In the Matter of Leonardo Enriquez, Respondent,v.Department of Housing Preservation and Development of the City of New York, Appellant.BriefN.Y.February 9, 2017APL-2016-00042 To be argued by: QCourt of ~ppeal% $>tate of 1Fletu ~ork JEREMY W. SHWEDER 30 minutes requested In the Matter of the Application of LEONARDO ENRIQUEZ, For an Order Summarily Vacating and Discharging of Record Alleged Notice of Lien, Dated 11118/11 filed by the Division of Enforcement of the Department of Housing Preservation and Development of the City of New York, Against Moneys Alleged for the Amount Unpaid to the Lienor for the Expenses Incurred for the Relocation Costs Allegedly Incurred 6/24/10-6/23/11 for Premises 2341 Waterbury Avenue, Bronx, New York, Petitioner-Respondent, against DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT OF THE CITY OF NEW YORK, Respondent-Appellant. BRIEF FOR APPELLANT RICHARD DEARING DEVIN SLACK JEREMY W. SHWEDER ZACHARY W. CARTER Corporation Counsel of the City of New York Attorney for Appellant 100 Church Street New York, New York 10007 Tel: 212-356-2611 or -2501 Fax: 212-356-2509 jshweder@law .nyc.gov of Counsel June 23, 2016 Reproduced on Recycled Paper TABLE OF CONTENTS Page TABLE OF AUTHORITIES ............... : ....................................... iii PRELIMINARY STATEMENT ................................................... 1 QUESTION PRESENTED .......................................................... 5 STATEMENT OF THE CASE .................................................... 5 A. The Regulatory Framework Allowing HPD to Recover Its Expenses in Relocating Displaced Tenants from the At-Fault Landlords .......................... 5 1. HPD provides temporary shelter to tenants displaced due to conditions created by their landlords .................................................................... 6 2. HPD has the statutory right to use relocation liens to recover expenses from at-fault landlords .... 8 3. Relocation liens must comply with State law . h . 'li 9 governing mec an1cs ens ...................................... . 4. Owners may seek discharge of a lien at a foreclosure trial or, under narrow circumstances, challenge the face of the notice via summary proceeding ............................................................... 11 5. Profound challenges face tenants seeking to return to their homes or find alternative permanent housing ................................................. 13 B. HPD's Relocation Lien Arising Out of the Relocation of a Tenant from Petitioner's Illegal and Unsafe Apartment ...................................................... 18 l TABLE OF CONTENTS (cont'd) Page C. The Conflicting Decisions Below ................................ 20 JURISDICTIONAL STATEMENT ........................................... 22 ARGUMENT ............................................................................. 22 A DISPUTE OVER THE REASONABLENESS OF RELOCATION EXPENSES PRESENTS A MATTER FOR A FACTUAL HEARING, NOT A FACIAL DEFECT IN A LIEN NOTICE ......................................... 22 A. The Appellate Division Erred in Resolving a Factual Dispute as to the Reasonableness of the Extent of HPD's Relocation Expenses ........................ 23 B. The Appellate Division's Gloss on the Terms "Temporary" and "Reasonable" Has No Statutory Basis and No Place in a Summary Discharge Proceeding ................................................................... 31 CONCLUSION .......................................................................... 39 0 0 ll TABLE OF AUTHORITIES Page(s) Cases Aaron v. Great Bay Contracting, Inc., 736 N.Y.S.2d 359 (1st Dep't 2002) ............................................. 27 Atlantic Cement Co. v. St. Lawrence Cement Co., 22 A.D.2d 228 (3d Dep't 1964) ................................................... 27 Bralus Corp. v. Berger, 307 N.Y. 626 (1954) ............................................................. 26, 30 CDR Creances S.A.S. v. Cohen, 23 N.Y. 3d 307 (2014) ................................................................. 37 City of New York v. N.Y. & H.K. Reciprocation Exch. Corp., 193 Misc. 2d 716 (Sup. Ct., N.Y. Cnty. 2002) ............................ 12 Dember Constr. Corp. v. P&R Elec. Corp., 76 A.D.2d 540 (2d Dep't 1980) ................................................... 30 Fyfe v. Sound Dev. Co., 235 N.Y. 266 (1923) ................................................................... 28 J.B. Cieri Constr. Co. v. Gramercy Constr. Corp., 13 A.D.2d 901 (4th Dep't 1961) ................................................. 27 Matter of Lucky land (N.Y.), LLC v. Core Cont. Constr., LLC, 83 A.D.3d 1073 (2d Dep't 2011) ................................................. 26 Mario's Home Ctr. v. Welch, 275 A.D.2d 839 (3d Dep't 2000) ................................................. 12 Melniker v. Grae, 82 A.D.2d 798 (2d Dep't 1981) ............................................. 12, 27 Ill TABLE OF AUTHORITIES (cont'd) Page(s) Matter of Retek v. City of New York, 14 A.D.3d 708 (2d Dep't 2005) ................................................... 30 Rivera v. Department of Housing Preservation and Development of the City of New York, APL-2016-00043 ........................................................................ 22 Slazer Enters. Owner, LLC v. Gotham Greenwich Constr. Co., LLC, 50 A.D.3d 341 (1st Dep't 2008) ......................................... 27 Venture v. Sicoli & Massaro, Inc., 77 N.Y.2d 175 (1990) ................................................................. 37 Statutes and Regulations 28 RCNY § 18-01 (2015) ......................................................... passim 28 RCNY § 18-01 (1991) ..................................................... 17, 21, 33 C.P.L.R. 5602(a)(l)(i) ...................................................................... 22 Housing and Community Development Act of 1937 Section 8, 42 U.S.C. § 1437£. ...................................................... 15 N.Y. Alco. Bev. Cont. Law § 97(1) .................................................. 32 N.Y. Civ. Serv. Law § 64(1) ............................................................ 32 N.Y. Gen. Bus. Law § 406(2)(e) ...................................................... 32 .N.Y. Lien Law§ 3 ........................................................................... 10 N.Y. Lien Law§ 5 ........................................................................... 