Summary
In EMA Realty, LLC v. Leyva (64 Misc.3d 11, 15 [ AT 2, 11, &13 2019]), the court stated : " the timing of the filing of a landlord's corrected registrations in a J-51 case is critical, as a delay may even be used as a factor to find a willful overcharge, allowing the imposition of treble damages and attorney's fees."
Summary of this case from Gridley v. Turnbury Vill. LLCOpinion
2017-1353 Q C
04-12-2019
EMA REALTY, LLC, Respondent, v. Mary Dorothy LEYVA, Appellant.
Robert A. Katz, Esq., for appellant. Horing, Welikson & Rosen P.C. (Niles C. Welikson of counsel), Williston Park, for respondent.
Robert A. Katz, Esq., for appellant.
Horing, Welikson & Rosen P.C. (Niles C. Welikson of counsel), Williston Park, for respondent.
PRESENT: MICHAEL L. PESCE, P.J., THOMAS P. ALIOTTA, DAVID ELLIOT, JJ.
ORDERED that the final judgment is reversed, without costs, the order entered June 7, 2017 is vacated, landlord's motion pursuant to CPLR 4404 (b) to set aside the decision dated October 5, 2016 is denied, and the matter is remitted to the Civil Court for the entry of a final judgment dismissing the petition.
In this holdover proceeding, the petition, dated July 8, 2015, alleges that the parties' lease expired and that the premises had "been destabilized as a result of luxury decontrol." Insofar as is relevant to this appeal, tenant's answer alleges that the apartment is subject to rent regulation because the Division of Housing and Community Renewal (DHCR) rent registration statements show that the apartment was last registered in 2007 with a monthly legal rent of $ 1,671.79.
At a nonjury trial on May 11, 2016, landlord's property manager, Dimitri Saridis, testified that the previous tenants, Ms. Schultz and Mr. Colombo, had moved into the apartment in May 2007 and vacated in May 2012. The tenant who had preceded Ms. Schultz and Mr. Colombo had a rent-stabilized tenancy, and landlord had properly registered the premises with DHCR in 2007 with the legal monthly rent of $ 1,671.79. After this prior tenant vacated, landlord added the 20% vacancy increase when it calculated Ms. Schultz and Mr. Colombo's initial rent, and the rent rose above $ 2,000, the luxury deregulation threshold in effect in 2007. As a result, landlord considered the apartment to be destabilized and stopped registering the rents with DHCR. Mr. Saridis also testified that the building had been a recipient of J-51 tax benefits, ending in 2008. After the Court of Appeals decided Roberts v. Tishman Speyer Props., L.P. , 13 N.Y.3d 270, 890 N.Y.S.2d 388, 918 N.E.2d 900 (2009) ( Roberts ), Mr. Saridis concluded that he "knew that the apartment could not be deregulated. As such we had to re-register with DHCR as a rent stabilized unit." Landlord "had a conversation with the tenants and we explained [ Roberts ] and that they would be considered rent stabilized." The court admitted into evidence a letter from a DHCR deputy commissioner, dated January 6, 2016, requesting that landlord file amended rent registrations indicating the apartments that were affected by the Roberts decision, which included the subject apartment. Mr. Saridis testified that landlord had followed the directive in the letter and filed the required amended registrations for the building in February 2016. With respect to the subject apartment, landlord filed amended registration statements for the years 2008 through 2013, taking into account the length of each lease and the Rent Guidelines Board rent increases in effect at the time. The court admitted into evidence landlord's amended DHCR rent registration statements, dated February 23, 2016, filed in response to the January 6, 2016 letter. The amended rent registration statements showed that, for Ms. Schultz and Mr. Colombo's last lease, ending in May 2012, the legal regulated rent should have been $ 2,207.90. Adding the vacancy increase for tenant's lease, which commenced in January 2013, brought the regulated rent above the then-applicable luxury deregulation threshold of $ 2,500, and therefore tenant's tenancy was registered as permanently destabilized.
The Civil Court's decision dated October 5, 2016 awarded tenant a final judgment dismissing the petition, finding that Ms. Schultz and Mr. Colombo's tenancy should have been rent stabilized pursuant to Roberts ; that landlord had failed to properly register the premises with DHCR; that the legal rent was therefore frozen at the last registered legal rent of $ 1,671.79 in 2007, which is well below any luxury deregulation threshold; and that therefore the apartment remained subject to rent stabilization.
Landlord then moved, pursuant to CPLR 4404 (b), to set aside the Civil Court's decision, arguing, among other things, that landlord had only failed to properly register the premises in 2008 due to the common misunderstanding regarding luxury deregulation while a J-51 tax abatement is in place, and had promptly corrected its registrations after receiving DHCR's January 2016 letter.
