The landlords purchased the building in 1998. Adem took occupancy of unit 3R in August 1999. His daughter, Mina, states that she needs the tenant's apartment for herself, her husband and their two children because they are paying rent in a two family house and would rather live in the subject building. At trial the tenant produced a copy of a non-renewal notice that Adem sent to the prior tenant of 3R, Bonnie McGovern. He signed the notice as owner and as agent for Mina Salaj. The notice sought to recover the apartment for Adem and his wife. Tenant McGovern initially resisted moving. During that period another apartment, unit 3L, became available. 3L was renovated and the owners rented it for $700 a month. Adem testified that 3L was not available for use at the time he sought 3R. He also testified that he did not intend to take all of the apartments in this 6-family building for his family. Adem claims that he did not "recover" 3R because he took possession without having to obtain a judgment because Ms. McGovern vacated the unit before the case went to litigation. The owner's attorney cited a previous case where that court ruled that the owner did not "recover" the apartment because the matter never reached a final judgment. Adem asserts that he merely took occupancy of a vacant apartment, and therefore his occupancy would not be a bar to Mina's right to recover the apartment for herself.

The court ruled that Adem's nonrenewal notice to Ms. McGovern clearly stated that Adem sought to recover her aparmtent for his own personal use. He declined to renew her lease on that ground. Ms. McGovern resisted. The court held: "There was no evidence to suggest that she [Ms. McGovern] would have voluntarily vacated the subject premises had it not been for the actions of Adem Salaj in sending the predicate notice and telling her that she needed to vacate." Hence, it cannot be disputed that Adem "recovered" Ms. McGovern's apartment based on common usage of the word "recover." The court rejected the notion that a judgment is the only way a "recovery" of an apartment occurs. Hence, the court concluded that since one of the landlords (Adam) had already obtained an apartment for personal use, the other landlord (Mina) could not evict this tenant. The court dismissed the petition.

The only arrears in question are for the period of August through December 2000. During this period of time the tenant's rent subsidy was suspended. Once a tenant has been approved for Section 8 assistance, HUD requires an annual review of the tenant's income to ensure that the tenant pays rents commensurate with their ability to pay. This tenant's annual recertification date is August 1. To implement a timely recertification, notice must be given to the tenant which must, according to HUD procedures, be served between 75 and 90 days before recertification is to be effective. If the tenant fails to respond, the owner must send a follow-up request/notice, and if necessary, a third and final notice.

According to HUD rules, the second and third notices must state that if the tenant fails to respond to the owner by the specified cutoff date, the owner may suspend Section 8 payments and obtain a market rent. In this case, tenant was sent form notices dated May 1, 2000, June 14, 2000 and July 3, 2000. All the notices were identical, except for the dates of the recertification appointment. The second and third notices did not include language to apprise the tenant that a failure to respond would result in a loss of the subsidy on the cut-off date (which in this case would have been July 10, 2000).

The court observed that the HUD handbook uses the word "must" in describing owner's obligations with respect to notices. Since the notices did not inform tenant of any cutoff date to submit her recertification documents nor apprised her of the penalty of losing her subsidy if she should fail to comply by that date, the rent should not have been raised to a market rent. The owner was not entitled to suspend the tenant's Section 8 subsidy since the notices did not comply with HUD rules. Therefore the court dismissed the petition.

Tenant argues that the petition uses the abbreviation "Inc." in its caption but the petition neither states that the owner is a corporation nor specifies the state, country or government of origin of such corporation. The CPLR requires that if a party is a corporation the complaint (or petition) must state so and where known the complaint must specify the state, country or government by or under whose laws the corporation was created.

The court held that a misstatement of a landlord's organizational form in a nonrenewal notice does not create a jurisdictional defect. The landlord's corporate form was correctly stated, but at the time the notice of nonrenewal was served the owner had not obtained proper authorization to conduct business in New York State. Thereafter when the petition was served, the owner obtained proper authorization. The court held that where a plaintiff (i.e., landlord) sued in the name of a dissolved corporation which had been officially revived by the time of commencement of trial, the argument that the corporation lacks capacity to sue has no merit. The appropriate remedy is to allow the corporation to cure the defect. The court noted that this landlord had already cured. Therefore the court refused to dismiss the petition.

