The tenant's witnesses included two people from the neighborhood who testified that they saw him three to four times a week on a regular basis on the street the tenant lived on. All the tenant's documentation, including tax returns and W-2's, list the apartment as his residence, and even his New Jersey driver's license lists his New York apartment as his residence. The landlord asked the court to draw a negative inference from the fact that the tenant's girlfriend did not come to court to testify. The court, however, found the tenant's testimony credible that his girlfriend had an unpleasant encounter with the landlord and refused to come to court. Based on all the foregoing, the court determined that the tenant did indeed occupy the apartment as his primary residence and dismissed the petition.

The tenant argued that the Ithaca Law known as chapter 177 is preempted by State Law, specifically RPAPL 715 and RPL 231, the statutes covering evictions for unlawful usage of an apartment. Chapter 177 mirrors these two laws, but the main difference is that Chapter 177 expands the grounds for eviction to include illegal drug use and possession. The tenant argued that the Legislature chose not to touch private noncommercial usage of drugs. The court regarded this as a non-issue and saw the real issue as whether chapter 177 directly conflicts with state law. The court stated that the mere fact that the Legislature chose to address illegal business activity in RPAPL 715 in no way evidences an intent to preclude a municipality from exercising its power by similarly addressing illegal private activities. It is only when the State has indicated a desire or intent to occupy an entire field to the exclusion of local law that the city is powerless to act. That is not the case here. Further, the tenant has failed to show how chapter 177 expressly conflicts with any provision of State law. In order to satisfy the inconsistency prong, it must be shown that the local law permits conduct prohibited by State law, prohibits conduct specifically permitted by State law or imposes restrictions on rights granted by the State. The court provided a host of examples from other cases to support the legal theory that courts consistently uphold local laws that provide details of a topic on which State statutes remain silent, where the local ordinance supplements, rather than supplants the State Legislation.

The court found that chapter 177 is consistent with the State statutory scheme of grounds for eviction based on illegal activity. Use and possession of illegal drugs is an illegal activity. The local ordinance merely supplements the State statute by adding additional grounds for eviction. Chapter 177 is not inconsistent with RPAPL 715 because it does not impose additional restrictions on rights granted by the State. Thus, the court concluded that chapter 177 is not preempted by State law. The court also rejected the tenant's privacy arguments, holding that "while people have a privacy interest in their homes, they have no corresponding right to violate the law in the privacy of their homes. The court ruled: "Clearly [the tenant] has no legitimate privacy interest in the possession or use of illegal drugs in his apartment."

The landlord's witness, a registered psychiatric nurse, through an affidavit alleges that the tenant is "functionally disabled' due to "severe and persistent mental illness" and that the tenant is "mentally incompetent to provide for his own interest in these matters." The court concluded that the landlord's position is inconsistent. If the tenant suffers from the mental disabilities claimed by the landlord, then the tenant certainly could not have the requisite intent to abandon the premises (since an abandonment must be done knowingly). The court concluded that the tenant did not intend to abandon the premises. Indeed, he was removed involuntarily by the police in handcuffs. Further he never returned the keys, and was denied entry when he tried to return to his home. The court concluded that although the tenant may suffer from a mental illness and may be dangerous to himself or even the residents of the building, the landlord must bring a proper court proceeding to evict him because there is no proof that the tenant abandoned his home. The court restored the tenant to his apartment immediately.

This case actually goes back to January 1994 when the landlord started a nonpayment proceeding and the tenant argued that the landlord overcharged by $642 per month since no Initial Rent Registration was ever filed for the apartment. Tenant's position was accepted by Judge Rodriguez in reliance on, for example, DCHR records revealing that the apartment was not registered until July 25, 1994, i.e., after the nonpayment proceeding had commenced. The July 25, 1994 retroactive filing was for the 1990 apartment registration and alleged a monthly rent of $600 as per a lease from December 15, 1989 to December 14, 1990. On December 14, 1990, the landlord filed a 1989 registration statement claiming that for the period from April 1989 the tenant was a Mr. Shaw. The landlord also claimed that the apartment had been registered in 1987, but Judge Rodriguez found this allegation contrary to the DHCR records. The landlord also alleged an Initial Rent Registration of January 10, 1991 with the tenant listed as Ms. Burton but apparently this tenant did not reside in the apartment on that date.

