New York Law Review

Tag: Rent Stabilization

  • ATM One, L.L.C. v. Landaverde, 2 N.Y.3d 472 (2004): Calculating Cure Periods in Rent-Stabilized Leases When Serving by Mail

    ATM One, L.L.C. v. Landaverde, 2 N.Y.3d 472 (2004)

    When a landlord serves a notice to cure by mail in a rent-stabilized tenancy, the 10-day cure period is calculated by adding five days to the minimum cure period to account for mailing time, ensuring the tenant has the full 10 days to cure.

    Summary

    This case addresses how to calculate the 10-day cure period when a landlord serves a notice to cure by mail in a rent-stabilized housing accommodation. The landlord, ATM One, served the tenant, Landaverde, with a notice to cure an alleged lease violation, providing only nine days to cure. The tenant moved to dismiss, arguing she didn’t receive the mandated 10-day cure period. The Court of Appeals held that landlords who serve notices to cure by mail must add five days to the 10-day minimum cure period, effectively deeming service complete upon mailing while ensuring tenants receive the full cure period mandated by the Emergency Tenant Protection Regulations.

    Facts

    The tenant leased a rent-stabilized one-bedroom apartment from the landlord. On September 8, 2000, the landlord served the tenant with a “Notice of Default; Ten Days’ Notice to Cure; Thirty Days’ Notice of Cancellation,” alleging overcrowding in violation of the lease. The notice was sent by certified and regular mail on September 8, 2000, setting a cure date of September 18, 2000. The tenant received the notice on September 9, 2000, providing only nine days to cure.

    Procedural History

    The landlord commenced a holdover proceeding against the tenant after the 30-day cancellation period expired. The tenant moved to dismiss, arguing she did not receive the required 10-day cure period. District Court dismissed the petition, borrowing from CPLR 2103 by requiring landlords to add five days for service by mail. Appellate Term affirmed, reasoning the purpose was to afford the tenant the full 10 days. The Appellate Division affirmed the dismissal, defining service in terms of receipt. The Court of Appeals granted the landlord leave to appeal.

    Issue(s)

    Whether, under the Division of Housing and Community Renewal’s Emergency Tenant Protection Regulations, the 10-day cure period is properly calculated from the date of mailing or the date of receipt of the notice to cure, when the notice is served by mail.

    Holding

    Yes, the 10-day cure period requires landlords serving by mail to add five days to the minimum cure period because this approach best effectuates the regulatory purpose of affording tenants a full 10-day cure period before lease termination.

    Court’s Reasoning

    The Court of Appeals emphasized that regulatory interpretation should align with legislative intent, examining the statute’s spirit and purpose. The Emergency Tenant Protection Act (ETPA) aimed to address housing shortages and prevent unjust rents. Because the regulations did not specify when service was complete for mailed notices, the Court looked to the underlying policies. The Court rejected the landlord’s argument that service was complete upon mailing, as this was inconsistent with providing tenants a 10-day opportunity to cure. It also rejected deeming service complete upon receipt because this would make it impossible for landlords to reliably compute the date certain. The court adopted District Court’s approach, holding that owners who serve by mail must add five days to the 10-day minimum cure period, consistent with CPLR 2103(b)(2). This ensures tenants receive the full 10-day cure period, balancing the need for efficient resolution of lease violations with the ETPA’s purpose. The Court stated, “[W]e therefore hold that owners who elect to serve by mail must compute the date certain by adding five days to the 10-day minimum cure period.” By requiring the additional five days, the Court ensured that tenants are not disadvantaged by the landlord’s choice of service method. A properly executed affidavit of service creates a presumption of proper mailing, rebuttable only by more than a denial of receipt. The Court encouraged DHCR to amend its regulations for clarity.

  • Domen Holding Co. v. Aranovich, 1 N.Y.3d 117 (2003): Establishing Nuisance for Eviction in Rent-Stabilized Apartments

    Domen Holding Co. v. Aranovich, 1 N.Y.3d 117 (2003)

    A landlord can pursue eviction of a rent-stabilized tenant based on a nuisance created by a guest if the guest’s conduct demonstrates a recurring or continuing pattern of objectionable behavior that threatens the comfort and safety of others in the building.