10 N.Y. Lien Law§ 9 ................................................................... passim N.Y. Lien Law § 19 ................................................................. passim IV TABLE OF AUTHORITIES (cont'd) Page(s) N.Y. Lien Law§ 59 ................................................................... 12, 24 N.Y. Lien Law § 23 ......................................................................... 28 N.Y. Real Prop. Tax Law § 523-a(2) .............................................. 32 N.Y. C. Admin. Code § 26-301. ................................................ passim N.Y.C. Admin. Code § 26-305 ................................................. passim N.Y. C. Charter§ 1802(2) .................................................................. 6 Other Authorities Audit Report on the New York City Housing Authority's Management of Vacant Apartments (June 24, 2015), available at http://tinyurl.com/gnztqxj ...................................... 15 Department of Relocation Memorandum in Support of Local Law No. 15 (Oct. 19, 1967), reprinted in New York Legislative Services' New York City Legislative History, 1968 Local Law #15 .......................... 8, 9, 33 Elyzabeth Gaumer and Sheree West, Selected Initial Findings of the 2014 New York City Housing and Vacancy Survey (Feb. 9, 2015), available at http://tinyurl.com/zaztvbe .......................................................... 14 HPD- Monthly Shelter Census Report, available at http://tinyurl.com/j9k9lmv ........................................................... 7 Jenean Taranto, Mechanics' Liens in New York § 5:7 (2014) ......................................................................................... 12 v TABLE OF AUTHORITIES (cont'd) Local Law No. 65, Report of the Infrastructure Division (May 12, 1997), reprinted in New York Legislative Services' New York City Legislative History, 1997 Page(s) Local Law #65 ................................................................ 16, 17, 34 New York City Comptroller, The Growing Gap: New York City's Housing Affordability Challenge (Apr. 2014), available at http://tinyurl.com/n6ajwv9 ......................... 14 New York City Rent Guidelines Board, Affordable Housing FAQ, available at http://tinyurl.com/jrjr56s ............... 15 Vl PRELIMINARY STATEMENT Few events are as traumatic as being forced from one's home. Every month, however, hundreds of New York City renters must abandon their homes due to hazardous conditions created by their landlords. The Department of Housing Preservation and Development of the City of New York (HPD) provides relocation services to these displaced tenants, ensuring that they have safe accommodations until they can either return to their homes or find alternative permanent housing. New York City's lawmakers have decided that when a landlord is responsible for causing a tenant's displacement, the at- fault landlord, and not the tenant or taxpayers, should shoulder the tenant's relocation expenses. HPD is statutorily entitled to recoup its relocation costs by filing a lien against the property of the landlord responsible for the hazardous conditions. New York's Lien Law permits liens to be challenged by two different avenues serving sharply different purposes. First, property owners may bring a summary proceeding to challenge the facial sufficiency of a notice of lien; that proceeding solely addresses whether the notice contains the basic information required by law. Second, property owners may seek a foreclosure trial at which lienors must defend the underlying substantive validity of the lien; in that proceeding, a fact-finder assesses the factual basis for the lien, including the amount of the lien, after an evidentiary hearing. In this case, the Appellate Division, First Department, improperly used a summary proceeding to resolve a question that should be reserved for a foreclosure trial. The court ruled that a landlord who created an illegal and dangerous dwelling could summarily discharge HPD' s notice of lien as facially invalid simply because the lien sought repayment for a year's worth of. expenses incurred by HPD in relocating the displaced tenant. Although the parties presented no evidence regarding the reasonableness of the expenses, the Appellate Division nonetheless determined that a notice of a relocation lien seeking temporary shelter expenses of a year or more 1s per se unreasonable and invalid on its face. 2 The Appellate Division's decision is contrary to decades of law and practice regarding summary discharge of notices of liens, and this Court should reverse. Parties seeking to summarily discharge a notice of lien for facial invalidity may do so only if the notice fails to contain the basic information required by New York's Lien Law. This summary discharge device is to be sparingly used, reserved for notices that are fundamentally flawed or obviously inadequate on their face. The device is not a substitute for a foreclosure hearing, where parties can present evidence regarding the underlying validity of the lien. The court below erred by ruling, at the threshold summary discharge stage, on the reasonableness of the costs that HPD sought in its notice of lien-the quintessential issue reserved for a foreclosure trial. Because the notice of lien contained all the information required under the law, it was facially valid and summary discharge should have been denied. The court's decision, if not corrected, would disrupt HPD' s ability to use relocation liens to recoup the expenses associated with the agency's important and every-day provision of relocation 3 services (and have unknown ripple effects on a range of other types of liens). The Appellate Division found, without the benefit of any evidence, that it was not reasonable for HPD to provide shelter services lasting a year or longer. And on that basis, the Appellate Division set aside HPD's notice of lien altogether- effectively stopping HPD from recovering any of the expenses identified in its lien. The court reached this outcome without considering the enormous challenges that HPD faces in finding suitable permanent housing for displaced tenants in New York City, which is experiencing a well-recognized housing shortage in a uniquely tight market, due to its status as a highly desirable location, its exceptional population density, and its limited space due to natural geographic boundaries, among other reasons. The reality is that displaced tenants regularly remain in HPD-funded shelter for a year or more-in nearly every case because the at-fault landlord has failed to correct the conditions