By Eileen O’Toole, Esq., Contributing Editor
As of April 26, 2023, owners of rent-regulated housing continue to wait for issuance of post-HSTPA amendments to the Rent Stabilization Code and rent control regulations. Meanwhile, courts have issued recent rulings on a number of rent regulatory matters, involving, for example, the constitutionality of HSTPA provisions, rent fraud claims, the use of rent concessions during initial 421-a building tenancies, and good cause eviction statutes.
A federal appeals court again has ruled, in 335-7 LLC v. City of New York (LVT #32537), that HSTPA amendments to the Rent Stabilization Law did not, either on their face or as applied, violate the Fifth Amendment Takings Clause of the U.S. Constitution. The court also ruled that there had been no “confiscation” of property by HSTPA since a confiscatory taking generally applied only to private companies required to provide public utilities.
New York’s highest court again revisited questions concerning use of the Rent Stabilization Code’s “default formula” in calculating rent overcharge findings for tenants of a building where units were improperly deregulated while the building was receiving J-51 tax benefits. Significantly, in Casey v. Whitehouse Estates, Inc. (LVT #32532), the Court of Appeals reversed a 2021 decision by the First Department, which had permitted use of the default formula to set legal rents in a class action lawsuit involving 78 rent-stabilized tenants. Stressing that the deregulations in this case were the result of a “misinterpretation of the law” rather than a fraudulent misstatement of the facts, and acknowledging that, to date, neither the owner nor tenants had necessarily provided enough information to determine base date rents, the Court sent the case back to State Supreme Court for individual overcharge determinations based on actual rent histories rather than application of the default formula. Separately, and applying similar reasoning, the DHCR itself ruled in a similar case, Matter of Funk & Hecht (LVT #32524), that there had been no rent fraud or overcharge.
The First Department addressed another recurring question in Wise v. 1614 Madison Partners, LLC (LVT #32545), ruling that tenants could pursue rent overcharge claims in a building where the full amount of the building’s initial legal regulated rents were offset by rent concessions. Tenants claimed that this practice required a lowering of the initial LRRs.
A Poughkeepsie court addressed that city’s adoption of a local Good Cause Eviction Law (GCEL) in Lakr Kaal Rock LLC v. Paul (LVT #32540), an eviction proceeding where the tenant asked the court to dismiss the case based on application of the GCEL. Following other upstate court rulings that struck down GCELs in Albany (see LVT #32159) and Newburgh (see LVT #32371), the court ruled that Poughkeepsie’s GCEL was void and unenforceable under the NY State Constitution because it was inconsistent with, and pre-empted by, other state laws concerning eviction proceedings.
In Matter of 7 Second Avenue, HDFC (LVT #32521), where the owner claimed that its building was a cooperative, the DHCR ordered rent registration of apartments since there was no proof that any of the units had been sold or were thereby exempt from rent regulation pursuant to applicable regulations.
In Matter of 58 E 83 Realty, LLC (LVT #32523), the DHCR denied a building demolition application where the owner failed to submit a firm commitment letter from a financial institution or a bank statement showing a segregated account with sufficient funds to complete the project. The DHCR ruled that without such proof, the owner failed to demonstrate it had the financial ability to complete the demolition project.
The DHCR was generally successful in some recent cases where final administrative rulings were challenged through Article 78 court proceedings. For example, in 88-05 171, LLC v. DHCR (LVT #32534), the Second Department upheld on appeal a DHCR finding of rent overcharge based on a 1989 rent reduction order that froze the apartment’s rent pending a required rent restoration order. The court pointed out that, even if RSC §2526.1(a)(2)(v) now permitted some discretion on the DHCR’s part when considering whether to apply Cintron v. Calogero (2010) to enforce old rent reduction orders, the DHCR’s decision here wasn’t an abuse of discretion. And in 495 Estates v. DHCR (LVT #32543), the First Department appeals court upheld the DHCR’s “rational” ruling that the owner’s installation of gas piping in a tenant’s apartment reduced required services by effectively reducing the apartment’s living area.
In Housing Court, owners are still asking judges to lift automatic stays of eviction proceedings required if tenants file an application for rental assistance under the Emergency Rental Assistance Program (ERAP). In the Bronx case of 1661 Topping Realty LLC v. Goodwin (LVT #32538), the court disagreed with the owner’s claim that the Section 8 tenant wasn’t eligible for ERAP relief and refused to vacate the stay. In the Brooklyn case of Elton Owner III LLC v. Vasquez (LVT #32544), the court upheld an ERAP stay despite the fact that the eviction warrant in that case had been issued in February 2020, shortly before the COVID pandemic shut down the court system for an extended period, and despite the fact that there were portions of the rent arrears in question that would not be covered by the ERAP program’s 15-month rental assistance limitation.
