The code describes a procedure in which the landlord may demand an income certification form ("ICF") from the tenant on or before May 1 of the calendar year, which the rent-stabilized tenant must complete and return within thirty (30) days. If the tenant fails to return the form, or if the landlord disputes the income amount reflected on the completed form, the landlord may then petition DHCR to verify the tenant's income. Within twenty (20) days of receiving the landlord's petition, the Act requires DHCR to send the tenant a notice of the proceeding, and requiring the tenant to provide 'such information as the division and the department of taxation and finance shall require to verify whether the total annual income exceeds [the threshold amount].' The code requires such information to be provided by the tenant within sixty (60) days of service.

In all three cases considered by the Court of Appeals, the tenants did not timely provide the requested information to DHCR. In Dworman v. DHCR, the tenants sent the verification form back to DHCR in 71 days (11 days late) due to their vacation in Europe at the time the notice was served. In Sudarsky v. DHCR, the tenant mistakenly returned the information requested by DHCR to his landlord, and at the time the notice was served by DHCR, the tenant was suffering from clinical depression while his wife, a concert pianist, had been away on tour. In Seymour v. DHCR, the tenant simply neglected to mail a response to the DHCR's request for information.

In all three cases, the DHCR issued orders of deregulation, and in Dworman v. DHCR and Sudarsky v. DHCR, the DHCR ruled that the sixty (60) day time limit in which to respond to DHCR's request was statutory in nature and that it was outside the purview of the DHCR to change the statutory time limit. In Seymour v. DHCR, the DHCR added that the inadvertent neglect cited by the tenant did not excuse the tenant's failure to file an Answer. All three cases resulted in denials of the tenants' respective Petitions for Administrative Review ("PAR"), and mixed results in the tenants' Article 78 Petitions in the Supreme Court and subsequent appeals before the Appellate Division. The Court of Appeals granted leave to appeal and considered the three consolidated cases.

Chief Judge Kaye, interpreting the 1993 RRRA, found that the plain meaning of the statute did not require DHCR to blindly follow the sixty (60) day time limit to respond. Rather, the Court noted that the statute's subdivision (c)(3) required DHCR to issue an order of deregulation "if the tenant or tenants fail to provide the information," with the clear implication that an order must be issued only if the tenant fails to respond at all, and not necessarily within the sixty (60) day time limit. Moreover, the Court found that the statute's legislative history supports the DHCR's discretion to review a case on the merits despite justifiable tenant tardiness, as the Introducer's Memorandum in Support of the Act states that the "Division of Taxation and Finance is required by this bill to verify whether the income threshold . . . is exceeded and to advise DHCR of its finding," even where a tenant fails to return the ICF to the landlord. Thus, the Court found that the Legislature intended for deregulation proceedings to be decided on the merits.

The Court further noted that although DHCR was mandated by the same statute to: a) notify tenants within 20 days after the landlord filed a petition for deregulation, and b) enter deregulation orders on default by December 1st of that calendar year, that DHCR showed little regard for their own deadlines imposed by the statutes, as DHCR was months late in complying with both of their statutory deadlines. Thus, the Court did not exactly appreciate DHCR's argument that according to the statute, the tenant's date to provide the information was absolute, but DHCR was free to ignore its own deadlines to notify tenants and enter deregulation orders.

The Court further opined that the DHCR was free to consider a slight delay (11 days) as "so minimal as to be considered to be excusable . . .." The Court concluded by holding that where a tenant demonstrates good cause for failing to submit the required information within sixty (60) days, the DHCR may accept the late filing.

The court found that six years was an unreasonable time for the landlord to move to compel DHCR to render a determination based upon the 1992 favorable investigation, and that the landlord abandoned its 1992 rent restoration application by filing a subsequent application to restore the rent in 1998. Moreover, the landlord's time to file a PAR on the March 23, 1999 denial of the subsequent application had expired. Thus, the landlord's failure to file a PAR on the March 23, 1999 denial of the subsequent application deprived the court of jurisdiction over the Article 78 proceeding on the issue, which the court dismissed as the landlord failed to exhaust DHCR's administrative remedies pursuant to RSL 26-516(h).

