth sufficient indicia of fraud to warrant consideration of the rental history beyond the four-year statutory period” (citing Matter of Grimm, 15 NY3d 366-367). The Appellate Division decision in Matter of Boyd (110 AD3d 594 (1st Dep’t 2013)) noted that the rent increased from $572 to $1,750 in 2004, which would have required approximately $39,000 in individual apartment improvements (IAIs) to justify the increase; the tenant there specifically described the condition of the apartment when she moved in and the owner did not submit any evidence “rebutting petitioner’s claim that the IAIs were minimal and cost far less than claimed.” 110 AD3d at 594-595. Nonetheless, the Court of Appeals held that this was insufficient to demonstrate fraud. Conversely, in Conason, sufficient evidence of fraud included a utility company witness’s testimony about service when a purported tenant was in possession, a superintendent’s testimony denying knowledge of the purported tenant, and the landlord’s own testimony that he possessed no records of the purported tenant’s tenancy. Conason, 25 NY3d at 8-9. Here, Respondent does not offer any affirmative evidence of fraud, other than the DHCR rent registration history. Although the Court notes and does not condone the irregularities therein, it is nonetheless bound by the holdings in Matter of Regina Metro. Co., LLC, Matter of Boyd, and Matter of Grimm. See generally Regina Metro. Co., LLC, 2020 NY Slip Op 02127, at *7 (” [I]t is clear from Boyd that use of a potentially inflated base date rent, flowing from an overcharge predating the limitations and lookback period, was proper in the absence of fraud.”). As Respondent has not come forth with adequate evidence to demonstrate fraud (in relation to the 2011-2013 registrations) under the standard established by the Court of Appeals, she has failed to assert “facts to establish a cause of action” (Farkas, 121 Misc 2d at 647, 468 N.Y.S.2d at 811) that would entitle her to the discovery sought (including leases and lease riders, annual rent registrations, and rent breakdowns) for the years 2011 to present. The second category of discovery sought, however, is subject to a different standard. Respondent requests production of documents from 2017 to present “concerning Individual Apartment Improvement (‘IAI’) increases, MCI applications, and an[y] other applications or complaints regarding the legal regulated rent includ[ing] all bills, canceled checks, contracts, receipts, and similar documents concerning any alleged improvements in the subject apartment.” In support, Respondent highlights an increase in the rent from $1,250.00 in 2017 to $2,474.99 (with a preferential rent of $1,850.00) in 2018, when Respondent and Mr. Williams moved in. The DHCR rent registration history includes notations for “VAC/LEAS” and “IMPRVMNT” as justifications for the increase. Respondent’s lease rider, annexed as an exhibit to her motion, states that Petitioner took an 18 percent vacancy increase (totaling $225.00), which was not unlawful.3 The remainder of the increase is attributed to an IAI increase of $999.00, resulting from $60,000 in alleged improvements (including a complete bathroom renovation, a complete kitchen renovation, and other improvements).4 The increase in 2018 clearly falls within the 4-year statute of limitations for [pre-June 14, 2019] rent overcharges. See former RSL §26-516(a)(2); former CPLR §213-a. Where a landlord claims IAIs as a basis for a rent increase, it “has the ‘burden of proving the cost of the renovations made to the apartment to justify the rent it charged [the tenant].’” DiLorenzo v. Windermere Owners LLC, 174 AD3d 102, 109 (1st Dep’t 2019) (quoting Bradbury v. 342 W. 30th St. Corp., 84 AD3d 681, 683 (1st Dep’t 2011)). In order to meet this burden, “the owner must present ‘documentary support therefor, [including] all relevant invoices, bills, cancelled checks, and/or other material.’” DiLorenzo, 174 AD3d at 109 (quoting Matter of 985 Fifth Ave. v. State Div. of Hous. & Community Renewal, 171 AD2d 572, 574-575 (1st Dep’t 1991), lv denied 78 NY2d 861 (1991)); see also DHCR Operational Bulletin 2016-1.5 Respondent’s motion includes copies of documents reflecting the IAI costs that Petitioner appears to have provided informally. They include a cancelled check (with front and back images) dated October 16, 2017 from “57th Avenue” (which is an entity that does not appear to be a former owner, based on the bargain and sale deed submitted with Petitioner’s opposition papers, which shows that “94-25 57th Avenue Holdings, LLC” and “Trisun 57th Avenue LLC” were the former owners) to Elite Renovations LLC for $61,424.73, as well as a letter dated January 17, 2019 (substantially later than the check date) on Elite Renovations LLC letterhead and signed by Felix Reyes, stating that the work was completed in the subject premises and payment was made in full, and an Application and Certification for Payment and Continuation and Detail Sheet acknowledging completion of the work by a representative of 94-57th Ave Holdings, LLC and Mr. Reyes of Elite Renovations LLC (and a cost breakdown of the work completed). Absent is any contract for the work, pre-payment bills/invoices, or documentation of the