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In re Application of 1234 Broadway LLC

Supreme Court, 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 Yun Cha Kim and Terry Bocanelli, Respondents.

Unpublished Opinion

Petitioner - Law offices of Santo Golino, Hollis Vandamme of counsel.

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

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 ZL410003RO, 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"). Respondents Yun Cha Kim ("Kim") and Terry Bocanelli ("Bocanelli") (collectively, the "tenants") are tenants of Unit 311 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 §26-501, et seq.

On September 17, 2009, the tenants filed an overcharge complaint with DHCR alleging that petitioner wrongfully increased their legal regulated rent from $606.10 to $633.37, 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 all residential units. The tenants alleged that fewer than 85% of the units at the subject premises were occupied by permanent rent stabilized tenants, based on a belief that 60 or more units were vacant at the time of the increase.

Petitioner denied the tenants' allegations; averred that the tenants had no proof of the allegations made in the complaint; and maintained that it was entitled to the 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 tenancies were subject to rent regulation.

The tenants 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 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. Petitioner submitted evidence that of 252 registered tenants/units, 215 registered tenants/units had rent below $2, 000.00 and were subject to rent regulation. DHCR notified petitioner that additional evidence was required to prove that the hotel was 85% occupied with rent stabilized tenants, and directed petitioner to submit a night auditor's report and a rent ledger. On July 13, 2011, DHCR noted that petitioner had failed to submit the requested additional 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. 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.

On October 28, 2011, the Rent Administrator ("RA") determined that petitioner had collected rent overcharges from the tenants (the "Order Finding Rent Overcharge"), and awarded $327.24 for overcharged rent, assessed $654.48 for treble damages on the overcharge, and directed petitioner to roll back the rent from $633.37 to $606.10.

On December 1, 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 the tenants had submitted no evidence to substantiate their allegation; 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.

The tenants 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 ...


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