Recitation, as required by CPLR 2219 (a), of the papers considered in the review of plaintiff’s motion for summary judgment and defendants’ cross motion to dismiss the amended complaint Papers NYSCEF Doc. Notice of Motion, Affirmations, Affidavits and Exhibits Annexed 46-80 Notice of Cross Motion, Affirmations and Exhibits Annexed 102-116 Affirmation in Opposition and Exhibits Annexed 120-123 Reply Affirmation 124 DECISION / ORDER Upon the foregoing cited papers, the Decision/Order on these motions is as follows: This is an action for a declaratory judgment brought by the plaintiff, 4401 Sunset Holdings, LLC (hereafter 4401 Sunset), the owner of seventeen unsold condominium units at a fifty-four unit condominium known as One Sunset Park Condominium (hereafter One Sunset). There was a fire at the building on April 3, 2019, and the NYC Department of Buildings as well as the NYC Department of Housing Preservation and Development issued Vacate Orders, after determining that it was unsafe for anyone to return to the building. On the date of the fire, the named defendants in this action occupied 15 of the 17 units pursuant to either Rent Stabilized leases, or as Rent Controlled tenants, but all as non-purchasing tenants who resided at the building when it was converted to a condominium in 2009. The other two units owned by 4401 Sunset were vacant on the date of the fire. In its amended complaint, plaintiff seeks a declaratory judgment that the defendants, as the tenants of the 15 apartments, “no longer have apartments” and “have no property and/or leasehold rights in any respects as regards the condominium, the building, and their former leases and tenancies” (amended complaint). The first cause of action states that it is brought under common law, and the second states it is brought under the NY Real Property Law, Section 339-cc,1 which is a part of the New York State Condominium Act. Plaintiff moves, in motion seq. 2, for summary judgment and thus for the issuance of the above-described declaratory judgment. Defendants cross-move, in motion seq. 3, for an order dismissing the complaint for failing to state a cause of action pursuant to CPLR 3211 (a) (7). For the reasons which follow, plaintiff’s motion is denied, and defendants’ cross motion is granted. There is a related action, Mendez et al v. One Sunset Park Condominium, Matt Levi, Paul Klausner and 4401 Sunset Holdings, LLC, 526936/2019, which has been joined for discovery and trial with this action. In that action, the people who were the tenants of ten of the unsold apartments are the plaintiffs, and the defendants are the condominium association and 4401 Sunset, the owner of these ten condominium units, along with Paul Klausner, a principal of 4401 Sunset, and Matt Levi, alleged to be an officer of 4401 Sunset. Paragraph 4 of the complaint in the tenants’ action summarizes the claims therein as follows: “Plaintiffs bring this action to obtain an order (1) enjoining Defendants from destroying or demolishing the subject premises; from destroying, combining, dividing or otherwise reconfiguring the rent stabilized and rent controlled apartments in the subject building; from delaying the lifting of the vacate orders by any means; and from selling the premises to any party with intent to do any of the same; (2) directing Defendants to commence forthwith the correction of all of the conditions underlying the within vacate orders; (3) ordering Defendants to pay Plaintiffs’ relocation costs and associated damages until all conditions are corrected, the units are fit for occupancy, and the vacate orders are lifted; (4) awarding actual damages based on Defendants’ negligence, constructive eviction and violations of the Martin Act; and (5) granting such other further relief as the Court may deem just and proper.” In addition to the tenants’ claims, the claims of the NYC Department of Housing Preservation and Development (hereafter HPD) in Kings County Civil Court, Index No. 2282/2019, were also joined with the tenants’ action, and their proceeding in NYC Housing Court was transferred and consolidated with the tenants’ action by order dated February 20, 2020. This order placed HPD in the caption as a plaintiff. The first motion (MS #2) now before the court was made on one set of papers but makes motions in both actions, denominating them Action No. 1 and Action No. 2. For Action No. 2, plaintiff’s counsel here inserted the wrong index number. The defendants’ cross motion only refers to this action. It would be too confusing to issue one decision for both cases, which were joined for trial but not consolidated, and thus the court elects to decide the motions in each case in a separate decision. They are, at the present time, two separate actions. The court notes that the attorneys for the defendants in this action are claiming (in footnote 1 to defendants’ notice of motion) that the defendants who are tenants in twelve of the fifteen apartments