    Summary

    Domen Holding Co., a landlord, sought to evict Irene and Jorge Aranovich, rent-stabilized tenants, due to the disruptive behavior of Irene’s guest, Geoffrey Sanders. The landlord cited instances of Sanders using racial slurs, making threats, and engaging in altercations with building staff and other tenants. The New York Court of Appeals held that while a high threshold of proof is needed for eviction, the landlord presented enough evidence of a potential nuisance to warrant a trial. The Court emphasized that the notice of termination adequately informed the tenants of the grounds for eviction, and the subsequent evidence elaborated on those allegations.

    Facts

    The Aranovichs were rent-stabilized tenants in a building owned by Domen Holding Co. Geoffrey Sanders, a guest of Irene Aranovich, resided in the apartment. Over several years, the landlord received complaints about Sanders’s behavior. In August 2000, Sanders allegedly used racial slurs and threatened a doorman, Wayne Ellis. In June 1997, Sanders allegedly threatened a visually impaired tenant, Thomas DeRosa. In November 1995, Sanders was involved in an altercation with the building superintendent. The landlord sent Ms. Aranovich notices regarding these incidents, reminding her of her responsibility for her guests’ behavior.

    Procedural History

    The landlord served a notice of termination and subsequently filed an ejectment action against the tenants. The Supreme Court denied the landlord’s motion for summary judgment and granted the tenants’ cross-motion to dismiss, finding the incidents insufficient to constitute a nuisance. The Appellate Division affirmed, limiting its review to the allegations in the notice of termination. Two dissenting Justices believed a factual issue existed regarding whether Sanders’ conduct constituted a nuisance. The landlord appealed to the New York Court of Appeals.

    Issue(s)

    Whether the landlord’s notice of termination and supporting evidence were sufficient to state a claim for nuisance warranting eviction of the rent-stabilized tenants.

    Holding

    No, because the evidence presented an issue of fact as to whether Sanders’ presence in the building resulted in a recurring or continuing pattern of objectionable conduct threatening the comfort and safety of others in the building sufficient to constitute a nuisance. The Appellate Division order was modified to deny the cross motion for summary judgment dismissing the complaint and remit to Supreme Court for a trial on the issues.

    Court’s Reasoning

    The Court of Appeals reasoned that the Rent Stabilization Code allows for eviction if a tenant permits a nuisance. Nuisance involves interference with a person’s enjoyment of their land, importing a continuous invasion of rights. The Court determined that the notice of termination adequately informed the tenants of the grounds for eviction, detailing specific incidents of Sanders’s misconduct, including names, dates, descriptions, and police complaint numbers. While the incidents occurred over five years, the Court found that their severity and circumstances supported the landlord’s claim that Sanders displayed intolerance and aggression. The Court distinguished the case from instances where a notice is deficient; here, the notice was adequate, and subsequent submissions were elaborations providing evidence of ongoing nuisance. The Court stated, “While surely a high threshold of proof would be required for eviction, we cannot conclude as a matter of law, as the courts below did, that dismissal of the complaint was warranted.” The Court highlighted that a trial was necessary to determine whether Sanders’s conduct constituted a “recurring or continuing pattern of objectionable conduct threatening the comfort and safety of others in the building sufficient to constitute a nuisance.”

  • Gilman v. New York State Division of Housing and Community Renewal, 99 N.Y.2d 144 (2002): Admissibility of New Evidence in Administrative Appeals

    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.

  • Elkin v. Roldan, 94 N.Y.2d 853 (1999): Agency Discretion to Excuse Late Filings

    Elkin v. Roldan, 94 N.Y.2d 853 (1999)

    An administrative agency has discretion to excuse a tenant’s late filing in rent stabilization proceedings, and such discretion should be exercised reasonably considering the circumstances of the delay.

    Summary

    Michael and Susan Elkin, and Howard Shapiro, separately challenged DHCR’s denial of their PARs, which upheld deregulation orders based on untimely income verification filings. The Elkins’ response was postmarked 10 days late, while Shapiro’s was metered four days before the deadline but postmarked three days late. The Court of Appeals held that DHCR had the discretion to excuse late filings and should reconsider the cases. The court emphasized that DHCR could consider whether the delays were excusable or so minimal as to be disregarded under the de minimis doctrine.

