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Court Upholds DHCR Rules Outside New York City

NYC Rent Regulation: Rent Control/Rent Stabilized, DHCR Practice/Procedures

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Court Upholds DHCR Rules Outside New York City

Postby consigliere » Wed May 01, 2002 11:11 am

Court Upholds DHCR Rules
 
By Warren A. Estis and Jeffrey Turkel
New York Law Journal - May 1, 2002
 
 
In Gioia v. New York State Div. of Housing & Community Renewal, DHCR beat back an omnibus attack on a host of DHCR amendments relating to rent stabilization outside of New York City. The April 15, 2002 decision may well impact on a similar challenge, pending in Supreme Court Kings County, to recent amendments to New York City's Rent Stabilization Code.
 
Background
 
On Dec. 20, 2000, DHCR published amendments to the Emergency Tenant Protection Regulations (ETPR).[1] The ETPR, pertaining to stabilization outside the City, implements the Emergency Tenant Protection Act (ETPA).[2]
 
The same day, DHCR published amendments to the Rent Stabilization Code (RSC).[3] The RSC governs rent stabilization within the five boroughs, and implements the Rent Stabilization Law, as amended.[4]
 
DHCR was required to amend the ETPR and the RSC by L. 1997, ch. 116, the so-called Rent Regulation Reform Act of 1997 (RRRA-97). The RRRA-97 dramatically altered the rent regulatory system with respect to, inter alia, vacancy increases, luxury deregulation, demolition and challenges to legal rents. Section 44 of the RRRA-97 provided that "[a]ny rule or regulation or form necessary for the implementation of this act, or any section of this act, is directed to be made and completed within 180 days after the effective date of this act." Forty-one months later, DHCR published the necessary regulations.  
 
'Gioia'
 
In 2001, various upstate tenants (represented by Westchester/Putnam Legal Services) challenged specific ETPR amendments on both substantive and procedural grounds. The case was heard by Westchester County Supreme Court Justice Francis A. Nicolai.
 
The tenants preliminarily alleged that DHCR's promulgation of the amended regulations violated various notice and public comment provisions of the State Administrative Procedure Act (SAPA). The court disposed of these procedural claims, finding that DHCR's amendments "were promulgated in substantial compliance with SAPA." The court then addressed the tenants' substantive challenges.
 
The tenants asserted that the challenged regulations were contrary to law, violated the ETPA, or were otherwise unauthorized. The tenants also claimed that DHCR had acted in excess of its jurisdiction, and had failed to perform various duties enjoined upon it by law.
 
The court, citing the 1990 Court of Appeals case of Versailles v. New York State Div. of Housing & Community Renewal,[5] held that "DHCR has broad authority to interpret the ETPA and to issue regulations, which may 'inevitably require some changes in the legal relationship between landlords and tenants.'" This language, used in Versailles to uphold a 1987 DHCR regulation favorable to tenants, would come back to haunt the tenants in Gioia 12 years later.
 
The tenants first objected to various ETPR amendments that strictly interpreted the so-called four year rule relating to rent overcharge complaints and Fair Market Rent Appeals. The court rejected the tenants' challenge. The court observed that DHCR's interpretation of the four year rule had been upheld by the Appellate Division in both the First (Brinkerhoff v. DHCR)[6] and Second (Perry v. DHCR)[7] Departments. The court also noted that the First Department had twice held that the four year rule applied to Fair Market Rent Appeals (Muller v. DHCR;[8] Estate of Goldman v. DHCR).[9]
 
The tenants sought to overturn ETPR §2502.8, which allows owners to collect surcharges for washing machines, dryers or dishwashers. The court upheld the regulation, focusing on DHCR's general latitude under the ETPA, as well as existing case law:
 
"ETPA §10 provides that rent regulations promulgated by DHCR shall prescribe standards with respect to the terms and conditions of new and renewal leases, additional rent and such related matters as other 'ancillary' facilities. Further, the imposition of such surcharges has been upheld. Parker v. CAB, 56 N.Y.2d 678."
 
The tenants sought to annul ETPR §2502.7, which implements the RRRA-97's authorization of statutory increases for a one or two year vacancy lease. The tenants alleged that the provision eliminated the "current ban" on increases for multiple vacancies within one year.
 
The court disagreed:
 
"The RRRA of 1997 added ETPA §10(a)(a-1), which mandates vacancy bonuses, providing for the addition of a base bonus of 20 percent to any vacancy lease entered into after the effective date of the provision and for additional bonuses depending upon the length of the occupancy of the tenant in possession prior to the vacancy. ETPA §10(a)(a-1) provides for bonuses for each vacancy lease without regard to the number of vacancies in a rent guidelines period."
 
The tenants next attacked ETPA §2503.4(d). The provision contains a schedule of de minimis service conditions which, even if found to exist, will not constitute a failure to provide required services. The court rejected the challenge, observing that courts had traditionally held that the rent agency had broad discretion to determine whether a service is required by law, and whether that service has been maintained. Moreover, DHCR's "de minimis" doctrine (which existed as an Operational Bulletin long before its codification) had been approved by the courts in Lee v. Higgins[10] and Hakim v. DHCR.[11] The Court also noted that the list was not exclusive and was not necessarily determinative of any particular service complaint.
 
The tenants also challenged ETPR §2503.4(e)(1), which provides that the existence of a service reduction for four years before a complaint is filed shall be considered presumptive evidence that the reduction is de minimis. The court upheld the regulation, noting that "the presumption is rebuttable and the section specifically exempts conditions involving health or safety."
 