that led to the tenant's displacement in the first place. The court's ruling was both improper at the summary discharge stage, and it was 4 contrary to the purpose of the recoupment statutes, which place the financial burden for tenant relocation expenses where they belong-on the at-fault landlord, and not on the innocent tenant or the taxpayers. QUESTION PRESENTED When a landlord seeks to summarily discharge a notice of lien filed by HPD to help recoup tenant relocation expenses, can a court dismiss the lien on its face and in its entirety because the court finds, without the benefit of any evidence regarding the reasonableness of the expenses, that the relocation services described in the notice occurred over a period of tin1e that the court deems unreasonable? STATEMENT OF THE CASE A. The Regulatory Framework Allowing HPD to ·Recover Its Expenses in Relocating Displaced Tenants from the At-Fault Landlords This case involves a challenge to HPD's right to recoup from landlords the costs associated with relocating tenants-families and individuals-who have been forced to vacate their homes due to unsafe or unsuitable conditions created by their landlords. A brief explanation of the regulatory framework is warranted. 5 1. HPD provides temporary shelter to tenants displaced due to conditions created by their landlords. The City Council has entrusted HPD with relocating tenants of private buildings who have been displaced due to the enforcement of any law, order, or regulation "pertaining to the maintenance or operation of such building or the health, safety and welfare of its occupants." N.Y.C. Admin. Code § 26- 301(1)(a)(v); see also N.Y.C. Charter § 1802(2). The operative provision of the Administrative Code lists some of the expenses HPD may incur in fulfilling this critical mission. See N.Y.C. Admin. Code § 26-305(2) (recoverable relocation expenses "shall include but not be limited to" departmental costs, bonuses, moving expenses, and other "reasonable allowances") (emphasis added). But rather than trying to specify (and ossify) the entire universe of relocation services that HPD may offer, the City Council left it to HPD to determine, in its expertise, which relocation services it "deem[s] necessary, useful or appropriate." Id. § 26-301(1)(a). In exercising this broad discretion, HPD has determined that it will offer-and in the first instance pay for-temporary 6 shelter for tenants forced to leave their rented dwellings in connection with a vacate order issued by a City entity like the Department of Buildings and the Fire Department. 28 RCNY § 18- Ol(a), (b). 1 As a result, HPD provides temporary shelter to hundreds of households-thousands of people-every single day. See HPD Monthly Shelter Census Report, available at http://tinyurl.com/j9k9lmv (at page 4 of PDF). When HPD provides temporary shelter to displaced tenants, it typically places tenants in a family living center, if the displaced tenants have children, or in privately run buildings colloquially known as "hotels"-these are single-room-occupancy apartments, not "hotels" as that word is commonly used-if the tenants do not have children. HPD pays the costs of this temporary lodging until it can find suitable permanent housing or, better still, until the tenants can return to their homes. Often, however, the need for relocation arises because the tenant's prior dwelling was unsafe or 1 HPD revised 28 RCNY § 18-01 in 2015. 28 RCNY § 18-01 (see Historical Note). While the revisions do not materially change the regulatory framework, the specific wording of the regulations has been updated from the version applicable at the time when this proceeding was commenced. Unless otherwise noted, we refer to the current version of the regulations here. 7 otherwise unsuitable as a residence, so the tenant cannot return- unless and until the landlord takes appropriate remedial steps to ensure the safety and suitability of the residence. 2. HPD has the statutory right to use relocation liens to recover expenses from at-fault landlords. When HPD incurs expenses in relocating displaced tenants, it has a statutory right to recoup its expenses from the landlord, if the landlord's intentional or negligent acts or failure to comply with building or health codes led to the conditions requiring relocation. N.Y.C. Admin. Code § 26-305(1). The key mechanism aiding HPD in realizing this right is the relocation lien: by statute, HPD's relocation expenses constitute a lien or liens upon the property from which tenants were relocated. Id. § 26-305(4). The City Council first endorsed the relocation lien as a means for recovering relocation expenses in 1968. Before that point, the then-named Department of Relocation had no effective way to recoup its relocation expenses. See Department of Relocation Memorandum in Support of Local Law No. 15, at 1 (Oct. 19, 1967), reprinted in New York Legislative Services' New 8 York City Legislative History, 1968 Local Law #15. At the time, landlords would rely on "code enforcement governmental agencies to vacate [their] building[s]" when they could not legally do so themselves, effectively using their own non-compliance with building and health codes as a cost-free eviction tool. Id. Nonetheless, unless the owner voluntarily reimbursed the agency for its relocation costs, the Department of Relocation's only recourse was to deny the owner a future rental increase. Id. The 1968 statute was designed to remedy this state of affairs, and "fix the liability" for tenant relocation costs where it belongs-"on the culprit owner," rather than on the displaced tenants and the taxpaying public. Id. The City Council concluded that the relocation lien was the means to this end. Id. 3. Relocation liens must comply with State law governing mechanics' liens. Rather than crafting a statutory relocation lien from whole cloth, the City Council elected to borrow the deeply rooted principles applicable to mechanics' liens, as set forth in New York's Lien Law. See N.Y.C. Admin. Code§ 26-305(4). In ordinary 9 usage, a mechanics' lien is a statutory lien that secures payment for labor or materials supplied in improving or maintaining real property. 