    Facts

    Michael and Susan Elkin resided in a rent-stabilized apartment. In March 1995, their landlord sent them an Income Certification Form (ICF) pursuant to luxury-decontrol provisions. They returned the form, verifying their income fell below the threshold. The landlord challenged their response, and DHCR notified them to supply income verification within 60 days. The Elkins sent two responses, both postmarked 10 days beyond the deadline. DHCR deregulated the apartment based on the untimely response. The Elkins filed a PAR, attaching an affidavit from their office manager claiming timely mailing. DHCR denied the PAR, prioritizing the postmark date.

    Howard Shapiro, also a rent-stabilized tenant, received an ICF and timely returned it. The landlord challenged his certification, and DHCR notified him to submit income verification within 60 days. Shapiro’s response was metered four days before the deadline but postmarked three days after. DHCR deregulated the apartment, deeming the response untimely, noting the statutory nature of the deadline. Shapiro filed a PAR, arguing the delay was de minimis and that DHCR had prior knowledge of his income. DHCR denied the PAR.

    Procedural History

    The Elkins brought a CPLR article 78 proceeding. Supreme Court granted the petition, finding no prejudice from the short delay. The Appellate Division affirmed, holding DHCR’s denial was arbitrary and capricious. Shapiro also filed an article 78 petition. Supreme Court annulled the deregulation order and remanded. The Appellate Division affirmed, citing the de minimis delay and DHCR’s prior knowledge. The Court of Appeals granted leave in both cases.

    Issue(s)

    1. Whether DHCR has the authority to accept filings after the 60-day deadline for income verification in luxury decontrol proceedings.
    2. Whether DHCR’s denial of the PARs based on untimely filings was arbitrary and capricious, considering the circumstances of each case.

    Holding

    1. Yes, because DHCR has discretion to conclude that a tenant’s late filing was excusable under applicable regulations (9 NYCRR 2507.5[d]; 9 NYCRR 2527.5[d]).
    2. The Court did not directly rule on whether DHCR’s denial was arbitrary and capricious; rather, it remitted the cases for reconsideration under the correct standard.

    Court’s Reasoning

    The Court of Appeals relied on its decision in Matter of Dworman v New York State Div. of Hous. & Community Renewal, 94 NY2d 359, issued the same day, which rejected DHCR’s argument that it lacked the authority to accept late filings under Administrative Code § 26-504.3. The court emphasized that DHCR has discretion to determine whether a late filing is excusable. The court noted that in Elkin, the tenants presented evidence that might establish timely filing or good cause for the delay. In both cases, DHCR could consider whether the delays (three days in Shapiro and ten days in Elkin) were so minimal as to be excusable under the maxim of de minimis non curat lex. The court cited Van Clief v Van Vechten, 130 NY 571, 579 and Flora Co. v Ingilis, 233 AD2d 418, 419 as examples of applying the de minimis principle. The court did not find DHCR’s determination to be arbitrary and capricious but held that the agency should reconsider its decisions applying the appropriate legal standard. The ruling underscores the importance of administrative agencies exercising their discretion reasonably, considering all relevant circumstances and not adhering to a rigid, inflexible application of deadlines.

  • Dworman v. New York State Div. of Housing & Community Renewal, 94 N.Y.2d 359 (1999): Agency Discretion to Excuse Late Filings

    94 N.Y.2d 359 (1999)

    An administrative agency has discretion to accept late filings and excuse defaults when a party demonstrates good cause for failing to comply with a statutory deadline, unless the statute explicitly prohibits such discretion.

    Summary

    This case concerns whether the New York Division of Housing and Community Renewal (DHCR) is authorized to accept late responses from rent-stabilized tenants certifying their income is below the threshold for “luxury decontrol.” The Court of Appeals held that DHCR has the authority to accept late responses if the tenant shows good cause for the delay. The Court reasoned that the relevant statute does not explicitly prohibit DHCR from accepting late filings and that legislative intent supports deciding deregulation proceedings on their merits. The court remitted two cases for DHCR to evaluate under the “good cause” standard but upheld the deregulation order in a third case where the tenant’s only excuse was inadvertent neglect.

