In the Mater of the Application of DANIELLE FRISCIA, Petitioner,
DARRYL C. TOWNS, COMMISSIONER OF THE STATE OF NEW YORK DIVISION OF HOUSING AND COMMUNITY RENEWAL and THE NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent for a judgment pursuant to Article 78 of the Civil Practice Law and Rules, -and- LEM LEE 13th LIMITED PARTNERSHIP Intervenor-Respondent Index No. 103952/12
Petitioner commenced this Article 78 proceeding seeking to annul the August 6, 2012 Order and Opinion issued by the Deputy Commissioner of the New York State Division of Housing and Community Renewal (DHCR)(Petition, Exh A). The Order was issued after a hearing following the December 17, 2009 remand by this Court in a prior Article 78 proceeding in response to a cross-motion to remand by DHCR (see Slip Op., Index No. 110762/09, Reply Exh C). The petitioner also challenges the findings made by Administrative Law Judge Cecil Hollins in his July 26, 2012 Report on which the DHCR Order is based. (Petition, Exh B).
The history of these proceedings is quite extended at both the administrative and judicial levels and need not be recounted in detail here. Suffice it to say, the dispute revolves around the claim by the petitioner tenant that the respondent owner Lem Lee 13th Limited Partnership unlawfully increased the rent for the apartment and wrongfully deregulated the apartment in violation of the Rent Stabilization Law (RSL). Citing Matter of Grimm v State of N.Y. Div. Of Hous. & Community Renewal Off. of Rent Admin., 15 N.Y.3d 358 (2010), the tenant further asserts that, based on evidence of fraud, DHCR when considering and determining the issues should have more aggressively and rigorously scrutinized the apartment's rent history preceding the four-year period for rent overcharge claims set forth in RSL § 26-516(a)(2). In particular, the tenant challenges the rent increase from $415.00 to $2, 300.00 during a vacancy in 1999, claiming that it was part of a fraudulent scheme to unlawfully deregulate the apartment.
In the Order and Opinion at issue, the Deputy Commissioner acknowledged the four-year rule and the exception based on fraud. He also cited the provision on which the owner was relying to claim "high rent vacancy deregulation", also known as "luxury decontrol"; namely, Rent Stabilization Code §2520.11(r)(4), which exempts from the RSL those apartments that "became or become vacant on or after June 19, 1997, with a legal regulated rent of $2, 000.00 or more per month." He then summarized the evidence adduced at the hearing as follows:
The tenant claimed that as part of the owner's scheme seeking high rent vacancy deregulation immediately prior to her tenancy, the owner had previously rented the subject apartment to certain "nominee tenants". This claim was unsupported by the credible evidence adduced at the hearing including testimony from the alleged "nominee tenant" who although having heard about it from someone he knew from school, paid full rent in a legitimate transaction and obtained the apartment through a broker. Moreover, the owner either through credible testimony or submissions established a non-fraudulent basis for its assertion that the rent could exceed the deregulation threshold, even if all of the proof would not necessarily meet the standard for establishing such increases, if the tenant's complaint had commenced within the four year period for standard overcharge review.
The Deputy Commissioner then stated his conclusion as follows:
As there was no fraudulent scheme to deregulate the subject apartment and the review that the tenant is seeking is otherwise barred by the four year period of review with respect to overcharges, review of the rent to otherwise ascertain whether it appropriately exceeded $2, 000.00 per month is time barred.
As a result, the Deputy Commissioner affirmed the District Rent Administrator's October 17, 2008 Order and denied the tenant's administrative appeal. In the 2008 Order, the DRA had determined that the subject Apartment 13 at 338 East 13th Street in Manhattan did qualify for high rent vacancy decontrol, explaining the reasoning as follows (DHCR Admin Return, C-16):
A review of the information/evidence in the records indicates that the rent for the subject apartment was $2, 500 for the year 2001, based upon the one year lease dated June 5, 2001 between the owner and the tenant Scott Taffet. Based on the DHCR four year statute of limitation, the agency cannot review rents prior to 2001, four years prior to the tenant's filing of the complaint in 2005.
In her petition, the tenant asserts that DHCR's Order should be annulled for the following reasons:
• The Administrative Law Judge (ALJ) who conducted the hearing improperly placed the burden of proof on the tenant, when the State Administrative Procedure Act § 306(1) places the burden on the owner, as 'the party who initiated the proceeding." (Petition, ¶ 16).
• The ALJ treated the proceeding as though it was a plenary action for fraud, instead of an investigation by DHCR under Grimm, supra, failing for example to ask the owner to explain the significant rent increase in late 1999 and substantiate it with original contracts and cancelled checks ...