DHCR determined that landlord's hardship increase was not warranted. In examining the financial records for the "test year," DHCR found that the buildings received income of $265,577.28 and had net expenses of $179,045.11, showing a net return of $86,532.17 for the entire "building" (i.e., the coop corporation), and this latter sum exceeded 8-1/2 percent of the capital value of the corporation. Rental increases based on hardship are permitted where the net return is less than 8-1/2 percent. Landlord filed a PAR (an administrative appeal) arguing that DHCR's methodology was not a fair valuation of costs and expenses.

Landlord did not object to the adjustments made to the claimed expenses, but took issue with DHCR's pro-rating the expenses of the entire building to the five apartments owned by landlord and comparing them with the income received from those five apartments. Rather, landlord alleges that its actual annual income (rent for the five apartments) is $6,874.00. The total expenses for the building after adjustments by DHCR was $179,045.11. Since landlord owns five out of sixty apartments, it claims a pro-rata share of expenses as 1/12th of $179,045.11, or approximately $14,920.43. Using this methodology, landlord argues that its expenses exceeded its income by $8,046.11 on an annual basis and therefore it is entitled to a hardship increase. Landlord argues that DHCR's methodology would mean that no shareholder would ever be able to qualify for a hardship rent increase since the gross income for the corporation as a whole, including maintenance fees, is attributed to his proportionate share of the corporation. Landlord argues that it shares in 1/12th of the corporation but does not share in 1/12th of the income of the corporation, and that a shareholder's personal net income, derived from the rents in question, is what should be measured, not the net income of the building as a whole.

The court noted the definition of landlord in the rent control laws regarding "hardship" applications and concluded that a cooperative shareholder satisfies this definition. But the court noted that the increase is permitted on the ground that the "current maximum gross building rental . . does not equal [expenses plus] a return of 8-1/2 percent on capital value . . ." Thus, by the terms of its regulations, DHCR focuses its concern on the income and expenses of a building as a whole and not on the income and loss statement of a particular shareholder. DHCR takes the position that the hardship provision is designed to protect the economic health of rental buildings in order to ensure that rent controls do not deplete the housing stock. While DHCR concedes that this landlord's income from the five units does not equal its individual expenses, DHCR's regulations are designed to protect the building and not to guarantee a profit to any individual investor.

The landlord argues that the regulations should be read to protect landlords against an unlawful "taking" of their property, i.e., their right to a constitutionally adequate return on their holdings. Hence, according to the landlord, it is arbitrary and capricious for DHCR to count income the landlord does not personally receive in measuring whether the landlord receives an 8-1/2 percent return on capital value.

The court cited prior case law which held that hardship applications were denied to shareholders of rent stabilized apartments, but the issue has never been addressed for rent control units. The denial for owners of rent stabilized units was due to the language in the rent stabilization law that the hardship statute applied only to "owners of buildings." Here, the provision relating to hardship in the rent control laws applies to landlords in general, and as noted, shareholders fit the definition of landlord in the hardship provision of the rent control laws. Hence, the landlord argues that the inclusion of cooperative shareholders as landlords eligible for hardship relief from rent control necessarily implies that the shareholder's income, not the building's income, is the appropriate measure of hardship. (The court noted in an aside that the landlord does not look to the entire building when measuring expenses as it does when measuring income).

The court viewed the issue before it as "whether the regulation, which by its terms measures hardship by weighing the income of a building and not the income of each individual landlord, is irrational." The court held that although the statute permits cooperative shareholders to apply for rent increases on rent controlled apartments, it is not arbitrary or capricious for DHCR to limit those increases to those circumstances where the economic health of the building, and consequently the housing stock in general, is at risk. Such an approach fulfills the purpose of the hardship provision. The landlord argued that this interpretation means shareholders will never get a hardship increase, but the DHCR disputed this and responded with several examples where hardship increases were granted to shareholders. In these cases, shareholders will win a hardship increase only when the cooperative as a whole is in financial peril.

In upholding DHCR's denial of the hardship application, the court also noted that "a narrow snapshot" of current income is unfair because it does not take into account the entire economic situation, including all the money made from prior sales and anticipated investment value of the unsold shares. The court held: "Anyone who buys 20 rent stabilized and rent controlled units in a cooperative building is thinking not only of income, but of investment value as well. Petitioner [landlord] bought the units knowing full well that the income would be, for some period of time, limited. Nonetheless, an economic determination was made that the investment was worthwhile notwithstanding the rent limits. This is not a case of hardship befalling an owner which affects the economic prosperity or survival of the housing units in question."