    Facts

    Several tenants in rent-stabilized apartments failed to meet deadlines for providing income verification to DHCR in response to landlord petitions for deregulation under the Rent Regulation Reform Act of 1993. Leona Dworman responded 11 days late because she was traveling in Europe. Peter Sudarsky claimed he mistakenly sent his response to the landlord instead of DHCR. Seymour admitted she received the notice but “neglected to mail it.” In each case, DHCR issued orders of deregulation based on the tenants’ failure to comply with the 60-day deadline to respond.

    Procedural History

    In Dworman and Seymour, the Appellate Division reversed Supreme Court decisions and held that DHCR acted arbitrarily and capriciously. In Sudarsky, the Appellate Division reversed the Supreme Court and reinstated DHCR’s deregulation order. The Court of Appeals granted leave to appeal in all three cases, consolidating them for review.

    Issue(s)

    Whether DHCR has discretion to accept late filings from tenants in luxury decontrol proceedings, or whether the 60-day response deadline in Administrative Code § 26-504.3(c)(1) is an absolute bar to considering late submissions.

    Holding

    Yes, DHCR has discretion to accept late filings when a tenant demonstrates good cause because the statute does not explicitly prohibit DHCR from doing so, and the Rent Stabilization Code permits acceptance of late filings for good cause. However, DHCR did not abuse its discretion in denying Seymour’s petition because “inadvertent neglect” does not constitute good cause.

    Court’s Reasoning

    The Court reasoned that while the Act requires tenants to provide information within 60 days, it does not explicitly mandate deregulation if the response is even a single day late. The statute requires an order of deregulation only if the tenant “fail[s] to provide the information.” The Court emphasized that this implies an order should be issued only if the tenant fails to respond at all, not necessarily if the response is simply tardy.

    The Court further noted that the Introducer’s Memorandum in Support of the Act indicates the Legislature intended for deregulation proceedings to be decided on their merits. The Court also pointed out DHCR’s own inconsistent adherence to deadlines, undermining its argument for strict enforcement against tenants.

    The Court distinguished Matter of Mennella v Lopez-Torres and Matter of Brusco v Braun, which required strict enforcement of a five-day response deadline in eviction proceedings, because the relevant statute (RPAPL 732[3]) explicitly stated that a default must be entered if the tenant fails to answer within five days.

    The Court relied on the Rent Stabilization Code, which states that DHCR may, for good cause shown, accept late filings “except where prohibited by the RSL.” Because Administrative Code § 26-504.3 does not prohibit DHCR from accepting late filings, DHCR may exercise its discretion under the Code.

    The Court emphasized that DHCR is within its discretion to interpret “good cause” to mean more than “any cause” and that the discretion to excuse a default should not be viewed as an invitation to ignore filing deadlines. The Court found that DHCR did not abuse its discretion in denying Seymour’s PAR because she alleged only “inadvertent neglect.”

    The Court remitted Dworman and Sudarsky to DHCR for reconsideration under the “good cause” standard. In Dworman, the Court noted that DHCR had never asked her to provide an explanation for her late filing, and on remittal, DHCR could consider whether the 11-day delay was excusable under the maxim of de minimis non curat lex. Similarly, in Sudarsky, the Court found that DHCR’s rejection of his explanation was too rigid.

  • Georgia Properties, Inc. v. Santos, 732 N.E.2d 120 (2000): Landlords Cannot Circumvent Rent Stabilization Laws with Lease Provisions

    Georgia Properties, Inc. v. Santos, 732 N.E.2d 120 (2000)

    A landlord cannot circumvent rent stabilization laws by requiring a tenant to falsely represent that an apartment will not be their primary residence as a condition of the lease.

    Summary

    In this rent overcharge action, the tenant, Santos, sought to recover rents paid exceeding the prior stabilized rate, along with statutory damages. The landlord, Georgia Properties, Inc., argued that summary judgment was wrongly awarded to the tenant because they were denied discovery regarding the tenant’s primary residence status, especially given a lease clause stating the apartment wouldn’t be her primary residence. The court held that the landlord violated Rent Stabilization Code provisions by requiring the tenant to make such a representation as a condition of renting, and that the tenant provided sufficient evidence that it was their primary residence. Thus, the landlord could not overcome the tenant’s legal position.