The Rent Stabilization Code provides penalties for an owner's failure to properly and timely comply with the initial or annual rent registration, including the ability to collect rent increases. In finding that the landlord failed to comply with proper registration filings, Judge Rodriguez set the legal rent at the last rent controlled rent of $75.20 per month and subsequently found that the tenant suffered an overcharge of $25,058 and treble damages of $75,174. The decision was appealed and the Appellate Term, Second Department reversed and ruled that the legal regulated rent could not be established until after the tenant filed a Fair Market Rent Appeal (i.e, meaning after the tenant is properly served the initial rent registration). Hence, the tenant's rent overcharge claim did not lie because the legal regulated rent had not yet been established.

In opposing tenant's motion, the landlord claims that she did file an Initial Apartment Registration with the DHCR and on the same day she mailed a copy of same to Mr. Shaw, the original tenant, albeit in care of the current tenant, Mr. Morrison. The landlord stated that the notice was sent by a certificate of mailing, and argued that such mailing was all that was required. The landlord also argued that the tenant waived his right to file a Fair Market Rent Appeal because he failed to file within 90 days of the mailing. The landlord also argues that the legal regulated rent is the lease rent of $642 per month. The court referred to the law that notice of the intial legal registered rent must be by certified mail, not certificate of mailing. Moreover, the landlord mailed the notice to the wrong apartment and not directly to tenant. Since the landlord did not serve the notice by certified mail, even if the landlord properly registered the premises, the legal rent has therefore not been established since the service of the notice was not proper. Hence the tenant's 90-day period for filing a Fair Market Rent Appeal has still not run, and therefore the court dismissed the nonpayment petition because the rent demanded by the landlord is not the legal rent.

This is an 8 unit building on West 19th Street which was, until 1981, fully occupied by residential tenants. The prior landlord went on a "reign of terror" according to the DHCR to empty the building of tenants. He installed prostitutes, drug addicts and goons who engaged in nefarious activities to coerce the tenants to vacate. Thugs hired by the landlord used sledgehammers to damage building systems and entrance doors to individual apartments. Fires were set, apartments flooded, and property stolen. An 83-page indictment and conviction was brought against the former landlord for his activities between October, 1981 and January, 1983. In 1986 the prior owner pled guilty and received a substantial prison sentence. The DHCR issued a 43 page decision finding a systematic pattern of harassment by the prior owner. DHCR issued an order precluding any rent increase until the agency issued an order removing the finding of harassment. The decision has not ben appeal nor modified. The damage to the building was significant: windows, floors, boiler, pipes and electrical fixtures suffered major damage. The current landlord purchased the building in 1987 as the prior landlord was on his way to jail.

In early 1987, the new landlord reached an extensive written agreement with the remaining tenants of the three buildings. The agreement contemplated significant repair of the buildings and transfer of the tenants to the first three floors of 446 West 19th Street. The agreement provided that the landlord would receive MCI (major capital improvements) increases in rent for the repairs, but that the MCI increases would not take effect for 5 years. The landlord made repairs, many of which were disputed at trial, added a fifth floor to the subject building and combined the fifth floor with the two existing fourth floor apartments to make two duplex apartments, one of which is the subject of this nonpayment trial. Landlord claimed that its substantial rehabilitation removed the building from rent stabilization. The fourth floor duplex (4A) was rented to the current tenant's predecessor and the "first rent" was set at $1,495 per month, far in excess of the prior monthly rent of $138.36. The current tenant paid $1,400 per month from November 1, 1994 through October 31, 1995. When the landlord attempted to increase the rent to $1,675 per month (in excess of the increases permitted under the Rent Stabilization Code), the tenant withheld rent on grounds that she is a rent stabilized tenant. The landlord then brought a nonpayment proceeding.

The court undertook a discussion of "substantial rehabilitation," preliminarily noting that neither the Rent Stabilization Law or Code expressly defines what work qualifies as substantial rehabilitation. The DHCR has Operation Bulletin 95-2 which provides guidance on the agency's criteria for substantial rehabilitation. To qualify under DHCR criteria, a landlord must completely replace with new systems at least 75% of 17 building-wide and apartment systems, including plumbing, heating, gas, electrical, windows, etc. The court, however, noted that it is not bound by the DHCR's criteria because Operation Bulletin 95-2 arose out of a statutory reading and analysis of the Emergency Tenant Protection Act which entails an accurate interpretation of legislative intent (as opposed to understanding DHCR's internal operational practices or evaluation of factual data). The court regarded Operation Bulletin 95-2 as "instructive."

