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LLC v. Division of Housing and Community Renewal

Supreme Court of New York, New York County

August 22, 2013

In the Matter of the Application of 1234 BROADWAY, LLC, Petitioner,
v.
DIVISION OF HOUSING AND COMMUNITY RENEWAL and Saukam Lau, Respondents.

[971 N.Y.S.2d 37] Law offices of Santo Golino, Hollis Vandamme of counsel, for Petitioner.

Gary R. Connor, General Counsel for DHCR, Robert Ambaras of counsel, for Respondent.

ALEXANDER W. HUNTER, J.

Petitioner's application for an order pursuant to CPLR Article 78, reversing, annulling, and setting aside the denial of Petition for Administrative Review under docket number ZK410042RO, and reversing treble damages assessed, is denied and the proceeding is dismissed with costs and disbursements to respondents.

Petitioner 1234 Broadway, LLC is the owner of the single room occupancy building located at 38 West 31st Street, New York, New York (the " subject premises" ). Respondent Saukam Lau (" Lau" ) is a tenant of Unit 624 located at the subject premises. Respondent Division of Housing and Community Renewal (" DHCR" ) is the administrative agency responsible for the administration of the Rent Stabilization Law (" RSL" ) as codified at N.Y.C. Administrative Code ยง 26-501, et seq.

On December 22, 2009, Lau filed an overcharge complaint with DHCR alleging tat petitioner wrongfully increased her legal regulated rent from $571.18 to $596.88, pursuant to N.Y.C. Rent Guidelines Board (" RGB" ) Hotel Order No. 38 (" Hotel Order No. 38" ), which permitted a 4.5% increase of legal regulated rent if the total number of permanent rent stabilized tenants occupied at least 85% of the total number of all residential units. Lau alleged that fewer than 85% of the units at the subject premises were rented to permanent rent stabilized tenants, based on a belief that 60 or more units were vacant at the time of the increase. Additionally, Lau alleged that she had been living with her husband at the subject premises since 1985, yet neither her name nor her husband's name appeared on the September 19, 2008 certified registration rent roll report for the year 1985; registration information was reported for this room beginning 1988.

Petitioner denied Lau's allegations; averred that Lau had no proof of the allegations made in the complaint; and maintained that it was entitled to a 4.5% increase because " rent regulated rooms constituted more than 85% of the rooms in the building." (Petitioner's exhibit C). In an affidavit, petitioner stated that at the time of Hotel Order No. 38, there were 258 tenancies at the subject premises, of which 221 were subject to rent regulation. Petitioner also averred that Lau occupied two rooms, and that Lau's rooms were properly registered under units " 624625."

Lau responded that there were conflicting numbers with respect to the total number of units at the subject premises: (1) the N.Y.C. Department of Buildings indicated that the subject premises contained over 300 units; (2) the building registration with the N.Y.C. Department of Housing Preservation and Development reflected that the subject premises contained 348 units; and (3) petitioner's previously sworn affidavit indicated that the subject premises contained 325 units, all of which would render the subject premises less [971 N.Y.S.2d 38] than 85% occupied by rent stabilized tenants.

DHCR directed petitioner to submit evidence demonstrating that 85% of the total rooms in the building were subject to rent regulation, and subsequently directed petitioner to submit a night auditor's report and a rent ledger. On June 14, 2011, DHCR noted that petitioner had failed to submit the requested evidence and that based upon the evidence in its files, petitioner was not entitled to a rent adjustment.

By mailing dated July 19, 2011, petitioner received a Final Notice to Owner— Imposition of Treble Damages on Overcharge, for failure to submit the requested evidence. Petitioner was given a final opportunity to show that there was no overcharge and/or that any overcharge was not willful. On August 9, 2011, petitioner submitted a letter response, a copy of the September 30, 2008 rent roll report, and an affidavit clarifying that there were 250 housing accommodation units, of which 213 units were subject to rent regulation. Petitioner asserted that it had a reasonable belief that it was entitled to the rent increase and that there was no basis to impose treble damages. Petitioner also averred that the complaint should be denied for lack of standing, as the tenant of record was Shen Fuk Chan and not Saukam Lau.

On October 27, 2011, the Rent Administrator (" RA" ) determined that petitioner had collected rent overcharges from Lau (the " Order Finding Rent Overcharge" ), and awarded $848.10 for overcharged rent, assessed $1,696.20 for treble damages on the overcharge, and directed petitioner to roll back the rent from $596.88 to $571.18. The RA also determined that Lau did have standing, as petitioner had recognized Lau as the tenant of record in its reply, and registration records indicated that Lau was the tenant of record.

On November 30, 2011, petitioner filed a Petition for Administrative Review (" PAR" ). In the PAR, petitioner claimed that the RA did not consider its August 9, 2011 letter, the September 30, 2008 rent roll, and supporting affidavit. However, the DHCR record contained those documents, which were date stamped August 10, 2011. Petitioner contended that Lau had submitted no evidence to substantiate her allegations; that the Order Finding Rent Overcharge made no findings of fact with respect to the actual percentage of rent-regulated units at the subject premises and cited no evidence in support of its conclusions of law; and that the method of calculating the 85% occupancy threshold was subject to interpretation and petitioner had a rational good faith belief that it had met that threshold and was entitled to the guideline rent increase.

Lau opposed petitioner's PAR, noting that RGB Hotel Orders have historically included provisos conditioning an owner's entitlement to a guideline rent increase on an occupancy threshold; that the explanatory statement issued in conjunction with Hotel Order No. 38 explained that the 85% occupancy threshold be calculated by dividing the number of occupied rent stabilized units by the total number of residential units; that petitioner submitted inconsistent evidence with respect to the number of occupied rent stabilized units and failed to submit any evidence with respect to the total number of units at the subject premises; that the RA had properly determined that petitioner had failed to establish its entitlement to the guideline rent increase; and that petitioner had failed to establish that the overcharge was not willful.

Petitioner replied stating that the September 30, 2008 rent roll established that [971 N.Y.S.2d 39] 216 units out of 252 units at the subject premises, or 85.71%, were subject to rent stabilization; that petitioner had submitted sufficient evidence to establish its entitlement to the guideline rent increase and explained all purported inconsistencies between the various figures that it had provided; that respondents had failed to produce any evidence to rebut petitioner's evidence; and there was no evidence in the administrative record to rebut petitioner's evidence that it had a good faith belief in its entitlement to the guideline rent increase.

On December 21, 2012, DHCR's Commissioner denied the PAR (the " Order and Opinion" ). The Commissioner opined that the RA had considered petitioner's August 9, 2011 letter and the September 30, 2008 rent roll; but determined that the rent roll was insufficient because it did not address the number of vacant units at the subject premises and failed to prove that 85% of the subject premises were occupied by rent stabilized tenants. The rent roll only contained the number of rooms that were allegedly rented and of this number, those that were ...


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