    Facts

    Santos, the tenant, entered into a lease with Georgia Properties, Inc., the landlord. The lease contained a rider stating that Santos would not use the apartment as her primary residence. The landlord allegedly presented the lease as a take-it-or-leave-it offer. Santos later brought an action claiming rent overcharges, asserting the apartment was her primary residence all along and that the landlord had illegally circumvented rent stabilization laws.

    Procedural History

    The trial court granted summary judgment to the tenant, finding the landlord had violated rent stabilization laws. The Appellate Division affirmed. The landlord appealed to the New York Court of Appeals as of right, based on a two-Justice dissent from the Appellate Division’s nonfinal order.

    Issue(s)

    Whether a landlord can require a tenant to represent that an apartment will not be used as the tenant’s primary residence as a condition of renting the apartment, in order to circumvent rent stabilization laws.

    Holding

    No, because Rent Stabilization Code § 2525.3(b) prohibits an owner from requiring a prospective tenant to represent that the housing accommodation shall not be used as the prospective tenant’s primary residence, and Rent Stabilization Code § 2520.13 voids any agreement by the tenant to waive the benefit of any provision of the Rent Stabilization Law.

    Court’s Reasoning

    The Court of Appeals held that the landlord’s actions violated the Rent Stabilization Code. The court emphasized that Rent Stabilization Code § 2525.3(b) prohibits landlords from requiring tenants to represent that an apartment will not be their primary residence as a condition of renting. Furthermore, Rent Stabilization Code § 2520.13 voids any agreement by the tenant to waive the benefit of any provision of the Rent Stabilization Law. The court stated that “[a]n agreement by the tenant to waive the benefit of any provision of the [Rent Stabilization Law] or this Code is void.”

    The court reasoned that deregulation of apartments should occur through official means, not through private agreements that are expressly forbidden. The court found the tenant’s evidence, including correspondence from the landlord, a driver’s license, voter registration, tax returns, utility bills, and school enrollment contracts, sufficiently proved that the apartment was her primary residence. This negated the necessity for further discovery. The court concluded that the landlord could not present anything to overcome the tenant’s legal position, rendering summary judgment appropriate. The court noted that the tenant’s affidavit stated she had resided in New York City prior to moving into the apartment and she had consistently resided in this apartment, as her sole residence, since July 1991.

  • Gaines v. New York State Division of Housing & Community Renewal, 87 N.Y.2d 548 (1996): Successor Landlord Liability for Rent Overcharges After Judicial Sale

    Gaines v. New York State Division of Housing & Community Renewal, 87 N.Y.2d 548 (1996)

    A successor landlord who purchases property after a judicial sale is exempt from carryover liability for rent overcharges by previous owners if rental records sufficient to establish the legal regulated rent were not provided at the judicial sale.

    Summary

    Germaine Gaines, a tenant, challenged DHCR’s determination that the current landlord was not liable for rent overcharges by a previous owner. The New York Court of Appeals held that a successor landlord who purchases property after a judicial sale is exempt from carryover liability for rent overcharges if sufficient rental records were not available at the judicial sale. The Court deferred to DHCR’s interpretation of its regulation, finding it rational and consistent with the policy goals of carryover liability and the judicial sale exemption, which are to ensure landlords keep proper records and to promote marketability of properties sold judicially, respectively.

    Facts

    Germaine Gaines, a tenant in a rent-stabilized apartment, filed a rent overcharge complaint with DHCR against Cornelia Associates, the owner at the time. Cornelia was in Chapter 11 bankruptcy. The Bankruptcy Court approved a sale of the property to Home Savings Bank, free and clear of liens. Home Savings then sold the property to ACB Realty Corporation (Sassouni Management, Inc.).