have retained them to answer this complaint, and that they represent the tenants of ten apartments as plaintiffs in the related action. There are two other actions pending with regard to this property. There is a partition action (508641/2020), brought pursuant to RPAPL §339-cc, and an action brought by the unit owners, other than the holder of unsold units, against the condominium’s board of managers, for under-insuring the building (516926/2020). Plaintiff’s Motion for Summary Judgment Plaintiff supports its motion with an affirmation from counsel, an affidavit from Paul Klausner, plaintiff’s principal, a memo of law, and some thirty exhibits. The exhibit which is Doc. 51 is a 42-page virtual pile of rent stabilization renewal lease forms for the period prior to the fire. There is no index or cover sheet, and the court can only assume there is one for each of the defendants’ fifteen apartments. This would lead one to conclude that none of the apartments were rent-controlled, but the defendants’ complaint in the other action says some are. This decision would not reach a different conclusion if some are Rent Controlled, but the applicable laws, codes, rules, and regulations are different. Therefore, for purposes of simplicity, the court will assume that all of the defendants are Rent Stabilized tenants. It is also not known if any of the former tenants are senior citizens or disabled persons. Plaintiff provides the vacate orders issued by the Department of Buildings and HPD. It is not known whether HPD provided relocation services to the tenants. Plaintiff provides a number of other documents. One indicates that the unit owners had the requisite meeting pursuant to RPAPL §339-cc and were not able to obtain a vote of 75 percent or more of the unit owners to rebuild, primarily because the fire insurance was only about one-third of the estimated cost of rebuilding. Doc. 65 is an affidavit from the architectural firm retained by the condominium, which provides a professional opinion that the building “has been over seventy five percent destroyed as a result of the fire and the resulting conditions.” These are the two prerequisites for a partition action in a condominium, which, as stated above, was commenced and is proceeding. Defendants’ Motion for Summary Judgment Defendants move for summary judgment dismissing the complaint “pursuant to CPLR 3211(a)(7).” Their memo of law is E-File Doc. 107. Defendants’ counsel avers, starting at paragraph 24 of his affirmation: “The Division of Housing & Community Renewal (“DHCR”) is the administrative agency responsible for administering the regulation of the Rent Stabilization Law and Code. N.Y.C. Admin Code §26-511(b). In interpreting the Rent Stabilization Law (“RSL”) and Rent Stabilization Code (“RSC”), DHCR has issued guidance on the rights of tenants forced to vacate due to fires and other health and safety hazards, including DHCR Operational Bulletin 95-2 (December 15, 1995), and DHCR Fact Sheet 38…. The Bulletin provides that tenants displaced in a building due to a vacate order can apply to have their rent reduced to $1 per month pending repairs to the building. Id. at *3.2 If repairs to a building require the replacement of at least 75 percent percent of seventeen enumerated building-wide and apartment systems, DHCR may deem the building substantially rehabilitated and thus exempt from future regulation under the RSL. Id. at *1-*2. Nonetheless, the tenants in occupancy before the vacate order will retain their full rights if they choose to return, as they are entitled to constructive occupancy during the vacate order. Id. at *3; DHCR Fact Sheet 38 at *1. DHCR has also issued limited guidance concerning the rights of tenants in buildings that burn down and are demolished, or effectively demolished, as a result of a fire. Attached as Exhibit G is DHCR’s April 21, 1998 Opinion Letter in response to an inquiry by the owner of a wood-framed residential building that burned to the ground. In this opinion letter, DHCR states its belief that where a building has completely “burn[ed] to the ground” the tenancies are extinguished and there is no obligation to offer rent-stabilized tenants’ apartments in any newly constructed building. Id. at *2. The letter cautions however that “[t]he razing of a fire-damaged building resulting from an economic decision of the owner to do so would change our opinion completely.” Defendants’ counsel also argues that “the Owners’ vote not to rebuild merely provides a mechanism for distributing insurance proceeds and unwinding the condominium association. It does not provide a basis for abrogating myriad statutory duties to the rent-stabilized tenants to maintain the building.” Discussion It is well settled that “the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact” (Ayotte v. Gervasio, 81 NY2d 1062, 1063 [1993], citing Alvarez v. Prospect Hospital, 68 NY2d 320, 324 [1986]; Zapata v. Buitriago, 107 AD3d 977 [2013]). Failure to make such a showing requires the denial of the motion, regardless of the sufficiency of the papers in opposition (see Alvarez v. Prospect Hosp., 68 NY2d at 324; see also, Smalls v. AJI Indus. Inc., 10 NY3d 733, 735 [2008]). Once a prima facie demonstration has been made, however, the burden shifts to the party opposing the motion to produce evidentiary proof, in admissible form, sufficient to establish the existence of material issues of fact which require a trial of the action (see Zuckerman v. City of New York, 49 NY2d 557 [1980]). Here, the court finds that there are almost no case decisions with regard to condominiums which have been destroyed by fire but which have non-purchasing Rent Stabilized tenants who are ordered to vacate because the property is unsafe. It turns out that the reason for this is that the Supreme Court does not have jurisdiction over the matter. Nonetheless, here, the applicable government agency, NYC HPD, assumes, and in fact, presses, for the court to order that the property be rebuilt. NYC HPD was joined as a party in the related action, by a court order that transferred its action from Housing Court, as described above. The occurrence of a fire in a building with Rent Stabilized tenants is not a rare event. When there is a fire, and the Rent Stabilized tenants must temporarily vacate, but then the landlord does not want to rebuild, it is clear that the landlord cannot come to court for relief in the first instance. This is because the Court of Appeals held in 1991 that the Supreme Court does not have jurisdiction to hear such matters (Sohn v. Calderon, 78 NY2d 755 [1991]). While plaintiff here is an LLC with a principal, Paul Klassner, (and thus at least one member) who was a principal of the Sponsor of the condominium conversion, it is not inequitable to treat plaintiff as the landlord of the fifteen apartments at issue, as the change in status from landlord of the apartments to the owner of the unsold units, occupied by the very same tenants, took place without any change in the tenants’ rights under the Rent Stabilization Laws, as is required by the Martin Act at General Business Law §352-eeee. As the relief plaintiff is seeking in this declaratory judgment action is, in essence, fifteen certificates of eviction and a determination that it has no obligation to the tenants, this is the same relief which was requested in Sohn v. Calderon and the Court found that the New York State Supreme Court has no subject matter jurisdiction, and that DHCR (The New York State Division of Housing and Community Renewal, an agency in the executive branch) has exclusive original jurisdiction. Thus, as the owner of the Rent Stabilized apartments, plaintiff must first apply to DHCR for permission to remove these apartments from Rent Stabilization, as the court does not have subject matter jurisdiction. Subsequently, an Article 78 is possible, but not in an initial application. Addressing whether and when the Supreme Court has original and concurrent jurisdiction with DHCR, and when DHCR has exclusive original jurisdiction, the Court of Appeals states, in Sohn v. Calderon, 78 NY2d 755, 765-769 [1991]: “It is clear beyond question that the Legislature intended disputes over a landlord’s right to demolish a regulated building to be adjudicated by the DHCR and, to a lesser extent, HPD…. Article VI, §7 of the NY Constitution establishes the Supreme Court as a court of “general original jurisdiction in law and equity”…[that] “is competent to entertain all causes of action unless its jurisdiction has been specifically proscribed”…. However,…rent-control and rent-stabilization disputes are a modern legislatively created category not encompassed within the traditional categories of actions at law and equity referred to in section 7 (a) of article VI of the NY Constitution. …[S]ection 7 (b) of article VI…provides: “If the legislature shall create new classes of actions and proceedings, the supreme court shall have jurisdiction over such classes of actions and proceedings,” even though “the legislature may provide that another court or courts shall also have jurisdiction and that actions and proceedings of such classes may be originated in such other court or courts.” [However,]…concurrent original jurisdiction is not necessarily conferred on the Supreme Court when the Legislature provides for the adjudication of regulatory disputes by an administrative agency within the executive branch…. In situations where the Legislature has [conferred exclusive original jurisdiction upon an executive agency], the Supreme Court’s power is limited to article 78 review, except where the applicability or constitutionality of the regulatory statute, or other like questions, are in issue. The only issues raised by plaintiff’s complaint were his satisfaction of the regulatory conditions for obtaining certificates of eviction and demolishing a structure containing protected apartment