The Housing Court severed the landlord's rent claim for the period prior to June 1, 1998, finding that the purported assignment, which was illegibly signed and uncorroborated by a deed to the premises, was inadequate. The Housing Court also dismissed, with prejudice, the landlord's claim for rent from June 1, 1998 through October 1, 1998, citing the Appellate Division, Second Department in David v. Priddie, NYLJ, March 25, 1980, p. 11, col. 1, which held that a landlord could not collect rent for the period of noncompliance with Multiple Dwelling Law 325(1), which in conjunction with the New York Administrative Code, Housing Maintenance Code, Section 27-2099 a.,b., requires a new owner to file a MDR within five (5) days from the date of taking title. The Court further ordered the landlord to comply with certain items requested in the tenant's Demand for Verified Bill of Particulars, or be precluded from the items sought therein.

The Court vacated the Judgment of Possession and Warrant of Eviction, subject to the tenant executing a renewal lease within twenty days from the order. In doing so, the Court found that the tenant's failure to sign the rent-stabilized renewal lease was a curable violation of her lease, and that she reacted swiftly and with diligence in an effort to execute the lease renewal upon receiving the Notice of Termination.

Nearly one year later, the landlord moved to vacate the stipulations, claiming that the parties committed mutual mistake as to the condition of the windows, or that tenant's counsel misrepresented the defective condition of said windows, which the landlord claimed were repaired in November, 1997.

The Court found that the work slip signed by the tenant merely stated that air was coming into the apartment through the air conditioner and electrical outlets, but did not state that air was not coming into the apartment though the windows. Moreover, the Court noted that the landlord merely inspected, but did not repair, the windows, and that the landlord would have to either challenge the DHCR finding that the windows were defective or make the repairs required by the DHCR, in order to receive the MCI increase. Thus, the Court refused to vacate the stipulations, finding no mutual mistake or misrepresentation by tenant's counsel.

Tenants argued that the recent case of Goldstein v. Hutton, Ingram, Yuzek, Gainen, Carrol & Bertoloti, 39 F. Supp. 2d 394 (S.D.N.Y. 1999) supports their argument that this rent demand violates the FDCPA even though the demand was not signed by the landlord's attorney. In Goldstein, the rent demand was signed by the managing agent but it was printed on the law firm's letterhead and the firm's name and address appeared on the mailing envelope and the certified mailing receipt. The federal court held that this amounted to a "sending" of the rent demand and therefore the attorneys were in violation of the FDCPA because the rent demand did not comply with a number of the FDCPA requirements. The court distinguished Goldstein from this case by observing that the Case Code reference numbers on the rent demand and the petition were different, and in any event a "least sophisticated consumer [tenants]" would not be led to believe that the landlord's attorney was the one collecting the debt since the attorney's firm name appears nowhere on the demand. The court also rejected the tenant's fall back position that the rent demand was probably drafted by the landlord's counsel. The court held that a landlord may seek the advice of counsel and counsel may assist a client to draft a demand without being in violation of the FDCPA, so long as counsel does not "send" the demand. Thus, the court held that this rent demand does not trigger the FDCPA since it was apparently signed and allegedly sent by the creditor [the landlord] (not the landlord's attorney's) which thus exempts it from FDCPA requirements.