    Procedural History

    DHCR’s Rent Administrator determined Cornelia and Home Savings liable for overcharges, but limited ACB Realty’s liability to only an excess security deposit due to the intervening judicial sale. The DHCR Commissioner upheld this decision. The Supreme Court denied Gaines’ Article 78 challenge. The Appellate Division reversed, holding the judicial sale exemption did not apply to successor purchasers. The Court of Appeals reversed the Appellate Division.

    Issue(s)

    Whether the judicial sale exemption from carryover liability for rent overcharges, as outlined in 9 NYCRR 2526.1(f)(2), extends to a successor purchaser of property who acquires title from the purchaser at a judicial sale.

    Holding

    Yes, because DHCR’s interpretation of the judicial sale exemption to include successor purchasers is rational and consistent with the policies underlying both carryover liability and the exemption itself.

    Court’s Reasoning

    The court reasoned that DHCR’s interpretation of its own regulation is entitled to deference if it is not irrational or unreasonable. The court found that DHCR’s interpretation was rational and consistent with the policies behind the imposition of carryover liability and the judicial sale exemption. Carryover liability was judicially imposed to ensure landlords maintained records to determine legal rent. The judicial sale exemption arose because it was inequitable to impose carryover liability when a debtor/owner had no incentive to furnish records and because such liability would negatively impact marketability. The court highlighted the language of the regulation: “[H]owever, in the absence of collusion or any relationship between such owner and any prior owner, where no records sufficient to establish the legal regulated rent were provided at a judicial sale, a current owner who purchases upon such judicial sale shall be liable only for his or her portion of the overcharges…” (9 NYCRR 2526.1 [f] [2]). The Court interpreted “upon” to mean “on” and indicated contiguity or dependence, such that the source of the purchase was the judicial sale. The court emphasized policy considerations: “First, because the likely unavailability of prejudicial sale rental records increases for successor purchasers, imposition of carryover liability on successor owners, based on prejudicial sale overcharges, would result in increased inequity. Additionally, the risk of unknown carryover liability will reduce the price a sophisticated investor will pay for the property from the purchaser at the judicial sale, and anticipation of this reaction will, inevitably, have an inhibitory effect on bids at the judicial sale.” Therefore, DHCR’s extension of the exemption to successor purchasers was upheld.

  • Manocherian v. Lenox Hill Hospital, 84 N.Y.2d 385 (1994): Regulatory Takings and Substantial State Interest

    84 N.Y.2d 385 (1994)

    A statute requiring landlords to offer renewal leases to not-for-profit hospitals for employee housing constitutes an unconstitutional regulatory taking if it does not substantially advance a legitimate state interest.

    Summary

    The case concerns a challenge to a New York law (Chapter 940) that required landlords to offer renewal leases to not-for-profit hospitals for apartments used to house their employees. The landlords argued this was an unconstitutional taking of their property. The New York Court of Appeals held that the law was unconstitutional because it did not substantially advance a legitimate state interest. The court reasoned that the law primarily benefited the hospital, not the general public, and therefore placed an unfair burden on the landlords. The decision highlights the importance of a close connection between a regulation and a legitimate state interest when private property rights are at stake.

    Facts

    Plaintiffs owned an apartment building and leased several units to Lenox Hill Hospital for employee housing. New York enacted Chapter 940, requiring landlords to offer renewal leases to not-for-profit hospitals for employee housing, effectively granting the hospital long-term control over the apartments. Plaintiffs sued, arguing Chapter 940 was an unconstitutional taking of their property.

    Procedural History

    The Supreme Court dismissed the complaint, upholding the law. The Appellate Division affirmed, leading to an appeal to the New York Court of Appeals. The Court of Appeals reversed the lower courts, declaring Chapter 940 unconstitutional and remanding the case for further proceedings.

    Issue(s)

    Whether Chapter 940 of the Laws of 1984 constitutes an unconstitutional taking of private property by requiring landlords to offer renewal leases to not-for-profit hospitals for employee housing.

    Holding

    No, because Chapter 940 does not substantially advance a legitimate state interest and therefore places an unjustifiable burden on the property owners.

