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In re Application of NYC 107, LLC

Supreme Court, New York County

August 27, 2013

In the Matter of the Application of NYC 107, LLC, Petitioner, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules,
v.
NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent, and FAIN KOLINSKY a/k/a FAIN CLARK, Respondent-Intervenor In the Matter of the Application of FAIN KOLINSKY a/k/a FAIN CLARK, Petitioner, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules,
v.
DARRYL C. TOWNS, AS COMMISSIONER OF THE NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent, and NYC 107, LLC, Respondent-Landlord Index No. 103885/12, 103897/12

Unpublished Opinion

For NYC 107, LLC: Robert H. Bennan, Esq. Kueker & Bruh, LLP

For DHCR: Martin B. Schneider, Esq. Patrice Huss, Esq.

For Kolinsky: Mika Dashman, Esq. Fishman & Mallon, LLP

DECISION & JUDGMENT

BARBARA JAFFE, JSC:

By order dated May 22, 2013, these actions were consolidated by another justice of this court. Fain Kolinsky, a/k/a Fain Clark, is the tenant of apartment 5E in the building located at 230 West 107th Street in Manhattan. She is the respondent-intervenor in action no. 1 and the that, because petitioner received J-51 tax benefits, the apartment remained rent-stabilized. By order dated February 5, 2009, the deputy commissioner denied Kolinsky's PAR and affirmed the order of the RA.

On March 5, 2009, the Appellate Division, First Department, decided Roberts v Tishman Speyer Props., L.P., 62 A.D.3d 71, 81 (1st Dept), affd 13 N.Y.3d 270 (2009), holding that "all apartments in buildings receiving J-51 tax benefits are subject to the [Rent Stabilization Law (RSL) during the entire period in which the owner receives such benefits." (See Administrative Code of City of New York § 11-243 [previously § J51-2.5]).

Thereafter, by order dated March 16, 2009, the deputy commissioner re-opened the administrative proceeding for consideration of the possible impact of the Roberts decision, and found that the apartment remained rent-stabilized and that the legal regulated rent for the apartment preceding Kolinsky's occupancy was $2, 053.64, but that the collectible rent for her initial lease term was $1, 925.00, as landlord "effectively waived any higher rent to which it may have been entitled." (Order, at 7).

Rent Stabilization Law § 26-51 l(c)(14), which became effective on June 6, 2003, roughly codifies Matter of Missionary Sisters of Sacred Heart III. v New York State Div. Of Hous. and Community Renewal, 283 A.D.2d 284 (1st Dept 2001), in which the court held, in relevant part, that:

[W]here the amount of rent charged to and paid by the tenant is less than the legal regulated rent for the housing accommodation, the amount of rent for such housing accommodation which may be charged upon renewal or upon vacancy thereof may, at the option of the owner, be based upon such previously established legal regulated rent, as adjusted by the most recent applicable guidelines increases and any other increases authorized by law.

Not only does the statute provide no support for a retroactive rent increase here, but there was no "previously established legal regulated rent." Consequently, there is no basis for a retroactive increase. (See 370 Manhattan Ave. Co. v Seitz, 20 Misc.3d 9, 10 [App Term, 1st Dept 2008] [legal regulated rent may be "previously established" only if tenant had notice of it]; see also Matter of Coffina v New York State Div. Of Hous. and Community Renewal, 61 A.D.3d 404, 404-405 [1st Dept 2009] [RSL § 26-511 (c) (14) applicable only where there is a "prior-noticed 'preferential' rent']). A "preferential rent" is a rent that is lower than the legal regulated rent, where the latter is "established and documented in a manner prescribed by the DHCR." (RSC § 2521.2). Here, it is undisputed that, in October 2005, Kolinsky had notice neither of any legal regulated rent, nor of the fact, established only after the Roberts decision, that the rent reserved in her lease was, in effect, a "preferential rent."

Landlord argues that, but for its mistaken belief that the apartment was exempt from rent-stabilization, it would have attached a preferential rent rider to Kolinsky's initial lease. Such a rider generally preserves a landlord's right to charge the legal regulated rent upon the passage of such time as is set forth in the rider. Landlord also maintains that, pursuant to RSC § 2522.8, respondent may consider the equities when it sets a legal regulated rate. Landlord failed, however, to advance this argument before the DHCR, and in any event, fails to demonstrate why it would be equitable to saddle Kolinsky with retroactive rent increases based on its failure to include a preferential rent rider because of its view of the law, now determined to have been mistaken.

That courts post-Roberts have refused to impose penalties for actions taken in good faith, does not change the result here, as the penalties to which landlord refers include treble damages for willful violation of the RSC. (See eg Rosenzweig v 305 Riverside Corp., 35 Misc.3d 1241 ...


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