2 It is, in effect, a charge on the underlying real property, securing a priority or preference in future payment. Under the Lien Law, a notice of any mechanics' lien must contain seven items of information: (1) the name and residence of the lienor, and, if applicable, the lienor's attorney; (2) the name of the owner of the real property against which a lien is claimed; (3) the name of the person who employed the lienor; (4) the labor performed or materials furnished, and the agreed price or value of those items; (5) the amount unpaid to the lienor; (6) the time when the first and last items of work were performed; and (7) a description of the property subject to the lien. N.Y. Lien Law § 9. For HPD's relocation liens, the notice must also state that the 2 The Lien Law distinguishes between "private improvement" liens upon real property, improved pursuant to an agreement with a private owner, and "public improvement" liens upon moneys of the state or a public corporation, where the improvement was made upon an agreement with the state or public corporation. See N.Y. Lien Law §§ 3, 5. Relocation liens are treated like private improvement liens. 10 expenses were incurred for relocation services provided pursuant to§ 26-301(1)(a)(v). See N.Y.C. Admin. Code § 26-305(4)(a). The purpose of these requirements is to provide the property owner-and perhaps more importantly, a potential purchaser- basic notice that the property is subject to the lienor's claim. To be sure, a notice of lien must identify the nature of the claim in broad terms-by stating the parties involved and the origin of the lienor's interest-but it does not serve the same function as a complaint in a civil action, in which a plaintiff must plead sufficient factual matter to support a legal claim to relief. 4. Owners may seek discharge of a lien at a foreclosure trial or, under narrow circumstances, challenge the face of the notice via summary proceeding. There are two principal methods relevant to this appeal for discharging mechanics' liens and, by extension, relocation liens. In the first, a property owner may seek to summarily discharge a lien where "it appears from the face of the notice of lien" that the lien is invalid because of either (a) the "character of the labor or materials furnished"; (b) a failure to include the information listed 11 in Lien Law § 9; or (c) a notice of lien was not properly filed. N.Y. Lien Law§ 19(6). This summary proceeding is meant to discharge the lien based on a facial examination of the lien itself, without recourse to extrinsic proof or fact-finding. See, e.g., Mario's Home Ctr. v. Welch, 275 A.D.2d 839, 840 (3d Dep't 2000); Melniker v. Grae, 82 A.D.2d 798, 798-99 (2d Dep't 1981); see also Jenean Taranto, Mechanics' Liens in New York § 5:7 (2014). When the issue is the underlying validity of the lien itself (not the notice), a property owner can force a foreclosure trial to vacate the lien. N.Y. Lien Law §§ 19(3), 59. The owner may serve a notice on the lienor, demanding that the lienor commence an action to foreclose on the lien within 30 days. If the lienor fails to timely commence a foreclosure action, the property owner may seek a court order discharging the lien. Id. If, however, the lienholder proceeds to foreclosure, both sides may seek a judicial hearing-known as a foreclosure trial-and present evidence on any disputed issues regarding the lien's validity. Foreclosure trials are bench trials that can involve all the typical elements of a fact-finding proceeding: discovery, evidence, 12 the presentation of witnesses, and sometimes post-trial briefing. See, e.g., City of New York v. N.Y. & H.K. Reciprocation Exch. Corp., 193 Misc. 2d 716 (Sup. Ct., N.Y. Cnty. 2002) (foreclosure trial addressing owner's claim that individuals should not have received HPD relocation services because they were not "tenants"). As a practical matter, however, the bulk of HPD relocation liens are resolved informally, and are never subject to a summary discharge proceeding or a foreclosure trial. In such cases, the relocation lien serves as the mechanism that enables HPD to bring at-fault property owners to the bargaining table in the first place. 5. Profound challenges face tenants seeking to return to their homes or find alternative permanent housing. HPD arranges shelter for families and individuals displaced from their homes, but its mission does not end there: shelter is a temporary measure, and merely a prelude to returning tenants to their homes or finding them alternative permanent housing. See 28 RCNY § 18-01(b)(7) (noting that "HPD will refer a Relocatee to one Standard Apartment"). A landlord can always eliminate the 13 need for temporary housing by remedying the conditions that led to a tenant's relocation at the outset. But when a landlord fails to do so, and thus prevents the tenant from returning home, HPD endeavors to find the tenant a suitable alternative for permanent housing. In New York City, this presents a significant challenge. For years, the City has faced a severe shortage in its housing market, and particularly in the availability of affordable housing. See Office of the New York City Comptroller, The Growing Gap: New York City's Housing Affordability Challenge, at 1-4 (Apr. 2014), available at http://tinyurl.com/n6ajwv9. In 2014, the City- wide rental vacancy rate was only 3.45 percent. See Elyzabeth Gaumer and Sheree West, Selected Initial Findings of the 2014 New York City Housing and Vacancy Survey, at 2 (Feb. 9, 2015), available at http://tinyurl.com/zaztvbe. The 2014 vacancy rate only marginally improved upon the 2011 vacancy rate of 3.12 percent. Id. at Table 7. The vacancy rates for the lowest-cost rental units- those with a monthly rent of less than $800-are especially stark: 1.80 percent in 2014 and 1.15 percent in 2011. Id. 14 Understandably, HPD cannot force a displaced tenant to move into permanent housing that he or she cannot afford. In many cases, this means that a displaced tenant must be placed into subsidized housing through the New York City Housing Authority, or into housing subsidized through Section 8 of the Housing and Community Development Act of 1937, 42 U.S.C. § 1437£. But it can be difficult to obtain subsidized housing. As of 2014, NYCHA had a vacancy rate of about one percent, with a waiting list of almost 275,000 households. See New York City Comptroller, Audit Report on the New York City Housing Authority's Management of Vacant Apartments (June 24, 2015), available· at http://tinyurl.com/gnztqxj. Likewise, individuals applying for Section 8 housing can expect to wait years to obtain a voucher. See New York City Rent Guidelines Board, Mfordable Housing FAQ, available at http://tinyurl.com/jrjr56s (estimating that it takes about eight years to obtain a Section 8 voucher in New York City). With these