    Court’s Reasoning

    The Court of Appeals applied the two-pronged test established in Seawall Assocs. v City of New York, asking whether the regulation (1) denies an owner economically viable use of their property, or (2) fails to substantially advance legitimate state interests. The Court focused on the second prong. The Court found that Chapter 940 primarily benefited Lenox Hill Hospital by providing subsidized housing for its employees, rather than addressing a broader public need related to the housing shortage. The court noted that the law contradicted the Rent Stabilization Law’s goals of occupant protection and eventual market redemption. The Court emphasized that the preservation of this Manhattan Upper East Side housing enclave for this privileged entity’s benefit, albeit one engaged in a laudable and necessary eleemosynary health service function, cannot masquerade as general welfare legislation.

    The Court distinguished this situation from legitimate exercises of the state’s police power, emphasizing that a law must not force some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole. “That law, in the unusual development and circumstances of this case, must meet the constitutional safeguards on its own merits, not as an augmentation or complement to some generalized State interest found elsewhere in organic law or other statutes.” The court found no close causal nexus between the law and the goals of the Rent Stabilization Law and Emergency Tenant Protection Act, which seek to ameliorate the emergency housing shortage. “This has little to do with a general State housing concern warranting chapter 940’s intervention. Rather, it sharply contradicts that indispensable legislative threshold and constitutional prerequisite.” Because the statute did not substantially advance a legitimate state interest warranting the indeterminate and unjustifiable burden draped disproportionately on the particular owners’ shoulders, it constituted an unconstitutional taking.

  • Board of Managers of Acorn Ponds v. Board of Assessors, 83 N.Y.2d 1033 (1994): Valuation of Condominiums Under Rent Stabilization

    Board of Managers of Acorn Ponds v. Board of Assessors, 83 N.Y.2d 1033 (1994)

    When a municipality adopts rent stabilization under the Emergency Tenant Protection Act (ETPA), Real Property Tax Law § 581 requires assessors to value condominium units as if they were rent-stabilized apartments.

    Summary

    This case concerns the proper method for assessing the value of condominium units for property tax purposes in a village that has adopted rent stabilization under the ETPA. The Board of Assessors argued that the condominiums should be valued without considering rent stabilization, while the Board of Managers contended they should be valued as if rent-stabilized. The New York Court of Appeals affirmed the lower court’s decision, holding that Real Property Tax Law § 581 mandates that condominiums be assessed as if they were rent-stabilized rental properties in municipalities with rent control. This means disregarding the condominium status and assessing the property as a rental, subject to existing rent regulations.

    Facts

    Two adjacent condominium complexes were established in the Village of Lynbrook in 1968. One complex contains 70 units, and the other contains 60 units. In 1975, the Village of Lynbrook adopted rent stabilization under the ETPA, regulating rents for residential buildings with six or more units. The Board of Assessors used the “income capitalization” method to assess the condominiums for tax years 1981-1988, without considering rent regulation guidelines. The condominium owners challenged these assessments, arguing that the rent stabilization laws should be considered.

    Procedural History

    The Supreme Court initially ruled that the properties should be assessed no higher than equivalent rent-stabilized apartment buildings. The Appellate Division affirmed this decision. The Board of Assessors appealed to the New York Court of Appeals, which granted leave to appeal and ultimately affirmed the Appellate Division’s order.

    Issue(s)

    Whether the Village of Lynbrook’s adoption of rent stabilization under the ETPA requires assessors to value condominium units, under Real Property Tax Law § 581, as if they were rent-stabilized?

    Holding

    Yes, because Real Property Tax Law § 581 mandates that the condominium status of the subject properties be disregarded for tax assessment purposes, and that the properties be assessed as if they were rental properties subject to existing rent regulations.

    Court’s Reasoning

    The Court of Appeals based its decision on the plain language of Real Property Tax Law § 581, which states that condominiums should be assessed “at a sum not exceeding the assessment which would be placed upon such parcel were the parcel not owned * * * on a condominium basis.” The court interpreted this to mean that condominiums should be assessed as if they were conventional apartment houses with rent-paying tenants. Since all rental apartment buildings in the Village of Lynbrook with at least six units are subject to rent regulation under the ETPA, it follows that the condominiums should also be assessed as if they were rent-stabilized. The court reasoned that disregarding the condominium status necessarily implies considering the impact of rent stabilization, as that is the regulatory environment for comparable rental properties. The court cited Matter of South Bay Dev. Corp. v Board of Assessors, 108 AD2d 493, 500, which correctly construed the statute to mean that “condominiums and cooperatives [should] be assessed as if they were conventional apartment houses whose occupants were rent paying tenants”. By affirming the lower court, the Court of Appeals reinforced the principle that tax assessments should reflect the actual economic conditions affecting the property’s value, including rent regulation. This ensures fairness and consistency in property taxation within municipalities that have adopted rent stabilization.