The court held that the substantial rehabilitation exemption from rent regulated housing must be viewed in the context of the remedial purposes of the ETPA and RSL to expand protections of the rent laws and prevent the exaction of unreasonable and oppressive rents. Although the Appellate Division has ruled that the words substantial rehabilitation must be accorded their commonly understood meaning, the Appellate Division has also stated that as an exception to the remedial provisions of the RSL, the exemption must be strictly construed. (In other words, garden variety renovations cannot be elevated to a substantial rehabilitation standard so as to exempt a building from rent stabilization status). The court found that an exemption is not intended to take buildings outside the purview of the rent regulatory laws for mere repairs, even if substantial, but is intended as a financial incentive to landlords to truly rehabilitate a building in order to create habitable apartments for residential use. The court did not regard the renovations in the case at bar as comporting to the intent of the statute.

In a key sentence summarizing the court's conclusion of this situations, the court held: "If a landlord could eliminate rent regulation through criminal conduct and wanton destruction of building systems designed to expressly empty the building of regulated tenants to take advantage of the real estate market and then claim exemption from rent regulation when the destroyed systems are repaired, obviously enormously increasing the sale value of the building, the beneficent purpose of this exemption would be turned on its head." The court further held: "Intentional criminal conduct by a landlord specifically as part of a criminal conspiracy to empty the building of its tenants and obtain the benefit of a favorable real estate market was not within the Legislature's contemplation of the beneficent aspects of this legislation. Permitting an exemption under such circumstances would contradict the policies underlying state and local anti- harassment laws."

The court recognized that the current landlord did not destroy the building. Nonetheless, the court concluded that the current landlord is bound by the acts of its predecessor. The court cited an Appellate Division case which held that once a finding of harassment has been issued in the form of an order against the landlord, with sanctions imposed, even an innocent subsequent landlord must come forward with convincing evidence that the predicate for the harassment order no longer exists, before the findings of harassment may be vacated and sanctions lifted" and the sanctions are not lifted retroactively. The current landlord was aware of its predecessor's past. The statute, the court noted, was not created to allow a windfall to the old or present landlord where criminal destruction accounted for the need for substantial rehabilitation. The court roundly rejected the landlord's position that the manner in which the building's destruction occurred is irrelevant.

In any event, the court found that the landlord's repairs fell far short of substantial rehabilitation. The landlord claimed that it spent two million dollars renovating the 3 buildings, but was unable to allocate how much was spent on the building involved in this proceeding. No contract was ever produced specifying the scope and cost of the work. Although the work was done roughly 9-11 years ago, the court did not allow the landlord to use the lapse of time as an excuse for its failure to produce documentation of the work claimed to have been done. The contractor testified that there was a contract (now unable to be produced). Significantly, the contractor is presently a principle of the corporate landlord. The court was of the opinion that the contractor-landlord should have retained records if it was later down the road going to claim exemption, since the documentation would have to back up an exemption claim. Additionally, the court noted that had the landlord/contractor obtained all the necessary work permits and sign- offs from government agencies, including a certificate of occupancy, there would have been reliable verification of the scope and quality of work conducted. The landlord produced very little documentation of the work it even claimed to have done.

The court believed landlord's testimony that he replaced the roof of the building in conjunction with the creation of the new penthouse apartments (one of which is the unit subject to the trial proceeding). The work was performed to enlarge apartments 4A and 4B to create a first rental for these units and the court ruled that the landlord is entitled to a first rent on this unit. The rent was raised from $138 to $1,495 even though there is an administrative finding that the prior tenant vacated as a direct result of harassment. The court raised a serious public policy issue: "whether it is appropriate to permit a landlord to piggyback work creating two new top floor units to augment a claim for substantial rehabilitation of the building based upon installation of a new roof that necessarily was changed when the top floor was added, creating two new apartments with first rents, especially in the absence of documentary evidence or credible testimony proving that the roof itself otherwise needed total replacement."

The court made findings of fact and determined those items that were actually renovated or installed by the landlord and those that were not renovated or installed. The court concluded that with the exception of the penthouse apartments, the repairs that were done came about due to the landlord's agreement with the remaining tenants to do various work. This work, the court found, could qualify for MCI rent increases, and indeed the parties' written agreement contemplated that the landlord would receive MCIs for this very work. In sum, the court concluded that the landlord's work did not rise to the level of substantial rehabilitation and therefore the building was not exempted from rent stabilization. Additionally, the facts indicate that several of the tenants paid for a significant portion of the repairs or improvements to their apartments via credits from settlement of their claims for damages. The landlord should not be able to include the costs of these repairs in its final tally of the total costs of the alleged substantial rehabilitation.

