[977 N.Y.S.2d 162]
Eric T. Schneiderman, Attorney General, New York City (Brian A. Sutherland,
[977 N.Y.S.2d 163] Barbara D. Underwood and Steven
C. Wu of counsel), for appellant.
Himmelstein, McConnell, Gribben, Donoghue & Joseph, New York City (David Hershey-Webb of counsel), for respondent.
Michael A. Cardozo, Corporation Counsel, New York City (Karen M. Griffin and Francis F. Caputo of counsel), for City of New York, amicus curiae.
LIPPMAN, Chief Judge.
[999 N.E.2d 526] This case arises from a determination of the Division of Housing and Community Renewal (DHCR) denying petitioner Paul
Murphy (Murphy) succession rights to a Mitchell-Lama apartment. Because the evidence of Murphy's primary residency was overwhelming, and because there was no relationship between the tenant-of-record's failure to file the income affidavit and the succession applicant's income or occupancy, the agency's determination was arbitrary and capricious.
Murphy is a lifelong resident of an apartment in Southbridge Towers, a housing complex in Lower Manhattan operated under the Limited-Profit Housing Companies Law (Private Housing Finance Law art. II [Mitchell-Lama] ). Murphy moved into the apartment with his parents when he was one month old, in 1981, and extensive evidence demonstrates that he has continued to live in the apartment ever since. In January 2000, Murphy's parents vacated the apartment, and in 2004, Murphy filed a succession application to succeed to the tenancy.
Southbridge Towers rejected the application and DHCR subsequently denied Murphy's appeal. DHCR based its denial on the fact that Murphy's mother, the tenant-of-record, had failed to file an annual income affidavit listing Murphy as a co-occupant for one of the two years prior to her vacatur in 2000. The agency considered this failure an absolute bar to Murphy's succession eligibility under its regulations. Murphy then filed the instant CPLR article 78 petition in Supreme Court challenging the agency's determination, and DHCR moved to dismiss the proceeding. Supreme Court denied DHCR's motion, annulled the agency's denial of Murphy's appeal, and granted his succession petition (29 Misc.3d 1213[A], 2010 N.Y. Slip Op. 51816[U], 2010 WL 4157295  ). The Appellate Division affirmed ( 91 A.D.3d 481, 937 N.Y.S.2d 16 [1st Dept.2012] ), and we granted DHCR's motion for leave to appeal (19 N.Y.3d 812, 2012 WL 4017779  ).
" ‘ In reviewing an administrative agency determination, [courts] must ascertain whether there is a rational basis for the action in question or whether it is arbitrary and capricious' " ( Matter of Peckham v. Calogero, 12 N.Y.3d 424, 431, 883 N.Y.S.2d 751, 911 N.E.2d 813 , quoting Matter of Gilman v. New York State Div. of Hous. & Community Renewal, 99 N.Y.2d 144, 149, 753 N.Y.S.2d 1, 782 N.E.2d 1137  ). " An action is arbitrary and capricious when it is taken without sound basis in reason or regard to the facts" ( Peckham, 12 N.Y.3d at 431, 883 N.Y.S.2d 751, 911 N.E.2d 813, citing Matter of Pell v. Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 N.Y.2d 222, 231, 356 N.Y.S.2d 833, 313 N.E.2d 321  ).
Regulations providing for succession rights to Mitchell-Lama apartments serve the important remedial purpose of preventing dislocation of long-term residents due to the vacatur of the head of household ( see Notices of Emergency/Proposed Rule Making, N.Y. Reg, Nov. 29, [999 N.E.2d 527] [977 N.Y.S.2d 164] 1989 at 23-29). Succession is in the spirit of the statutory scheme, whose goal is to facilitate the availability of affordable housing for low-income residents and to temper the harsh consequences of the death or departure of a tenant for their " traditional" and " non-traditional" family members ( see Braschi v. Stahl Assoc. Co., 74 N.Y.2d 201, 544 N.Y.S.2d 784, 543 N.E.2d 49 ; see also Rent Stabilization Assn. of N.Y. City v. Higgins, 83 N.Y.2d 156, 608 N.Y.S.2d 930, 630 N.E.2d 626  ).
In the event that Mitchell-Lama tenants vacate an apartment, their co-occupants are not automatically entitled to succeed to the tenancy. Under the applicable regulations, succession applicants must make an affirmative showing in order to establish their eligibility. Specifically, they must demonstrate that they qualify as family members or were otherwise sufficiently interdependent with the tenant-of-record; that the unit at issue was the applicant's primary residence during the two years immediately prior to the tenant's vacatur; and that they were listed as co-occupants on the income affidavits filed for the same two-year period ( see former 9 NYCRR 1727-8.3 [a] ).
We have recognized that " [t]he Mitchell-Lama law prescribes strict guidelines for tenant eligibility and succession" ( Matter of Schorr v. New York City Dept. of Hous. Preserv. & Dev., 10 N.Y.3d 776, 778, 857 N.Y.S.2d 1, 886 N.E.2d 762  ). However, as DHCR noted in connection with the 1991 amendments to its regulations, " these [succession] regulations are not intended to cover all possibilities that may occur but are intended to meet the probable occurrences that may transpire as a result of a tenant's permanent absence from a housing unit and the rights and obligations of those who may claim to be entitled to succeed such tenant" (N.Y. Reg., June 5, 1991 at 21).
In this case, DHCR contests neither Murphy's status as a family member, nor that he lived in the apartment during the
relevant two-year period of 1998-1999. The sole basis for DHCR's denial of Murphy's application was that his mother did not file the requisite income affidavit for 1998, the year prior to Murphy's high school graduation. Given the overwhelming evidence of primary residence, and the absence of any indication that the failure to file was related to Murphy's status as a co-occupant or an income-earner, we hold that it was arbitrary and capricious for DHCR to deny succession on the basis of the failure to file a single income affidavit.
There is no doubt that DHCR has a compelling interest in encouraging the timely filing of income affidavits in order [999 N.E.2d 528] [977 N.Y.S.2d 165] to fairly and efficiently administer the Mitchell-Lama program. Housing companies and supervising agencies like DHCR rely on these affidavits to monitor both the number and aggregate income of occupants, information that is crucial to determining the appropriate amount of rent and to ensuring that tenants remain eligible for the rental subsidy. Accordingly, failure to file income affidavits can result in harsh penalties: the tenant can be charged a surcharge on rent for the applicable year (as occurred here), or can be evicted ( see former 9 NYCRR 1727-2.6[a] and 1727-5.3[a] ).
In the succession context, however, the principal purpose of the income affidavit is to provide proof of the applicant's primary ...