By order dated June 7, 2017, the Civil Court granted landlord's motion to set aside the decision, and, upon reconsideration, awarded landlord a final judgment of possession. The Civil Court relied on an Appellate Division, First Department, case that had been decided after the court had rendered its decision. The case, Matter of Park v. New York State Div. of Hous. & Community Renewal , 150 A.D.3d 105, 50 N.Y.S.3d 377 (2017) ( Park ), allowed an owner of apartments which were treated as unregulated while the building was receiving J-51 benefits to take retroactive increases where the landlord promptly corrected the pertinent DHCR rent registration statements after Roberts .
When a landlord fails to "properly and timely" register an apartment with DHCR, the rent is generally considered "frozen" at the amount of the "legal regulated rent in effect on the date of the last preceding registration statement" and the landlord may not collect rent in excess of such amount ( Rent Stabilization Code [9 NYCRR] § 2528.4 ; Rent Stabilization Law § 26-517 [e]; see Bradbury v. 342 W. 30th St. Corp. , 84 A.D.3d 681, 684-685, 924 N.Y.S.2d 349 [2011] ["Where an owner fails to file a ‘proper and timely’ registration, until such registration is filed, the rent is frozen at the legal regulated rent listed in the preceding registration statement"]; Jazilek v. Abart Holdings, LLC , 72 A.D.3d 529, 531, 899 N.Y.S.2d 198 [2010] ["A landlord's failure to file a ‘proper and timely’ annual rent registration statement results in the rent being frozen at the level of the ‘legal regulated rent in effect on the date of the last preceding registration statement’ "] ). Generally, "amended registrations have no retroactive effect" ( 125 Ct. St., LLC v. Sher , 58 Misc.3d 150[A], 2018 N.Y. Slip Op. 50092[U], 2018 WL 559234, *2 [App. Term., 2d Dept., 2d, 11th & 13th Jud. Dists. 2018] ).
Here, in reliance on the holding of the Appellate Division, First Department, in Park that the rents should not be frozen if the failure to register was based on a justifiable belief that the apartment was not subject to rent regulation, the Civil Court vacated its decision. The landlord in Park , however, had promptly corrected its registrations on February 6, 2012, even before the appeal to the Court of Appeals in Gersten v. 56 7th Ave., LLC , 88 A.D.3d 189, 928 N.Y.S.2d 515 (2011) (applying the holding in Roberts retroactively) had been withdrawn. After the Gersten appeal was withdrawn in March 2012, the law regarding luxury deregulation by a landlord receiving a J-51 tax abatement was clear ( Taylor v. 72A Realty Assoc., L.P. , 151 A.D.3d 95, 100-101, 53 N.Y.S.3d 309 [2017] ). Thus, the timing of the filing of a landlord's corrected registrations in a J-51 case is critical, as a delay may even be used as a factor to find a willful overcharge, allowing the imposition of treble damages and attorney's fees ( id. at 106-107, 53 N.Y.S.3d 309 ). Indeed, the Appellate Division, First Department, found that a landlord had engaged in a fraudulent scheme to deregulate apartments, at least in part because the "defendant [had] failed to promptly register the apartment and 30 other apartments in the building as rent-stabilized in March 2012, when the applicability of [ Roberts ] was clear" ( Nolte v. Bridgestone Assoc. LLC , 167 A.D.3d 498, 498-499, 90 N.Y.S.3d 159 [2018] ).
The time in which landlord could have held a "justifiable belief" that its registrations did not require any corrections has long since passed ( Park , 150 A.D.3d at 113, 50 N.Y.S.3d 377 ). In Park , the landlord promptly corrected its registrations in February 2012, more than four years before the landlord in this proceeding. We note that landlord in this proceeding admitted knowledge of its responsibility to correct its registrations when it discussed with Ms. Schultz and Mr. Colombo that their tenancy would be considered rent stabilized before those tenants moved out of the subject premises in May 2012.
As a result of landlord's failure to promptly correct its rent registration statements in 2012, when tenant moved into the apartment in 2013, the rent remained "frozen" at the last registered legal rent of $ 1,671.79, well below any applicable luxury deregulation threshold (Rent Stabilization Law § 26-504.2 [a] ). As such, the apartment remains subject to rent stabilization.
Accordingly, the final judgment is reversed, the order entered June 7, 2017 is vacated, landlord's motion pursuant to CPLR 4404 (b) to set aside the decision dated October 5, 2016 is denied, and the matter is remitted to the Civil Court for the entry of a final judgment dismissing the petition.
PESCE, P.J., ALIOTTA and ELLIOT, JJ., concur.