Since the building is subject to rent stabilization, the court needed to consider how much rent the tenant should have to pay. No certificate of occupancy was ever obtained after the work was done, including the creation of the new penthouse units. The landlord's position is that it didn't know it needed a certificate of occupancy until this case arose and that it had performed all the work that was necessary in order to get a certificate of occupancy, and that the Department of Buildings failed in its administrative duty to issue a certificate of occupancy. The court faulted the landlord, "an experienced builder" for never bothering to ascertain if a certificate of occupancy was issued or to ensure that the Buildings Department inspected and signed off concerning the particular work performed. Had the landlord undertaken this process, the court noted that more documentation would have been available to support the landlord's claims as to what renovations were done to the building. Much of the work done in this building occurred prior to any record of the issuance of any permit. A temporary certificate of occupancy was issued in October, 1999. A Department of Buildings employee testified that had a sign-off of the work existed, for example, the plumbing work, a certificate of occupancy could have issued. (Most of the sign-offs were received). But no certificate could issue based on expired permits and the landlord's permits had expired in 1989 and were not renewed. Also, a certificate of occupancy could not issue if there were violations of record, and violations existed even at the time of trial.

A certificate of occupancy is not required for buildings built before 1929, as this building was, unless substantial alterations occurred, and such alterations did occur here with the creation of the duplex apartments. Since landlord never obtained a certificate of occupancy, and the court rejected landlord's contention that the Department of Buildings was at fault in failing to issue a certificate, the court was required to examine the rent forfeiture provisions of the Multiple Dwelling Law. The harsh penalties of 100% rent forfeiture for a landlord in the absence of a certificate of occupancy where one is required will not be enforced unless there are also conditions which adversely affect the habitability of the structure or render the tenent's occupancy illegal. The court concluded that this landlord failed to take appropriate steps to have inspections and sign-offs so that its work could properly be reviewed by the Department of Buildings, especially where an additionally floor is created on a roof. On the other hand, most of the branches of the Department of Buildings did sign off on work and a temporary certificate of occupancy was ultimately issued. Since the Department may not issue a temporary certificate of occupancy without inspecting the building, the court found that it appears that any shortcomings in the construction did not warrant denial of a certificate of occupancy and therefore the court would not invoke at this time the rent forfeiture provisions of the Multiple Dwelling Law.

The court then set about to determine whether the tenant had overcharges. The court cited case law for the principle that when a landlord creates an apartment in a space that was previously non-residential the owner is entitled to charge the first tenant a free market rent which is subject to a fair market rent appeal, although none has yet been filed. The tenant believes that the prior tenant (the first rent tenant) paid $1200 per month, as opposed to $1495 as the landlord claims, although neither party presented proof at trial as to what the first tenant paid. Since the current tenant has the burden of proof to prove an overcharge, the court took the $1495 sum as the starting point, and in that regard no overcharges occurred when the lawful guidelines increases are considered. Once the landlord properly registers the apartment by filing an RR-1 registering the first rent, then the court can make a final calculation based upon the tenant's overcharge claim. The belated registration will permit the landlord to prospectively charge the full legal regulated rent for the apartment, defined as the first rent charged this tenant of $1400 per month, plus any lawful increases pursuant to the rent guidelines order. The landlord is not permitted to retroactively collect rent increases. For the two months sought in the petition, if the apartment is properly registered the landlord may collect rent based on the initial rent of $1400 per month. The court gave the landlord 60 days to properly register the apartment.

The landlord filed an Article 78 (i.e., appeal of the PAR) stating that the waterproofing and pointing was distinct from the prior similar work on the north side of the building. The landlord argued that the Rent Administrator never asked for additional documentation, nor reject the application on that ground. Only on the Article 78 did the owner finally submit a contractor's statement and building diagram, curing the defects cited in the denial of the PAR. The Supreme Court judge thereupon sent the case back to the DHCR to review the belatedly submitted documentation. The judge noted that her decision was motivated by "strong policy grounds in favor of encouraging landlords to keep up the quality of housing stock to the benefit of everybody."