connection between the payor (57th Avenue) and the former owners. Respondent (as she did in her earlier order to show cause) also highlights the fact that Elite Renovations LLC shares an address (500 Frank W Burr Boulevard, #47, Teaneck, New Jersey 07666) and members/agents (Adam Mermelstein and Azi Mandel) with the former owners. It is well-established that “identity of interest” between a landlord and contractor subjects IAI costs to heightened scrutiny. See e.g. Matter of 125 St. James Place LLC v. New York State Div. of Hous. and Community Renewal, 158 AD3d 417 (1st Dep’t 2018); Matter of 201 E. 81st St. Assoc. v. New York State Div. of Hous. & Community Renewal, 288 AD2d 89 (1st Dep’t 2001); see also Operational Bulletin 2016-1 (“The costs for an IAI paid to a person or organization sharing an identity of interest with the owner or managing agent may require additional evidence relating to cost and payment.”). In opposition, Petitioner argues that it should not be required to produce documents that pertain to former owners (who are not parties) and that may be publicly available through DHCR. As to the first point, Petitioner cites to Matter of Suit-Kote Corp. v. Rivera, 137 AD3d 1361 (3d Dep’t 2016). In Matter of Suit-Kote Corp., however, leave to conduct discovery was denied because the petitioner specifically sought “extensive disclosure from numerous nonparties, some of which were not even identified.” 137 AD3d at 1365 (emphasis added). Here, however, Respondent only seeks discovery from Petitioner. Under 9 NYCRR 2526.1(f)(2)(i), “[f]or overcharge complaints filed for overcharges collected on or after April 1, 1984, a current owner shall be responsible for all overcharge penalties, including penalties based upon overcharges collected by any prior owner.” Accordingly, a “new owner of a residential property is under a legal obligation to secure from its predecessor complete rental histories and payment records for all tenants, so that the legal rents may be appropriately established so that subsequent increases may be correctly calculated.” Morton v. 338 West 46 Realty, LLC, 45 Misc 3d 544, 551, 992 N.Y.S.2d 621, 627 (Civ. Ct. NY County 2014) (citing Turner v. Spear, 134 Misc 2d 733, 512 N.Y.S.2d 335 (Civ. Ct. NY County 1987)); see also Helfand v. Division of Hous. & Community Renewal, 182 Misc 2d 1, 696 N.Y.S.2d 630 (Sup. Ct. NY County 1999); Simon v. Elkon, N.Y.L.J. Apr. 26, 1976, p. 6, col. 1 (App. Term 1st Dep’t)). Therefore, Petitioner may be ordered to disclose documents that establish the rent that is being sought herein, notwithstanding the fact that some of those documents originate from a period when the subject building was under prior ownership. As to Petitioner’s argument that some of the documents that Respondents is seeking are publicly available, Respondent has attached documents from DHCR (to the reply papers) showing that the agency only produced a certified rent registration history in response to a “request for records access”, which also sought the “case file” and “entire file” for the subject premises. Consequently, it is not apparent that the records that Respondent seeks are publicly available. In sum, Respondent has established an “ample need” for the documents that it seeks in relation to rent increases since 2017. Since there is no dispute that Respondent has vacated the subject premises, the prejudice caused by any delay occasioned by the discovery process is minimal. Moreover, the Court may supervise discovery to ensure that it is completed expeditiously. See Farkas, 121 Misc 2d at 647, 468 N.Y.S.2d at 811-812. Accordingly, the Court grants Respondent’s motion for leave to conduct discovery to the sole extent of ordering Petitioner to produce the documents described in Respondent’s Discovery Request #2. To the extent that any documents previously provided to Respondent informally are responsive, Petitioner may provide an affidavit to that effect. In light of the continuing COVID-19 public health crisis and the challenges that it may place upon Petitioner in locating and organizing the requested documents, the Court refrains from setting a production deadline at this time and will mark this proceeding off the Court’s calendar pending discovery. However, the parties may seek a discovery conference by contacting the Queens County Housing Court Supervising Judge in accordance with Administrative Order #85 (dated April 8, 2020).6 The parties may also restore this proceeding by stipulation, or either party may move to restore and/or for appropriate relief by order to show cause (which may be filed electronically with the Queens County Housing Court Clerk’s office while normal operations are suspended). Finally, Petitioner’s request for use and occupancy pendente lite, included in the opposition papers, is denied. Petitioner has not moved for this relief by cross-motion (see CPLR §2215), so the request is procedurally improper. Moreover, since Respondent has surrendered possession, use and occupancy pendente lite is no longer warranted. See e.g. MMB Associates v. Dayan, 169 AD2d 422 (1st Dep’t 1991) (Use and occupancy appropriate where tenant “remain[s] in possession”). THIS CONSTITUTES THE DECISION AND ORDER OF THE COURT. Dated: April 20, 2020