limitations on HPD's ability to find suitable, permanent housing, displaced tenants remain in HPD's temporary 15 shelter for an average of more than 500 days. The difficulty in securing a permanent placement has increased somewhat over time but is hardly a new phenomenon. Two decades ago, in 1997, displaced single adult tenants averaged a year-long wait in HPD's shelter system. See Local Law No. 65, Report of the Infrastructure Division at 4 (May 12, 1997), reprinted in New York Legislative Services' New York City Legislative History, 1997 Local Law #65. That year, 1997, the City Council strengthened § 26-305 of the Administrative Code to allow HPD to place a lien on a property while relocation services were being provided, rather than forcing HPD to wait until services were concluded before placing the lien. Id. Prior to the 1997 revisions, HPD was not permitted to place a lien for relocation expenses on private property until after the last household displaced from the vacated property had left the shelter system. Id. During that interim period, often lengthy, some property owners would transfer title to their property, effectively nullifying the City's claim to relocation expenses because, absent a notice of lien, its claim would not run with the property. I d. 16 The City Council thus amended the law in 1997 to allow HPD to place a lien for relocation costs incurred on a rolling basis, with the intent of making it easier for HPD to recoup its temporary shelter expenses. Id. The City Council made this amendment with the full knowledge that single adult tenants stayed in temporary shelter for an entire year, on average; that HPD had long been paying shelter expenses for such tenants for a year or more; and that HPD had been recouping expenses for such temporary shelter benefits from at-fault landlords. Id. Indeed, the amendment's purpose was to close down opportunities for gamesmanship by landlords that arose precisely as a result of the length of time that relocation services were typically needed. In 2015, to help expedite the transition from temporary to permanent housing, HPD revised its regulations to allow the termination of relocation serv1ces if a displaced tenant unjustifiably refuses just one suitable referral. 3 See 28 RCNY § 18- 01(f). Additionally, HPD requires displaced tenants to take part in 3 The prior rules allowed a displaced tenant to refuse up to three suitable referrals. 28 RCNY § 18·01(g) (1991). 17 the search for permanent housing. For instance, relocatees must "actively" seek out permanent housing and report progress to HPD weekly and, if appropriate, they must apply to NYCHA for housing or a housing subsidy. Id. § 18-01(d)(1), (5). B. HPD's Relocation Lien Arising Out of the Relocation of a Tenant from Petitioner's Illegal and Unsafe Apartment In 2010, the City's Department of Buildings ordered anyone occupying the cellar of a building located at 2342 Waterbury Avenue in Bronx County to vacate the premises because it presented an "imminent danger" (Record on Appeal ("R") 44). The vacate order explained that the building owner-the petitioner here-had created three illegal single rooms without natural light, ventilation, and a secondary means of egress (id.). The last of these conditions presented a particular danger to the occupants: if the only means of egress was blocked in the event of a fire or other emergency, the occupants would have no means of escape. The order thus required that the occupants vacate until petitioner corrected the conditions (id.). 18 At least one tenant was affected by the vacate order. Petitioner signed a sworn statement admitting that this individual was the "tenant of record" at 2342 Waterbury Avenue and that he had been living in the basement (R45). HPD then provided relocation services to the tenant, because he had been displaced as a direct result of petitioner's building code violations. HPD later filed a verified notice of lien with the Bronx County clerk (R46-4 7). The notice specified that HPD incurred relocation expenses in connection with this displaced tenant from June 24, 2010 until June 23, 2011 (R46). The lien listed the total relocation costs as $16,862.89, the vast majority of which were attributed to the costs of the tenant's temporary shelter (id.). The lien contained all of the additional information required by the Lien Law and Administrative Code, including a statement that the relocation expenses were incurred due to the owners' negligent 19 or intentional acts or failure to maintain 2342 Waterbury Avenue according to the building or health codes (id.). 4 The notice of lien was served on petitioner (R48, 50-51). A copy of the notice was also affixed conspicuously to the premises at 2342 Waterbury Avenue (R50). C. The Conflicting Decisions Below Petitioner filed a verified petition in Supreme Court, Bronx County, seeking to summarily vacate HPD's notice of lien because, in his view, the notice failed on its face to comply with the requirements of the Lien Law (RS-13). Upon HPD's motion, Supreme Court dismissed the petition (R5-7). Supreme Court found that the notice of lien itself was facially valid and thus could not be summarily discharged. The court concluded that any dispute regarding the lien's underlying validity "must await trial ... by foreclosure," and that petitioner must first demand a foreclosure hearing in order to challenge the 4 Although petitioner later established that his wife had died in 2002, because both petitioner and his wife were still the owners of record, the notice of lien listed both. 20 "substantive merits" of the lien (R6-7). The court also rejected petitioner's argument that the lien was improperly served (id.). The Appellate Division, First Department, reversed (R151- 53). With little analysis, the court determined that "HPD's financing of the tenant's residence in a hotel for an entire year was not reasonable," citing Administrative Code § 26-305(2), which allows HPD to recoup "reasonable" allowances given to induce voluntary relocation (R152). The Appellate Division also concluded that the agency's "payment of a year's worth of hotel charges" did not qualify as "temporary shelter benefits" under the former 28 RCNY § 18-01(b)(3) (1991) (R152-53). That provision stated that HPD would "pay temporary shelter benefits in the amounts provided in subsection (c)." 5 On this foundation, the Appellate Division apparently concluded that any HPD notice of lien stating that it is based on one year's worth of shelter expenses is per se facially invalid. 