The Appellate Division reversed and held that the lower court "based its determination on an improper standard of review and improperly applied that standard to evidence which was submitted for the first time in an Article 78 proceeding." Rather, an MCI application entails the DHCR's expertise in evaluating factual data and the lower court should have deferred to the agency. The landlord has the burden of proving entitlement to an MCI rent increase and if a landlord does not submit the appropriate documentation to the Rent Administrator, then the landlord should not be given second chances on appeal (either a PAR appeal or an Article 78). Under DHCR procedure, a landlord must produce a contractor's statement that the contractor inspected the premises before and after all the necessary work was performed, and a diagram indicating the location of the work. The Rent Administrator reasonably denied the landlord's application in the absence of the contractor's documents. The Appellate Division further found that the DHCR is under no legal obligation to search its own records to determine if the landlord had already received an MCI rent increase before for this or any other similar work.

Finally, the landlord challenged the DHCR's definition of what constitutes a "useful life." The Appellate Division noted that the DHCR interprets this term as meaning "that the useful life of pointing is not limited to the specific pointing done at the time the MCI increase is granted but also to any subsequent pointing done at any location in the building within the useful life of the original work." The Appellate Division did not regard this interpretation as irrational because to qualify for na MCI rent increase for pointing and waterproofing , te owner must prove that the work was necessary and comprehensive. If the owner's application is approved, all the tenants' rents would increase, not just the rents of the tenants in the area where the work was done. An MCI rent increase will be denied if the work is performed piecemeal and not completed within a reasonable time. The Court noted that DHCR's position does not force the owner to do unnecessary work because the owner can always apply for the waiver of the useful life rule in the appropriate case.

In the next ten years, some owners began modifying the garden units by eliminating shared facilities like common heating plants and selling off individual units consistent with their certificates of occupancy. In a 1983 decision (involving another case) the DHCR's predecessor agency took the position that tenants previously part of a garden complex will not lose their rent stabilization rights if the number of units in a building is reduced to less than 6 units (the threshold for stabilization status). The board's opinion was appealed in an Article 78 proceeding and subsequently affirmed by the Supreme Court. In 1986 four of the units in the subject building were severed from the rest of the garden apartment and a certificate of occupancy was issued to reflect this. The unit in litigation here was part of the severed four family building. Before the new certificate of occupancy for the four-family premises was issued in 1986, the tenant filed a rent overcharge complaint with the DHCR which rendered a decision in 1985 finding an overcharge occurred.

In 1989, the current owner purchased the subject premises and continued to register the subject apartment (as did the prior owner) with DHCR and offered rent stabilized renewal leases until July 31, 1999. Thereafter, the landlord refused to offer a renewal lease and instead filed an application with DHCR to have the subject building declared exempt from rent stabilization as it contained less than six units, or only four units. The tenants in the subject apartment responded to this application by providing the DHCR with the crucial information that their apartment was part of a garden apartment development that was subject to the Rent Stabilization Law since 1969. In response, DHCR sent an inspector to the subject building who duly reported that this was a four family building. As a result, DHCR issued an order deregulating the subject building as it indeed contained less than six housing units. The senior citizen tenants did not file a Petition for Administrative Review.

The Court stated that this decision was a product of the landlord's omission of significant background facts. The Court further reasoned that in deregulating the subject apartment, DHCR simply relied on its inspector's report and overlooked the history of the subject premises. However, the Court correctly held that it does not have the power to collaterally attack a final order of DHCR. However, the tenants' attorney argued that an interpretation of DHCR's decision as deregulating the subject apartment would be in violation of the Rent Stabilization Law as well as the applicable case law. The Court agreed with this argument and further determined that although it may not collaterally attack DHCR's order, " [c]learly DHCR has the power to modify or revoke its own final order where such order 'was the result of illegality, irregularity in vital matters or fraud.'" Accordingly, the Court interpreted the DHCR deregulation order as applicable to the subject building as opposed to the tenants' individual apartment. As a result, the court granted the tenants' motion to dismiss the petition which prevented the eviction of the tenants.

