Gilman v. New York State Division of Housing and Community Renewal, 99 N.Y.2d 144 (2002)
An administrative agency acts irrationally when it accepts new evidence on appeal without requiring the party submitting the evidence to demonstrate good cause for its failure to present the evidence at the initial hearing.
Summary
Anne Gilman, a tenant, initiated a fair market rent appeal (FMRA) in 1990 to challenge her rent-stabilized apartment’s initial rent. The Division of Housing and Community Renewal (DHCR) delayed processing the appeal for years. After the Rent Regulation Reform Act (RRRA) of 1997, the owner submitted new comparability data at the petition for administrative review (PAR) level, which DHCR accepted, resulting in a significantly higher rent and substantial back rent owed by Gilman. The New York Court of Appeals held that DHCR acted irrationally by accepting the new evidence without requiring the owner to show good cause for not submitting it earlier, as required by DHCR’s own regulations. The court reversed the Appellate Division’s order and remanded the matter for further proceedings.
Facts
In 1990, Anne Gilman moved into a rent-stabilized apartment and filed a FMRA to challenge the $2,095 rent. DHCR was slow to act, and the owner requested FMRA answering forms indicating an intention to submit comparability data. DHCR didn’t send the forms until Gilman filed a mandamus proceeding in 1994. DHCR then notified the owner it could submit comparability data, clarifying that the rents had to be “legal rents,” requiring proof of notice to the first rent-stabilized tenant. Despite an extension, the owner submitted no data. In 1994, the Rent Administrator set a lower rent based on guidelines. The owner filed a PAR but did not include the comparability documents.
Procedural History
The Rent Administrator initially set a lower rent for Gilman in 1994. The owner filed a PAR. In 1999, DHCR allowed the owner to submit new comparability data due to the Rent Regulation Reform Act of 1997 (RRRA). DHCR’s Deputy Commissioner then adjusted the rent upward based on the new data. Gilman commenced an Article 78 proceeding challenging DHCR’s determination. Supreme Court granted Gilman’s petition. The Appellate Division reversed. The Court of Appeals then reversed the Appellate Division’s order, remanding the matter to the Supreme Court with directions to remand to DHCR for further proceedings.
Issue(s)
Whether DHCR erred in considering new comparability data submitted by the owner for the first time at the PAR level, without requiring a showing of good cause for the owner’s failure to submit the data earlier.
Holding
Yes, because DHCR’s regulations require a showing of good cause to introduce new evidence at the PAR level, and the owner failed to demonstrate such cause in this case.
Court’s Reasoning
The Court of Appeals acknowledged that the RRRA of 1997 applied to FMRAs, clarifying the four-year statute of limitations in rent overcharge claims and easing legal sufficiency requirements for comparability data. The RRRA was intended to apply to all pending cases, but the Court held that the agency acted irrationally by permitting new comparability data at the PAR level without any showing that the owner could not have provided the information earlier. Referencing the dissent at the Appellate Division, the Court emphasized that DHCR is generally limited to the facts and evidence before the rent administrator and that new facts can be admitted only when the petitioner establishes that the evidence “could not reasonably have been offered or included in the proceeding prior” (9 NYCRR 2529.6). The court emphasized that agencies are required to abide by their own regulations. The court found no proof in the record that the owner could not have complied with the older, more stringent requirements. DHCR’s failure to require the owner to show that it could not previously have submitted comparability data was deemed irrational. Allowing the owner a second chance to establish comparable rents without showing that it could not have provided the requisite evidence earlier was an improper extension of the RRRA. On remand, the agency should require the owner to show good cause prior to reviewing its comparability data.