The tenants then presented a novel issue which has never been raised in any forum as yet: that the nonpayment petition (a formal pleading) is the "initial communication" subject to the FDCPA, and since it was signed by the landlord's attorneys without providing a 30 day validation period, it is a violation of the FDCPA rendering the petition subject to dismissal in Housing Court. The FDCPA exempts formal pleadings (e.g., nonpayment petitions) for certain communications, such as the statutory-required disclosure (Section 1692(e)(11)) by the debt collector that he or she is attempting to collect a debt and that any information obtained will be used for that purpose. The court noted that this requirement "appears to encompass initial and subsequent communications." Section 1692c(c) involves the requirement that the debt collector cease communications with a debtor who refuses to pay, except that the debt collector can state that he or she "may invoke" or "intends to invoke a specified remedy" such as pursuing legal remedies and notifying the debtor of such specific remedies, like filing a lawsuit. This section likewise specifically exempts formal pleadings. On the other hand, the 30 day validation notice (Section 1642(g)) does not contain a specific exemption of formal pleadings. The tenants argue that the petition signed by the landlord's attorney constitutes the initial communication, and since it does not provide the 30 day debt validation notice, the petition violates the FDCPA since the FDCPA contains no exemption of formal pleadings where the debt collector fails to comply with the 30 day debt validation requirement in an initial communication.

The court clearly was not prone to deeming a nonpayment petition as subject to FDCPA requirements. In that regard, the court pointed to the case of Travieso v. Gutman, Mintz, Baker & Sonnenfeldt Lexis 17804, WL 704778 (E.D.N.Y. 1995) where the federal court opined that the FDCPA is intended to protect persons from abusive debt collection at the earliest stage. "Once the dispute reaches the courts, the purposes behind the FDCPA are moot." The court noted that once a case is in court the tenant-debtor "is naturally protected and safeguarded when he or she comes within the sphere of the court's influence. If any abusive debt collection practices occur, the debtor may seek appropriate relief from the court." Yet, the court misses the point and indeed begs the question given that the tenants' federal consumer rights were violated by the very pleading which failed to provide the tenants the federally mandated 30 day validation notice. This court, however, would not even explicitly acknowledge that a nonpayment proceeding constitutes a "communication" as defined by the FDCPA. The court noted that the FDCPA generally prohibits third-party communications with the collection of any debt, but exempts from that prohibition any communication undertaken with "the express permission of a court of competent jurisdiction." The court applied this exemption (Section 1692c(b) to the filing and prosecution of the nonpayment petition (if the petition constitutes a communication).

Finally the court reached the issue of whether an FDCPA violation is a defense to a summary proceeding, and answered this question in the negative. It deferred to the recent Appellate Term, Second Department case in Brooklyn, Wilson Han Assoc. v. Arthur (briefed in Housing Court Decisions for the week of July 6, 1999). That decision found that the FDCPA did not render a three-day notice defective for purposes of dismissing a nonpayment petition in Housing Court. That case, however, approached the issue from a subject matter jurisdiction angle, rather than the concept of "preemption" (discussed below). The court also relied on Gerontis v. Schwartz, New York Law Journal, October 28, 1998, an Appellate Term, First Department decision which also rejected the FDCPA's applicability in Housing Court. In that case, though, the one-year statute of limitations had already passed. The tenant there also appealed a Bankruptcy Court decision which held that there was no precedent to support the application of the FDCPA as a defense in an eviction proceeding. The court looked at an excerpt from the District Court's decision in Romea, and another case, to conclude that Congress did not intend for the FDCPA to be used a shield to avoid the underlying debt (i.e., the rent owed).

The issue of preemption involves federal law trumping state law when in conflict, i.e., the FDCPA requires a debt collector to serve a 30 day validation notice while New York state courts requires the service of a 3 day rent demand. The court examined the elements that must be present to determine if a state law should be preempted by a federal law: (1) the scheme of federal legislation is so complete and pervasive that no room is left for the state to supplement it, (2) the federal interest is so dominant that state laws on the same subject must yield or (3) the enforcement of the state statute presents a substantial conflict with the administration of the federal program. The court noted that the state legislation survives any conflict with federal laws if it is indirectly and not wholly repugnant to the federal statutes so that in the end the two are reconciled. The court noted that the Second Circuit in Romea explicitly stated that there was no conflict between New York's 3 day notice (RPAPL 711(2)) and the FDCPA. The Second Circuit, however, meant that there is no conflict because the landlord's attorney can readily serve a 30 day rent demand and still comply with both New York and federal law. The court conceded that if there was a conflict, state law would have to yield to federal law. The court also conceded that there may be a possible conflict when a landlord's attorney "sends" the rent demand without regard to the FDCPA, but for reasons unexplained the court held that such a notice would "indirectly conflict with federal law `but not [be] wholly repugnant . . so that in the end the two are reconciled.'" The court concluded by stating that since the Supreme Court hesitates to construe a state law in conflict with a federal law, the court chose to resolve any "perceived conflict" between state law and the FDCPA in favor of consistency and propriety. Thus, the court held that the FDCPA does not preempt state law.