units. The…provisions of the rent-control and rent-stabilization laws demonstrate that the Legislature intended DHCR and HPD to be the exclusive initial arbiters of whether an owner has, in fact, met these regulatory conditions…. Since concurrent Supreme Court jurisdiction was not contemplated in this situation and the Constitution does not require it…, Supreme Court erred in entertaining plaintiff’s claims on the merits…[and its] consideration of the delays that purportedly typify the administrative adjudicative process was inappropriate…. [T]he Supreme Court should not have entertained plaintiff’s action for declaratory and related relief in connection with his efforts to demolish the building…. [and, instead,] should have dismissed the complaint for lack of subject matter jurisdiction” [emphasis added] (Sohn, 78 NY2d at 765-769 [internal citations omitted]). There is no reason this reasoning should not apply in this matter. A case with similar facts, Bernard v. Scharf (246 AD2d 171 [1st Dept 1998]), which was unfortunately reversed and remanded for dismissal by the Court of Appeals as moot, provides precedent of unclear value. In Bernard v. Scharf (246 AD2d 171), the Appellate Division states “we emphasize the fact that appellants’ rights in the property are subject to their statutory and regulatory obligations to their rent-regulated tenants. However, this fact has no bearing on whether the building’s owner can be compelled into an investment with a negative rate of return. Whatever the answer to that question, appellants would still not be free to walk away from this situation entirely. If the building is not restored, petitioners may have the right to compensation for the loss of their tenancies” (id. at 175). The Rent Stabilization Code now provides (9 NYCRR §2504.4 [f]) what compensation is minimally required under New York’s laws. It states that a landlord who applies to DHCR for permission to not renew leases so the building may be demolished is required to pay the tenant’s moving expenses, to relocate the tenant to a suitable apartment and to pay the tenant a stipend (using the “Demolition Stipend Chart”) for six years if the rent at the new apartment is higher than the rent was at the landlord’s building. This analysis and the resulting calculations may only be employed administratively by DHCR, not by the court. We do not have “demolition stipend charts.” Nor are we in a position to determine if a proposed apartment is “suitable” as defined in the regulations. Here, plaintiff has demonstrated that it is powerless to compel the condominium to rebuild, as they have voted to not rebuild due to the inadequate insurance available. This makes rebuilding economically infeasible, seemingly a valid affirmative defense for a landlord whose property sustains damage from a fire (see Bernard v. Scharf, 246 AD2d 171 [1st Dept 1998], revd and remanded on other grounds, Matter of Bernard, 93 NY2d 842 [1999]). The plaintiff owns approximately thirty percent of units and thirty percent of the common interest in the building.3 It is important to note that whether plaintiff voted to rebuild or not to rebuild, the outcome would have been the same, as 75 percent or more of the units must vote to rebuild in order for the rebuilding to occur. Plaintiff presumably voted its thirty percent against rebuilding, but even if it had voted for rebuilding, rebuilding would not have made the 75 percent threshold required. Thus, the decision whether or not to rebuild was not within the control of the holder of unsold units. Therefore, DHCR should permit plaintiff to apply for approval to terminate the Rent Stabilized tenancies on the basis that the building will be demolished, pursuant to 9 NYCRR §2504.4 (f). This would be the equitable way to analyze this issue and would provide the tenants with the legally required compensation. The court also notes that the condominium’s decision not to rebuild means that plaintiff, as the holder of unsold units, will not be required to fund thirty percent of the reconstruction costs which exceed the insurance coverage, which would be somewhere around Five Million Dollars for 4401 Sunset’s share. On the other hand, plaintiff should not be allowed to receive the entire amount of its proportionate share of the insurance money and the money that will be generated by a sale of the property, without compensating the tenants, as that would be a windfall to the holder of the unsold units. Compensating the tenants who lost their homes from the plaintiff’s share of the proceeds would be both equitable and appropriate. It is unclear to the court why the plaintiff has not already applied to DHCR for permission to terminate the defendants’ tenancies. Conclusions of Law For the reasons stated above, plaintiff’s motion for summary judgment is denied and defendants’ motion is granted. The complaint is dismissed. The foregoing constitutes the decision and order of the court. Dated: March 18, 2021