In January 2000, landlord offered tenants a renewal lease with a term commencing retroactively to April, 1999. Tenants declined to sign the lease with an incorrect with a term commencing June 1, 2000. Based upon tenants failure to execute the renewal lease, landlord served tenants with a notice to cure and subsequently terminated their tenancy and commenced the within proceeding. Tenants moved to dismiss the petition and landlord cross-moved for summary judgment. The Court stated that the Rent Stabilization Code (RSC) 2523.5 governs the procedure for renewing rent stabilized leases and requires that landlord notify tenant whose lease is expiring, whether or not there is an offer or a refusal of a lease renewal within a specified period. Specifically not more than 150 days and not less than 120 days prior to the end of the tenantþs lease term. If a landlord fails to timely offer a renewal lease RSC 2523.5(c) provides that, þ...the one/or two-year lease term selected by the tenant shall commence at the tenantþs option, either (1) on the date a renewal lease would have commenced had a timely offer been made, or (2) on the first rent payment date occurring no less than 120 days after the date that the owner does offer the lease to the tenant.þ The above language of RSC 2523.5(c) is mandatory and the tenant may choose the date that a renewal lease shall commence according to the statute.

In this case the tenants, upon receipt of the retroactive renewal lease in January 2000 informed landlords by their attorneys that they chose to have their renewal lease commence on June 1, 2000. The Courts have repeatedly upheld prospective renewal leases in cases where landlords are late in offering renewal leases, and the Appellate Division, First Department has adopted the general rule used by the Conciliation and Appeals Board that renewal leases which are untimely offered should begin prospectively. The Court also addressed the language of a stipulation entered into by the parties and held that under the terms of the partiesþ stipulation the landlord has no right to offer a retroactive renewal lease in apparent disregard of RSC 2523.5(c). The landlords also argued that the tenantsþ remedy is not to refuse to execute the untimely offered lease but to execute it and return it with the correct dates of the tenantþs choosing. The Court held that the tenants did in fact do this through their attorney and are entitled to have the renewal lease commence on June 1, 2000. Accordingly, landlordþs proceeding was dismissed with prejudice.

The Court held that the landlord failed to provide a reasonable excuse for its delay of more than a year in commencing the nonpayment proceeding. However, despite landlordþs unreasonable delay, tenant does not have a valid laches defense. Landlord claims that tenant cannot show that he was in fact prejudiced by the alleged delay. Tenant interposed a defense pursuant to MDL302-a and in accordance with the statute had deposited all rent demanded in the petition with the Commissioner of the Department of Finance. Landlord alleged that there is no resultant prejudice to tenant since he does not even face eviction because all the rent has been deposited.

The essential elements of laches are, þunreasonable and inexcusable delay by the petitioner in undertaking to enforce its rights which result in prejudice to the opposing party.þ One reason for the þstale rentþ defense is that landlords in an attempt to evict deliberately delay in commencing a proceeding so that rent builds up to an extravagant amount and the tenant is unable to pay. The tenant has the burden of proving the landlordþs ulterior motive. In order for a tenant to prevail on a claim of laches the tenant must show the delay resulted in actual prejudice to him or caused him to change his position. Once the tenant has satisfied the elements of laches the burden shifts to the landlord to provide a reasonable excuse for the delay. The prejudice necessary is the possibility of a tenantþs eviction due to an inability to pay the accumulated rent. In this case the tenant does not face eviction and cannot establish the requisite prejudice, and the Court dismissed the affirmative defense of laches.

With regard to punitive damages for breach of the warranty of habitability, a tenant must allege facts indicating that the landlordþs conduct rose to the level of moral culpability or criminal indifference to civil obligations. In this case there were several disputed facts and the Court left the decision to a trier of fact and set the case down for a trial on the issue of punitive damages.

The statutory scheme provides for an issuance of a final order issued by the loft board setting the initial regulated rent after which, þeach residential occupant qualified for protection pursuant to this article shall be offered a residential lease subject to the provisions...set forth in the Emergency Tenant Protection Act of 1974...þ In this case, the loft board has not issued a final rent order with respect to tenantþs unit. Tenant's payment of permissible Rent Guidelines Board increases during the transition did not create a rent stabilized lease or term.

The Appellate Court affirmed stating that,þ DHCRþs determination to process the tenantþs þrent overchargeþ complaint as a fair market rent appeal and to adjust the legal regulated rent to the fair market rent and to direct the owner to refund the excess rent but not to impose treble damages, interest and attorneyþs fees was rationally based upon the record and in accordance with applicable law.þ

The tenant filed a PAR in 1991 challenging the denial of his rent overcharge complaint. Almost 4 years later tenant sought to supplement his submission in the pending PAR by stating that RSC 2521.1(b) was inapplicable because landlord never filed a valid (residential) registration with the DHCR. In 1996, DHCR rejected the supplemental submission as untimely and denied tenantþs PAR ruling that the issue had been long joined before the Rent Administrator and that included the commercial use of this apartment.