The lower court dismissed the proceeding as premature. The lower court held that there is no proof that any violation has been placed against the premises or that landlord is actually subject to civil or criminal penalties. Tenant has not made unauthorized alterations and has utilized the premises as intended by the parties. The Appellate Term upheld and added, "Even assuming the existence of a violation, landlord would be required to demonstrate that the certificate of occupancy is incapable of amendment, or that it would be unduly burdensome to amend it. Moreover, the Court held, that any violation of the Multiple Dwelling Law with respect to occupancy of the basement is not a basis for eviction at this juncture in the absence of any application to the Department of Buildings for a permit or the Department's rejection of plans for legalization. This is not a case where a violation has been issued and the Department has rejected a building application to cure the violation.

The landlord claimed that he hired an architect to legalize the apartments. However, the apartments needed to be vacant in order to achieve this goal. The landlord conceded that although the apartments were illegal, the tenants failed to vacate as a result of the vacate order. The landlord testified that he spoke to HPD as well as the Department of Buildings, both of whom refused to enforce the vacate order. The court noted that this left the landlord unable to legalize the subject apartments since the tenants refused to voluntarily vacate and the landlord was unable to collect rent and/or use and occupancy because of the illegal status. The court ordered the tenants of all illegal units appear in this action. Subsequently, three of the four units were vacated, leaving one tenant in occupancy of an illegal unit.

HPD failed to provide the court with a policy statement with respect to when it will enforce and vacate an apartment it deems to be unfit for human habitation. The court noted that the vacate order obligates the landlord to remove the violation. However, if the landlord was to commence a summary proceeding, the resolution would exceed the violation cure period set forth in the vacate order. This would subject the landlord to additional monetary penalties. Further, the court recognized that many housing court judges will not permit a landlord to bring summary proceeding when an illegal apartment is involved and instead would require an action in ejectment, thereby further delaying the process. Accordingly, the court ordered HPD to exercise its authority to take whatever steps are necessary to vacate the premises.

Landlord commenced this proceeding on nuisance grounds alleging that the tenant had sublet the apartment to three men who have verbally and physically abused the tenants on numerous occasions, causing the police to be summoned to the building on numerous occasions. The tenant claims that the predicate notices and petition should, in addition to English, be served in Spanish since that is the only language he speaks and landlord knows this. The court observed that the tenant cited no case law or statutory authority for his position that the failure to serve the petition in Spanish required the petition's dismissal. The Judiciary Law allows for court interpreters, but it has not been extended to require landlords to serve their legal pleadings in another language. The court denied the tenant's request to dismiss on this ground.

The tenant also raised the issue that the termination notice did not specify with particularity the allegations forming the basis of the proceeding, and therefore the petition should be dismissed. The court again disagreed with the tenant, holding that a termination notice does not have to be particularly detailed since the tenant can always served a Demand for a Bill of Particulars in order to ascertain more information about the allegations. Finally the court ruled that the landlord was not required to serve a notice to cure in a nuisance proceeding.

The family receiving Section 8 benefits from the government must supply information as to its composition and advise when the composition changes. The mother did this in 1986 when she said that her son no longer lived in the apartment. The law provides that a family receiving benefits must promptly advise as to the absence of a family member. Absence of course is not removal, however on her own, petitioner's mother advised that her son no longer lived in the apartment. The Court held that since there was no actual residence at the subject apartment by petitioner, nor was there continuity of residence, he would not be entitled to succession rights. The Court further noted that when petitioner turned 18 years old, he became a legal adult and nonetheless elected to remain in foster care. Accordingly, the Court further found that there was no expectation of support from his mother nor a serious intent to return to the apartment until perhaps when it became apparent that he could make a claim for the apartment. Since the Court found that petitioner could not establish a succession rights claim, it refused to restore him to the subject apartment, holding that doing so would subject him to a holdover proceeding that he would not be able to win. However, the Court allowed petitioner limited access to the apartment to retrieve any belongings that he may have there.