5 The 2015 revisions to 28 RCNY § 18-01 eliminated both § 18-01(b)(3) and the subdivision it cited to. Instead, § 18-01(b)(6) now states that "HPD will pay the cost of Shelter Services in such amount as HPD deems adequate for Relocatees residing in temporary shelters." 21 Because the Appellate Division summarily discharged the notice of lien, no evidence regarding the reasonableness of the charges that HPD sought to recoup was ever submitted or considered. JURISDICTIONAL STATEMENT The Court has jurisdiction to hear this appeal because the proceeding originated in Supreme Court, and the Appellate Division's June 2, 2015 order finally determined the proceeding (R151-53). See C.P.L.R. 5602(a)(1)(i). The Court granted leave to appeal on February 18, 2016 (R149), and has also granted leave to appeal in a related case, Rivera v. Department of Housing Preservation and Development of the City of New York, APL-2016- 00043, where HPD is the respondent. ARGUlVIENT A DISPUTE OVER THE REASONABLENESS OF RELOCATION EXPENSES PRESENTS A MATTER FOR A FACTUAL HEARING, NOT A FACIAL DEFECT IN A LIEN NOTICE In dismissing HPD's notice of lien at the earliest possible stage, the Appellate Division evidently concluded that any notice of a relocation lien covering one year or more of shelter expenses will always be invalid, no matter that HPD actually incurred such 22 expenses or what the evidence would show as to their nature and the reasons for them. As a justification for cutting off this proceeding at the threshold, well before the relevant facts about HPD's expenses could be developed and presented, the court found that it was "not reasonable" for HPD to pay for shelter expenses for an entire year, and that shelter, as a matter of law, cannot be "temporary" when offered for that period of time (R152-53). A. The Appellate Division Erred in Resolving a Factual Dispute as to the Reasonableness of the Extent of HPD's Relocation Expenses. The Appellate Division's sweeping holding did not rest on any facial deficiency with HPD's notice of lien-the only justification for using the narrow summary discharge device. The court did not find that the notice of lien in this case omitted any of the information required by law (R151-53). Nor did the court find that tenant relocation expenses, including shelter benefits, are not of the kind and character that may be subject to a lien (id.). Absent such deficiencies-both of which turn on the face of a 23 notice-there was no basis for summarily discharging the notice of lien here. 6 See N.Y. Lien Law§ 19(6). Far from restricting its analysis to the facial adequacy of HPD's notice of lien, the Appellate Division impermissibly ranged into contested factual territory reserved for a foreclosure hearing. Whether it is reasonable or not for HPD to pay for a year of a displaced tenant's shelter-when the need for shelter 1s attributable to the landlord's own actions-is an issue that can be resolved by a fact-finder only after the presentation of evidence. Lien Law § 59 gives the property owner the power to force lienors to commence such a foreclosure hearing, where the lienor would have the burden to present evidence supporting the lien's underlying validity, including the reasonableness of the amount sought. But petitioner never sought such a hearing, and the Appellate Division short-circuited the process. 6 A notice of lien can also be summarily discharged when it was not properly filed, see N.Y. Lien Law § 19(6), but petitioner did not dispute that HPD's notice of lien was properly filed here. 24 The Appellate Division's decision upends the carefully calibrated statutory scheme governing relocation liens, which places the cost of non-compliance with building and health codes where it belongs-on the at-fault landlord-and channels factual disputes about the reasonableness of relocation expenses to foreclosure hearings. Due to the shortage of affordable housing in New York City, it is not unusual-in fact, it is the norm-for a displaced tenant to spend a year, or more, in temporary shelter while HPD attempts to locate suitable permanent housing and secure the landlord's compliance. Of course, a landlord can always bring an end to temporary shelter benefits by doing what the law requires: correcting the conditions so a tenant can return home. This Court has long recognized that the Lien Law-which the City Council adopted as the backbone for HPD's relocation liens-reserves factual disputes over the validity of a lien for foreclosure hearings, and confines summary discharge proceedings to those rare cases where a notice of lien is so fundamentally defective that it fails on its face. More than half a century ago, in 25 Bralus Corp. v. Berger, 307 N.Y. 626 (1954), the Court confirmed the circumscribed reach of the summary discharge device. In Bralus, the issue was whether a mechanics' lien validly covered the respondent architect's work creating preliminary plans that were ultimately left unused. Id. at 627. The petitioner sought summary dismissal of the notice of lien under Lien Law § 19(6), arguing that the plans were not the type of labor or materials that could support a mechanics' lien. Id. In rejecting petitioner's position, this Court was clear: factual disputes about the scope of services and whether they fall under the umbrella of the Lien Law "should be decided after a trial, and not in a summary proceeding." Id. at 628. The First Department's decision in this case departed from this long-settled principle. As far as we can tell, it is the only appellate decision in the Lien Law's more than 100-year existence to ignore the clear boundaries between a summary discharge proceeding to vacate a notice of lien, and the discharge of the lien upon a full evidentiary hearing and fact finding. See, e.g., Matter of Luckyland (N.Y.), LLC v. Core Cont. Constr., LLC, 83 A.D.3d 26 1073, 107 4 (2d Dep't 2011); Melniker, 82 A.D.2d at 798-99; Atlantic Cement Co. v. St. Lawrence Cement Co., 22 A.D.2d 228, 229-31 (3d Dep't 1964); J.B. Cieri Constr. Co. v. Gramercy Constr. Corp., 13 A.D.2d 901, 902 (4th Dep't 1961) (applying statutory distinction to public improvement lien). The First Department's decision was not even consistent with its own precedent. See Slazer Enters. Owner, LLC v. Gotham Greenwich Constr. Co., LLC, 50 A.D.3d 341, 341 (1st Dep't 2008); Aaron v. Great Bay Contracting, Inc., 736 N.Y.S.2d 359, 360 (1st Dep't 2002) ("[T]he validity of the lien plainly turns on a dispute as