The sublet was not done in compliance with the requirements of Real Property Law 226- b, nor with the DHCR Fact Sheet on Subletting. The tenant argued that the landlord orally consented to the sublet, to the effect that the landlord waived any objections to it. But the court noted that the landlord said it had to be one pursuant to DHCR requirements and these were clearly not met by the tenant, therefore there was no consent. For example, the application to sublet is supposed to be sent by certified mail, not regular mail. The court noted that even if the sublet were properly made, the tenant had unclean hands because she represented that she would be with her terminally ill sister and made no mention of buying and living in a condo. The tenant claimed that she bought the condo because her sister could not climb the stairs in the tenant's apartment building, that she wanted to share the caring with her mother, that her sister was in and out of intensive care, and that she wanted to spare her sister embarrassment. Yet, the court noted that the tenant's mother is currently in Spain, the tenant's apartment is only ten minutes from her present employment, and no mention was made of which hospital the sister visits regularly. The court concluded that the tenant was using her sister's illness as a pretext to keep the apartment while living upstate. The court gave the tenant ten days to cure the illegal sublease.

The court found that the first condition was met since the tenant had been on public assistance for a number of months. The second and third conditions, however, were not present in the tenant's written request for dismissal of the nonpayment petition. The tenant argued that a letter dated October 14, 1997 from HPD to Human Resources Administration ("HRA") constituted notice (the third condition). The court disagreed because the letter did not refer to any particular violations at any particular building; it was just a general letter that HPD will advise the HRA on an ongoing basis of HPD-issued violations in New York City multiple dwellings. Also, the letter cannot be used to address violations which arose after the letter issued. Thus, the court ruled that a trial was needed to determine if the tenant satisfied the third Speigel criteria of notification.

With respect to the second condition, hazardous violations of record, the evidence presented involved violations occurring at a point in time after the period in question in this nonpayment proceeding. The court, however, held that the tenant should be allowed a trial to prove that violations existed during the six months she withheld rent. Tenant's motion papers alone failed to prove this because the computer print-outs she attached from HPD data base do not on their face correspond to portions of the HPD inspection report. The landlord argues that the court should reject the Spiegel Law defense, and not allow tenant an opportunity at trial to prove the defense because the violations were allegedly corrected as soon as they were reported to the landlord by the tenant. The landlord also argued that the electrical violations were caused by tenant's use of a commercial sewing machine. Finally, the landlord argued that the tenant deprived the landlord of access to the apartment to make the repairs. The court held that the landlord could raise all these grounds at trial.

For purposes of a motion to dismiss the court relied on the facts as presented by the party against whom the relief is sought, the landlord. Thus, the court looked at 1993 as date that the mother permanently vacated the apartment. The court noted that a child who has resided in the apartment since the inception of the lease is entitled to be substituted as a party to a renewal lease when the prime tenant permanently vacates. Further, the child's absence due to enrollment as a full-time student does not interrupt any residency requirements. In a case relied upon by the landlord involving an infant (Quiala v. Laufer, 180 AD2d 31, First Dept. 1992), it was held that there exists "an established presumption that the residence of the child is the residence of the parents," and that the child's primary residency "is tied to the individual adult under whose parental authority and control they are raised." The presumption, however, may be overcome and rebutted "by proof that the parties have surrendered parental control and that such control is being exercised by some other person with whom the child lives." In Quiala, where the infant lived with his guardian out of state at the time the lease expired, the infant was not entitled to succession rights. The controlling facts look to the residence of the infant at the time the succession right is asserted. There was a case, however (Doubledown Realty Corp. v. Harris) where the court allowed a 15 year old grandson to succeed to the lease even though his mother only lived in the apartment sporadically.