  • Manhattan Avenue Assocs. v. Lenox Hill Hosp., 77 N.Y.2d 938 (1991): Notice Requirements for Non-Primary Residence Claims in Rent Stabilization

    Manhattan Avenue Assocs. v. Lenox Hill Hosp., 77 N.Y.2d 938 (1991)

    In rent-stabilized tenancies, a landlord seeking to deny a renewal lease based on non-primary residence must strictly comply with the notice requirements of the Rent Stabilization Code; failure to do so entitles the tenant to a renewal lease.

    Summary

    Manhattan Avenue Associates sought a declaratory judgment to avoid offering a renewal lease to Lenox Hill Hospital, arguing the hospital wasn’t using rent-stabilized apartments as primary residences but subletting them to employees. The landlord claimed a 1984 statute allowing hospitals to sublet these apartments was an unconstitutional taking of their property. The Court of Appeals held that the landlord failed to provide timely notice as required by the Rent Stabilization Code, entitling Lenox Hill to a renewal lease. The Court emphasized that the procedural rules must be followed regardless of the landlord’s legal theory or form of action.

    Facts

    Lenox Hill Hospital was the tenant of record for rent-stabilized apartments owned by Manhattan Avenue Associates. The hospital sublet these apartments to its employees. Manhattan Avenue Associates sought to avoid offering a renewal lease, arguing that Lenox Hill was not using the apartments as primary residences. A 1984 New York statute authorized not-for-profit hospitals to sublet rent-stabilized apartments to employees.

    Procedural History

    Manhattan Avenue Associates initiated a declaratory judgment action in Supreme Court, seeking relief from the obligation to offer Lenox Hill Hospital a renewal lease. The Supreme Court ruled in favor of Lenox Hill Hospital. The Appellate Division reversed. The New York Court of Appeals reversed the Appellate Division and reinstated the Supreme Court’s order.

    Issue(s)

    Whether a landlord seeking to deny a tenant a renewal lease on the grounds of non-primary residence must adhere to the notice procedures set forth in the Rent Stabilization Code, regardless of the form of action (e.g., declaratory judgment) or the legal theory asserted (e.g., unconstitutional taking).

    Holding

    Yes, because when a landlord claims a tenant isn’t using an apartment as a primary residence, they must follow the notice procedures in the Rent Stabilization Code to deny a renewal lease.

    Court’s Reasoning

    The Court of Appeals emphasized the importance of adhering to the procedural requirements of the Rent Stabilization Code when a landlord seeks to deny a tenant a renewal lease based on non-primary residence. The Court cited Crow v. 83rd St. Assocs., 68 NY2d 796 and Golub v. Frank, 65 NY2d 900, underscoring that the owner must provide notice of their intention not to offer a renewal lease within a specific timeframe (120-150 days before the lease expiration) as per former section 54(E) of the Rent Stabilization Code (9 NYCRR 2524.4[c]).

    Because Manhattan Avenue Associates conceded they did not provide the requisite notice, Lenox Hill was entitled to a renewal lease. The Court explicitly stated: “Inasmuch as plaintiff concededly did not give Lenox Hill the requisite notice, Lenox Hill is entitled to a renewal lease for each of the subject apartments.”

    The Court further reasoned that the form of action (declaratory judgment) and the landlord’s legal theory (unconstitutional taking) were irrelevant to the requirement of following proper notice procedures. As the Court stated, “Since the gist of plaintiff’s claim is that it should not be obliged to offer Lenox Hill a renewal lease because of Lenox Hill’s alleged failure to use the subject apartments as ‘primary residence,’ the procedural rules set forth in former section 54 (E) of the Rent Stabilization Code must be observed.”