to whether respondent has completed the work required by the contract, and, accordingly, must await trial of the foreclosure action."). To be sure, the Appellate Division purported to rest its decision on the face of HPD's notice of lien, but its stated reason- the unreasonableness of HPD's year-long shelter payments- demonstrates that the court improperly reached questions that go to the validity of the lien, not the face of HPD's notice. A notice of lien is a simple document. In the relocation lien context, a notice is facially valid so long as it contains the items of 27 information listed in the Lien Law, and states that the lien is based on listed expenses incurred in connection with relocation services. See N.Y. Lien Law § 9; N.Y.C. Admin. Code § 26- 305(4)(a). Nothing more is required. Even if a notice falls short in some technical respect, it must be construed "liberally," with an understanding that "substantial compliance ... shall be sufficient." N.Y. Lien Law § 23; see also Fyfe v. Sound Dev. Co., 235 N.Y. 266, 270 (1923). But a "liberal" construction of HPD's notice of lien was not even necessary here because the notice fully complied with the Lien Law and the Administrative Code. See N.Y. Lien Law § 9; N.Y.C. Admin. Code § 26-305(4)(a). The notice set forth the name of the lienor and the lienor's attorney (see R46-4 7). It listed petitioner and his spouse as the owners of real property against whose interest the lien was claimed (R46). The notice listed the "labor performed or materials furnished," N.Y. Lien Law § 9(4), in that it stated that HPD paid relocation costs and "hotel expenses" (R46). It also listed the "amount unpaid to the lienor" as $16,862.89 (R46). The notice 28 listed June 24, 2010 and June 23, 2011 as the time when the first and last expenses were incurred (R46). It listed the address of the property subject to the lien, and it was verified by the Assistant Commissioner of HPD (R46-4 7). Finally, the notice of lien stated that the itemized expenses were incurred for relocation services provided pursuant to statute (R46). The notice was also filed with the clerk and properly served (R48-53). 7 The notice of lien thus satisfied all of the facial requirements under the law. The Appellate Division's conclusion that a relocation lien is invalid on its face when it lists shelter payments occurring for a year or more does not correspond to any of the requirements in the Lien Law or the Administrative Code. For instance, while a notice of lien must state "[t]he time when the first and last items of work were performed and materials were furnished," N.Y. Lien Law § 9(6), nothing about this requirement purports to make a notice of lien invalid based on the length of 7 Subsection (3) of Lien Law § 9 is not applicable to a relocation lien, because HPD is not technically employed by the property owner and has not entered into any contract with the property owner. 29 time between when the first and last items of work were performed. Yet that is what the Appellate Division focused on in setting aside HPD's notice of lien. Nor could the Appellate Division have relied on the provision within Lien Law § 19(6) allowing for summary discharge "by reason of the character of the labor or materials furnished." The court acknowledged that HPD is entitled to file a notice of lien for the costs associated with relocation expenses, including expenses for providing temporary shelter (see R152, citing Matter of Retek v. City of New York, 14 A.D.3d 708, 709 (2d Dep't 2005) (confirming that HPD may recover "hotel expenses" for relocating tenants)). The only question the Appellate Division raised was whether HPD could seek repayment for shelter expenses occurring for an entire year. But this is not a question about the "character" of the work that HPD is seeking to receive payment for; it is a question about how much HPD is entitled to recover. That is a matter for a foreclosure trial, not summary discharge. See Bralus Corp., 307 N.Y. at 627-28; see also Dember Constr. Corp. v. P&R Elec. Corp., 76 A.D.2d 540, 546 (2d Dep't 1980) (where dispute is over the 30 lienor's entitlement to the money sought in the notice of lien, it must be resolved at a foreclosure trial). Indeed, it makes little sense for a court to conclude, as the Appellate Division did here, that a notice of lien should be summarily discharged in its entirety simply because the lienor may be entitled to less than the full amount claimed. B. The Appellate Division's Gloss on the Terms "Temporary" and "Reasonable" Has No Statutory Basis and No Place in a Summary Discharge Proceeding. The decision below should be reversed for the additional reason that it was based on an arbitrary application of the terms "temporary" and "reasonable" In HPD's rules and the Administrative Code. The court's attempt to apply these terms to this case was necessarily premature, and uninformed, because it occurred at the earliest stage, before the parties could develop and present a factual record about the nature of and reasons for HPD's relocation expenses in the context of a foreclosure hearing. The Appellate Division stated that payment of a shelter expenses for a year or more cannot qualify as "temporary shelter 31 benefits" under the former 28 RCNY § 18-0l(b)(3), and that such payments are not "reasonable" under Administrative Code § 26- 305(2) (R152-53). But these conclusions are not based on any principled reasoning. Rather, they are contrary to the legislative intent, add meanings to those words that do not follow from the regulations themselves, and provide no analytical roadmap by which HPD can plan future behavior in order to comply with the law. The Appellate Division's decision is unworkable and contrary to the law, and it should be reversed. Lawmakers say so explicitly when they intend to cabin the meaning of "temporary" to a specific time period. 8 But neither the Administrative Code nor HPD's own rules support the Appellate Division's rigid one-year limit on "temporary" relocation benefits. Rather, Administrative Code § 26-301(1)(a) states only that s See, e.g., N.Y. Civ. Serv. Law § 64(1) ("A temporary appointment may be made for a period not exceeding three months when the need for such service is important and urgent."); N.Y. Real Prop. Tax Law § 523-a(2) ("[T]emporary members" of boards of assessment review "shall be appointed to one-year terms of office"); N.Y. Gen. Bus. Law § 406(2)(e) (a temporary license to practice nail specialty, natural hair styling, esthetics, or cosmetology expires six months from issuance); N.Y. Alco. Bev. Cont. Law § 97(1) ("[T]emporary permits" authorizing the sale of certain types of alcohol at certain events cannot be effective for more than 24 hours). 