The court noted that in December, 1993, the daughter was one month shy of turning 18, a fact which standing alone may not be enough to rebut the presumption "not to be lightly case aside" that her primary residence followed her mother. Although she was still a minor, she maintained the apartment as her primary residence because the totality of the circumstances indicate so. She lacked parental control or control exercised by some other person with whom she lived. The affidavits from her doctor and grammar and high school headmistress together with her affidavit and other credible documentation indicate that she in fact resided in the apartment until September 1994 when she left to attend college full-time. Proving her ongoing nexus to the apartment as her primary residence, the court held that she was entitled to succession rights. The court noted the vast array of documents indicating her return to the apartment after college. The court directed the landlord to tender the daughter a rent stabilized lease in her name in thirty days.

The tenant seeks a judgment annulling HPD's decision that she is no longer eligible for Section 8 housing assistance, and further she wants benefits retroactive to 1997 when HPD cut off her subsidies. Alternatively, the tenant sought to have the matter remanded to HPD for a new hearing. The tenant argued that HPD did not comply with federal notice provisions, that the hearing never cured the notice defects and that she was entitled to receive benefits pending the outcome of the hearing, and that HPD failed to issue a written determination following the hearing which is required by the federal Section 8 rules. HPD argued to the court that the Article 78 was barred by the statute of limitations because it should have been brought within four months after the tenant received the letter terminating her Section 8 benefits. HPD also argued that their decision was rational because the tenant failed to report her income and her daughter's employment in violation of HUD rules and that she made false statements relating to recertification of the benefits and that 30% of the adjusted family income was greater than the apartment's rent so she should not be entitled to any benefits. Apparently, HPD didn't address the issue of why they did not render a written decision following the hearing with the tenant.

The court held that the statue of limitations was not applicable because the letter terminating the tenant's benefits was not a final determination. The court also found that the only hearing the tenant had was informal and likewise did not constitute a final determination because HPD failed to issue a written decision thereafter as the law requires them to do. Since no final determination was ever issued by HPD, the tenant's time to challenge her termination of benefits never expired, thereby making her Article 78 timely. The court also found that HPD's notice terminating her benefits was "woefully inadequate and failed to comport with the [federal] notice requirements." The tenant received no notice of her right to a hearing, a right to examine HPD's documents before a hearing, or her right to be represented at a hearing, all of which are required notices under federal law. Further a written decision was necessary. HPD was required to provide the tenant an opportunity for a hearing before it terminated housing assistance payments. Since HPD failed to comply with federal law, the court annulled the decision and restored the tenant's housing benefits. The court neglected to rule whether the benefits were restored retroactively from the time they were terminated, or whether they would be restored only as of the date of the decision.

While the illusory prime tenancy case was pending, the DHCR continued to process the overcharge complaint and demanded that the owner produce all leases back to April 1, 1980. The owners replied that they only had leases back to 1983 for this apartment and they were all with Verden. The DHCR thereafter informed the landlord that the tenant's complaint would be treated as a timely challenge to the initial rent registration statement (i.e., a Fair Market Rent Appeal, "FMRA"). The DHCR ruled that the overcharge, including treble damages, amounted to over $62,000. A hearing took place as well and the DHCR also determined that Verden was an illusory prime tenant and found that the rent registration information conflicted with the actual leases. The DHCR froze the rent at its 1984 rate which was $182.03, in contrast to $425, the amount of rent the tenant paid upon taking occupancy in June, 1984. The owner filed a PAR on a multitude of grounds, including lack of notice or sufficient time to respond to papers, as well as asserting that it was the agency's policy to make the illusory prime tenant, not the landlord, liable for overcharges. Further, the landlord argued that the DHCR lack authority to convert the overcharge case into a FMRA. The tenant argued that since Verden was illusory it was as if no rent registrations had ever been filed and therefore an FMRA was appropriate.