The court next addressed two recent code amendments that have angered many tenants. The first provision, ETPR §2505.8, limits the amount a tenant may charge a roommate to a "proportionate share of the rent" and treats any excess rent collected as profiteering. The tenants asserted -- on grounds the court termed "illusory" -- that such arrangements were private and could be necessitated by an individual tenant's financial means. The court held that profiteering of any kind is inconsistent with rent stabilization. It should also be observed that financial agreements between a tenant and his or her roommate are no more "private" than a lease between a landlord and a tenant.
 
The court also upheld ETPA §2544.2(b), which makes harassment by a tenant a new basis for eviction. The tenants asserted that this provision was ultra vires the ETPA. The court disagreed, stating:
 
"However, ETPR §2544.2(b) specifically provides that 'the lawful exercise by a tenant of any right pursuant to any law or regulation relating to occupancy of a housing accommodation, shall not be deemed an act or harassment or other ground for eviction'.
 
Petitioners argue that the ETPA does not contain the same language as this regulation and is thus unauthorized citing Siegal v. DHCR, 143 A.D.2d 430. However, in Siegal, the Appellate Division invalidated a previous attempt to promulgate this regulation on procedural grounds rather than substantive grounds. Further, notwithstanding Siegal, eviction on the grounds of nuisance has been held to be rational. 301 E. 69th St. Assoc. v. Eskin, 156 Misc.2d 122."
 
The tenants also challenged ETPR §2503.4(b), which provides that a tenant, before filing a decreased service complaint with DHCR, must first give his or her landlord ten days written notice of the condition alleged. The court found the regulation to be reasonable:
 
"It is clear that an owner must have an opportunity to respond and cure a condition prior to issuance of a final determination. Dworman v. DHCR, 94 N.Y.2d 359. Thus, amended ETPR §2503.4(b), which requires the tenant to give written notice to the owner of all service problems ten days before the tenant can file a rent reduction application with DHCR is a rational amendment. The requirement also set forth in ETPR §2503.4(b) that applications based upon a lack of adequate heat or hot water are to be supported by findings from the appropriate city agency is likewise rational."
 
Finally, the court also upheld ETPR §2503.4(c)(2), which affords an owner 45 days to answer a tenant's complaint of reduced services. The court credited DHCR's argument that "the previous 20 day answering period was often insufficient to allow for repairs."
 
'Myers' and 'Cecilia'
 
A challenge to various RSC amendments, Brooklyn Housing Family Services, Inc. v. Lynch, is currently pending before Justice Rivera of the Kings County Supreme Court. Although the Gioia decision is in no way binding upon Justice Rivera, the decision nevertheless constitutes persuasive authority for the proposition that DHCR has broad authority to implement the various rent regulatory statutes, even if such implementation alters the legal relationship between landlords and tenants. In any event, it is likely that both challenges will ultimately be decided by the Appellate Division, Second Department.
 
Landlords received two more favorable rulings within the last several weeks, both of which we hope to examine in a future column. In Myers v. Frankel,[12] the Appellate Division, Second Department, reversing Appellate Term,[13] held that the four-year statute of limitations precludes examination of the rental history of an apartment prior to the four-year period preceding the filing of a rent overcharge claim, even where the landlord fails to register the apartment for several years, or where the registrations are erroneous or even fraudulent. (Note: Rosenberg & Estis PC represented amicus curiae Rent Stabilization Association of New York, Inc. in Myers.)
 
In Cecilia v. Irizarry,[14] the Appellate Division, Second Department reversed an Appellate Term order which held that several provisions of the Rent Stabilization Code were inconsistent with the governing statute. The Appellate Division did not address the legality of the Code provisions at issue, and instead dismissed the complaint under the four-year statute of limitations for rent overcharges.
 
The court, citing Versailles, held that "DHCR has broad authority to interpret the ETPA and to issue regulations, which may 'inevitably require some changes in the legal relationship between landlords and tenants.'"
 
 
FootNotes:
 
[1] 9 NYCRR §2500.1 et seq.
[2] L. 1974, ch. 576, §4.
[3] 9 NYCRR §2520 et seq.
[4] Admin. Code of the City of New York, §26-501 et seq.
[5] 76 N.Y.2d 325, 559 N.Y.S.2d 472 (1990).
[6] 275 A.D.2d 622, 713 N.Y.S.2d 56 (1st Dep't 2000).
[7] 281 A.D.2d 629, 722 N.Y.S.2d 556 (2nd Dep't 2001).
[8] 263 A.D.2d 296, 703 N.Y.S.2d 80 (1st Dep't 2000).
[9] 270 A.D.2d 169, 706 N.Y.S.2d 381 (1st Dep't 2000).
[10] 186 A.D.2d 138, 587 N.Y.S.2d 431 (2nd Dep't 1992).
[11] 273 A.D.2d 3, 708 N.Y.S.2d 112 (1st Dep't 2000).
[12] N.Y.L.J., 2002 WL 467140.
[13] 184 Misc. 2d 608, 708 N.Y.S.2d 566 (App. T. 2nd Dep't 2000).
[14] N.Y.L.J., 2002 WL 464908.
 
 
Warren A. Estis is a founding partner and Jeffrey Turkel is a partner at Rosenberg & Estis in New York
 
consigliere
 
Posts: 613
Joined: Sun Mar 03, 2002 2:01 am

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