32 relocation serv1ces "shall consist of such activities as [the Commissioner] may deem necessary, useful or appropriate for the relocation of [] tenants." Similarly, § 26-305(2) states broadly that HPD may seek reimbursement for "departmental costs, bonuses, moving expenses or other reasonable allowances given to induce tenants to relocate voluntarily." Nor do HPD's former or current rules impose inflexible boundaries on the term "temporary." See 28 RCNY § 18-01(b), (c) (1991); 28 RCNY § 18-01(a), (b)(2) (2015). The absence of a specific and categorical boundary for the term "temporary" within the relevant statues and rules suggests that no such rigid constraints were ever intended. The legislative history of Administrative Code § 26-305 does not give any indication that lienable relocation expenses should be subject to strict time limitations. See Department of Relocation Memorandum in Support of Local Law No. 15 (Oct. 19, 1967). To the contrary, the legislative history demonstrates legislative approval of HPD's ability to recoup shelter expenses that last a year, or more. 33 In 1997, with full knowledge that displaced single adult tenants remained in HPD shelter for a year on average, the City Council still amended § 26-305 to improve HPD's ability to recoup its shelter expenses from at-fault owners. See Local Law No. 65, Report of the Infrastructure Division at 4 (May 12, 1997) (noting specifically the average length of stay in HPD shelters at that time). The amendments allowed HPD to place a lien on a property while emergency relocation services were ongoing, rather than after the last displaced tenant had left the shelter system. Id. The purpose of the amendments was to prevent property owners from avoiding their financial obligations under § 26-305 by transferring title before HPD could file a notice of lien for its expenses. Id. Thus, in 1997, the City Council clearly was not concerned about HPD recouping a year (or more) of shelter expenses from property owners. Rather, the Council specifically made it easier for HPD to do so by reducing the opportunities for landlords to game the system when their own failure to provide safe and suitable dwelling conditions resulted in a need for relocation services lasting some length of time. 34 The legislative history of§ 26-305 demonstrates the error in the Appellate Division's limited reading of the term "temporary." HPD's relocation services are temporary in the sense that they last only as long as a landlord fails to remedy the code violations, or until alternative permanent housing is found. The mere fact that a landlord's recalcitrance extends for a year or more does not render "unreasonable" or not "temporary" the relocation expenses that follow. To the contrary, a landlord's extended non-compliance is precisely what may make longer relocation services necessary. Similarly, the Appellate Division's rigid limitation on what is "reasonable" under the Administrative Code finds no support in the law. While § 26-305 limits HPD to recouping "reasonable allowances given to induce tenants to relocate voluntarily," N.Y.C. Admin. Code § 26-305(2) (emphasis added), the reasonableness of HPD's lien amount in each specific case is the quintessential question reserved for a foreclosure hearing. The Administrative Code does not define the term "reasonable." Rather, it gives the Commissioner of HPD wide discretion to determine what relocation services are "necessary, useful or appropriate." Id. § 26- 35 301(1)(a). The decision below would transform the notice of lien into a quasi-complaint, where lienors would have to plead factual allegations supporting the "reasonableness" of their charges. But the Lien Law does not contemplate notices of lien serving that function-and they never have in their long history. Distilled to its essence, the decision below reflects an off-the- cuff conclusion, made without the benefit of any evidence, that HPD can never be said to offer "reasonable" allowances or "temporary" shelter services when it pays for a year's worth of shelter resulting from a landlord's own misdeeds or failures. That holding is unprincipled and unsupported by the law. If HPD can never seek to recoup the costs associated with providing temporary housing for displaced tenants who stay in shelters for a year or more, then the taxpaying public, and not the property owner at fault, will pay the financial cost. Such a result would run contrary to the legislative purpose of § 26-305, which the City Council passed in 1968 precisely to relieve taxpayers from paying for relocation costs when the property owner was responsible. 36 The Appellate Division's decision also creates a perverse incentive for landlords to drag their feet in remedying code violations. A landlord would only need to stall a year or more to fix whatever problem caused the vacate order; under the Appellate Division's decision, HPD would be prevented from recouping the shelter expenses when the tenants return because the notice of lien would be facially invalid, due to the length of HPD's shelter payments. This, too, was not what the City Council intended. This Court has recognized that in the area of property encumbrances, legal "certainty, reliability and predictability are at a premium." Venture v. Sicoli & Massaro, Inc., 77 N.Y.2d 175, 182 (1990). The Appellate Division's decision delivers on none of those goals. It both fails to provide HPD with guidance on how to comply with the law, and fails to give courts a roadmap on how to resolve future disputes, for example over whether relocation liens seeking reimbursement for shelter expenses of less time-or, similarly, of a certain dollar amount-are also facially invalid. The decision is "unworkable in practice," CDR Cn!ances S.A.S. v. 37 Cohen, 23 N.Y.3d 307, 322 (2014), and legally wrong. It should be reversed. 38 CONCLUSION The order of the Appellate Division should be reversed, and the petition should be dismissed. Dated: New York, NY June 23, 2016 RICHARD DEARING DEVIN SLACK JEREMY W. SHWEDER of Counsel By: Respectfully submitted, ZACHARY W. CARTER Corporation Counsel of the City of New York Attorney for Appellant JE 5f W. SHWEDER Ass1stant Corporation Counsel 100 Church Street New York, NY 10007 212-356-2611 jshweder@law .nyc.gov 39