The PAR Commissioner found that an illusory prime tenancy did exist and thus the tenant, who filed his complaint in 1986, had a right to challenge the FMRA for the year 1984. Since the complaint was filed in 1986, the owner was required to provide a rental history from 1982 onward (i.e., within four years of the filing of the complaint). The DHCR determined that the owners were not exempt from producing the leases even though they only bought the building in 1983 because they had a duty to obtain the rent history. The DHCR rejected virtually all the owner's claims about lack of notice and due process. With some minor modifications to the underlying order, the PAR basically upheld the overcharge and treble damages. The owners appealed this decision in an Article 78 proceeding, although they did not dispute the illusory prime tenancy finding. The owners argued that the DHCR should not have gone back to 1982 to set the base rent, but rather only to 1984. The owners continued their argument that they were denied due process.

The Supreme Court judge found that DHCR's decision was neither arbitrary or capricious and is supported by the record. The court held that since Verden was an illusory prime tenant, the DHCR had a right to convert the overcharge claim into a FMRA since no proper initial rent registration had been filed. Thus, since any initial rent registration with an illusory prime tenant would be null and void, a 1984 registration in Verden's name is of no value and therefore the DHCR could go to 1982 to determine the initial rent. The penalties for failure to initially register the rent provides for a bar to the collection of any rent increases. The court also found that the owners were provided with due process. They and their attorney had ample time (roughly 11 years) and notice to submit either the leases or the rental history and of their own accord failed to do so. They should not be heard to complain now.

In light of the landlord's formidable evidence the court set the matter down for a traverse hearing, which is a hearing to determine if the tenant was properly served. If the tenant had received the nonpayment petition, she would have come to court and resolved the matter back then. If, however, she was never served the papers then she was deprived an opportunity to resolve the case before she was evicted. The process server testified that he made conspicuous place service of the legal papers (on the door or under the door) after making prior attempts to personally serve the tenant. Tenant's daughter and a neighbor testified that the process server testified incorrectly with respect to the door, that it was in fact gray, not brown and not painted gray until after the eviction (implying that the process server was only there recently and not in August when the papers were supposed to have been served). The Appellate Term, however, noted that the process server's affidavit of service for the three day notice indicated that the door was brown while his affidavit of service for the petition indicated that it was grey, which leads to "the almost inescapable conclusion" that the door had been painted in the interval between the two services. They also disputed the process server's testimony that he rode up in the elevator because they said the elevator had been broken for a year. The tenant did not testify.

The judge examined the process server's log book and found an overwhelming majority of unsuccessful first attempts at service for other cases. He thereupon ruled that service in this case was not proper. The judge vacated the judgment and restored the tenant to possession of the apartment. After the tenant's eviction, the landlord had re-rented the apartment to a new tenant, so the court ordered that the new tenant had to vacate. The tenant, however, was unsuccessful in getting the marshal to evict the new tenant because the proceeding had been marked dismissed. So the tenant had to return to the court for relief on this and further sought sanctions against the landlord.

The Appellate Term reversed the lower court's determination and found that the tenant failed to establish an excusable reason for defaulting and also did not have a meritorious defense because her sworn assertion that rent was paid was shown by overwhelming proof to be false. The Appellate Court found the process server credible and the weight of the evidence against tenant, including her failure to testify. Thus, the tenant was not entitled to be restored to the apartment. As an aside, the Appellate Court noted that the lower court was incorrect in awarding the tenant a possessory judgment because only a party who commences a proceeding can obtain a judgment of possession.