Tenant successfully challenged the ruling by Article 78 proceeding and upon new hearing, DHCR again ruled that the legal regulated rent was that agreed to in the 1987 vacancy lease. In a second Article 78 proceeding, tenantþs new theory was based upon an allegedly invalid initial registration. In 1998 DHCR once again ruled that the initial rent established upon vacancy of the professional occupancy in 1987 was $1800/month but now also held that because the current tenant had never been served with a copy of the initial amended (þRR-1") registration form, the rent had to be considered frozen at that rate of $1800, retroactively, until landlord completed its registration requirements. This rollback to 1987 resulted in an overcharge of $46,409.50, including $10,788.88 in interest. No treble damages were awarded.

In the current Article 78, the landlord is challenging DHCRþs latest ruling. The Court dismissed landlordþs petition noting that the RSL required initial registration of stabilized apartments and the timely filing if an þinitial or annual rent registration statementþ and service of the þannual statementþ before a landlord can collect rent in excess of the previously established legal regulates rent. The Appellate Division stated that this reasoning is unpersuasive and DHCRþs latest ruling þirrational.þ

The Court held that the tenant was served with annual rent registration statements, including an initial statement from the commencement of tenantþs lease indicating rent of $1800/month which was less than the previous tenant's rent. The RSL does not require service of an initial registration statement on a subsequent tenant. Additionally, the Court stated the matter was þlaid to restþ 4 years ago when DHCR rejected tenantþs untimely submission in this regard. Judgment reversed and landlordþs petition to vacate and annul the rollback determination granted.

Respondents allege that although they possess and occupy all rooms of the subject building the notice to quit made no mention of the first floor and as such was misleading and inaccurate. (Petitioner filed second holdover to recover possession of the first floor). The Court stated that the failure to mention the first floor is of no consequence to Petitionerþs right to obtain possession of the dwelling units actually described in the notice to quit.

Respondents also allege that the notice to quit is contradictory in that it fails to provide Respondents with adequate notice of the grounds upon which the proceeding is based because it alleges that Respondents are both mortgagors as well as licensees. The Court stated that no contradiction exists. Respondents formerly held a mortgage on the subject premises but lost title for defaulting on the payments and upon foreclosure and sale. Upon transfer to Petitioner, the respondents ceased to be owners and became licensees. The notice to quit clearly set forth petitionerþs interest in the premises and explains that respondentsþ license was to be revoked upon expiration of the ten days as provided in the notice.

Respondents allege that the notice is also defective given that it was signed by attorney for petitioner. The Court stated that attorney for Petitioner had authority pursuant to a limited power of attorney to act in the stead of the owner. Additionally, a copy of the power of attorney was annexed to the notice of petition and petition. Finally, Respondents allege improper service. The Court stated that in order to raise an issue of fact regarding personal service, þthe party contesting service must submit an affidavit or statement based upon personal knowledge that he failed to receive the pleadings.þ The Court may not order a traverse hearing (i.e., a hearing which challenges service) absent a sworn denial of the receipt of process by the party contesting service (i.e., the tenant) setting forth the reasons why service was improper. The tenant's papers did not annex a sworn affidavit of someone with personal knowledge explaining why service was allegedly not proper. Hence, the court did not allow a traverse hearing.

The Court held that the landlord should be barred from raising the issue of nonprimary residence since the same relief was sought in the context of a 1988 holdover proceeding where the petition was dismissed on the ground that landlord had failed to raise a single factual issue that the premises are not being used as primary residences by the Jesuit community or its individual members. The landlord did not appeal this order, but rather agreed to recognize the "present occupants" of 16 apartments whose occupants were identified in the settlement agreement. The Court also noted that the fact that the settlement agreement in the prior case affirmatively identifies individual occupants, it thus meets the Manocherian requirement as to identifiable individuals in occupancy. Tenant claims that 15 of the original listed occupants continue in possession, while landlord contends that there has been a change in occupancy in at least 4 of the apartments. The Appellate Term remanded the case back to Civil Court to resolve these competing claims as to who is no longer occupying one of the 16 apartments in accord with the 1989 stipulation.