PETER H. MOULTON, J.S.C.
Petitioner, a rent controlled tenant, challenges a 2010-2011 Maximum Base Rent Order of Eligibility (the "MBR Order"), and the orders which upheld it, because they are based on the "ex parte" submission of the owner's amended answer and the owner's false room count. The petition was held in abeyance pending further submissions in accordance with the Decision and Order, dated September 28, 2012. By Stipulation of Intervention, dated February 1, 2012, the owner was added as a party respondent to this proceeding. The court deems the caption of the proceeding amended per above.
Arguments Regarding the Ex parte Submission
Petitioner acknowledges receipt of the owner's answer, but states that she never received a copy of the owner's amended answer during the appeal before the Rent Administrator, depriving her of the opportunity to respond. The parties appear to agree that the amended answer merely corrects the physical description of the premises. Petitioner complains that this failure is a violation of Rent Stabilization Code § 2527.3 (a) (1) which provides that "where the application or complaint or any answer or reply thereto is made by an owner or tenant, the DHCR shall serve all parties adversely affected thereby with a copy of such application, complaint, answer or reply." Although this proceeding was brought by a rent controlled, and not a rent stabilized tenant, petitioner notes that rent stabilization and rent control laws are read in pari materia. Further, petitioner maintains that the agency's failure to serve her with, a copy of the amended answer violates the New York Administrative Procedure Act § 307 (2) which forbids ex parte communications, unless otherwise authorized by law. Petitioner also cites Matter of Spedicato v
New York State Div. of Hous. & Community Renewal (269 A.D.2d 233 [1st Dept 2000]), where the appellate court found that trial court properly vacated the agency's determination in light of the Commissioner's improper reliance on evidence never seen by the parties.
DHCR maintains that petitioner's citation to the rent stabilization code is misplaced because the apartment is rent controlled. The applicable regulation, DHCR maintains, is RER § 2207.3 (a) (1), and that provision only requires that the district rent administrator forward a copy of the application to all affected parties. Further, the agency argues that due process does not require that petitioner receive copies of every document filed in the proceeding, and also points out that the amended answer was served on petitioner at the PAR level.
Arguments Regarding the Room Count
In seeking the maximum base rent ("MBR") increase, the owner listed a total of 42 apartments. However, in prior agency proceedings, the evidence submitted indicated that the owner made inconsistent references to other agencies as to the number of apartments (40 or 41 apartments).
The agency maintains that, excluding the initial MBR computations in 1972, the issue of the room count is irrelevant. Instead, the agency explains that pursuant to Rent Control Law § 26-405 a (3), increases are based on a small sampling of rent controlled buildings, which takes into account factors including real estate taxes, water and sewer charges, and operating and maintenance expenses for these buildings. The sampling is then applied citywide, because, as noted in Tenants' Union of the West Side, Inc. v Beame, 40 N.Y.2d 133 ), it was too time consuming and expensive for the agency to calculate the MBR for each individual building, and a sampling method is sound and fair.
Petitioner complains that the Rent Administrator's Order improperly rejected her room count argument on this basis of the agency's finding in a prior fuel cost challenge under Docket number YC420005F. In that proceeding, the agency rejected the tenant's room count argument, stating that "the owner has consistently stated that there at 41 apts, 5 stores and 224 rooms and the tenants never previously challenged the issue." In that proceeding, however, evidence was submitted demonstrating that the owner made a 2010 filing with the New York City Department of Finance, indicating that the building had 40 residential units, and filed a Multiple Dwelling Registration, reflecting 40 Class A residential units. However, that decision was not appealed.
Unlike the Rent Administrator's rejection of petitioner's room count argument, the Deputy Commissioner found that "any misstatement by the landlord as to the buildings room count cannot be used to impugn the landlord's certification of other statements required for the filing of the landlord's MBR application." Thus, the agency did not uphold the Rent Administrator's rejection of the room count argument on the ground that the room count argument was already decided, but rather because the issue is simply irrelevant.
Petitioner maintains that the false room count issue is not irrelevant because the inconsistencies mandate closer scrutiny of all of the owner's statements concerning its 2010-2011 MBR application. In fact, in reply, petitioner goes one step further and argues that "these - undisputed misrepresentations made to DHCR by Landlord in seeking DHCR approval for the MBR increase preclude DHCR as a matter of law, from accepting as true any representations by Landlord." Petitioner cites the doctrine of falsus in uno falsus in omnibus and Matter of Artha Mgt. v New York State Div. of Horn. &-Community Renewal (143 Misc.2d 717 [Sup Ct, New York County 1989] ["The court agrees with DHCR, that where the contractor or supplier (or their principals) of the improvements have an equity interest in the owner, the figures must be extremely carefully scrutinized; very possibly the scrutiny must be more careful than the scrutiny in a normal case"]).
Generally, courts will not interfere with the determinations of agencies unless "there is no rational basis for the exercise of discretion or the action complained of is arbitrary and capricious" (Matter of Pell v Board of Education of Union Free School District No. 1 of Towns of Scarsdale and Mamaroneck, Westchester County, 34 N.Y.2d 222, 231  [internal quotation marks omitted]). "This settled standard requires the Court to assess whether the action in question was taken 'without sound basis in reason and ... without regard to the facts'" (Matter of County of Monroe v Kaladjian, 83 N.Y.2d 185, 189 ). However, where the issue of one of law, the agency is not entitled to deference because the issue is for the court (see e.g, Matter of Bikman v New York City Loft ...