Lorraine Borden, et al., Respondents,v.400 East 55th Street Associates, L.P., Appellant.BriefN.Y.October 14, 2014To be Argued by: CHRISTIAN SIEBOTT (Time Requested: 30 Minutes) APL 2013-00312 Nassau County Clerk’s Index No. 650361/09 Court of Appeals of the State of New York LORRAINE BORDEN, on behalf of herself and all others similarly situated, Plaintiff-Respondent, – against – 400 EAST 55TH STREET ASSOCIATES, L.P., Defendant-Appellant. BRIEF FOR PLAINTIFF-RESPONDENT CHRISTIAN SIEBOTT GABRIEL G. GALLETTI HEATHER V. LYNCH Of Counsel BERNSTEIN LIEBHARD LLP Attorneys for Plaintiff-Respondent 10 East 40th Street, 22nd Floor New York, New York 10016 Tel.: (212) 779-1414 Fax: (212) 779-3218 Date of Completion: March 20, 2014 STATUS OF RELATED LITIGATION Pursuant to this Court’s Rule of Practice 500.13 (a) (22 NYCRR § 500.13 [a]), Respondent wishes to inform the Court of related litigation. Two other related cases from Supreme Court, New York County, are simultaneously on appeal to this Court. These cases, like the instant case, raise the question of the propriety of certifying a class of tenants paying market rents in a residential apartment building while their landlord receives J-51 tax benefits. The cases were all brought in the wake of this Court’s decision in Roberts v Tishman Speyer Properties, L.P. (13 NY3d 270 [2009]) that landlords cannot deregulate their apartments while receiving J- 51 tax benefits. In the first, Gudz v Jemrock Realty Co., LLC (Index No. 603555/09), the landlord appeals the First Department’s affirming Supreme Court’s granting class certification. In the second, Downing v First Lenox Terrace Associates (Index No. 100725/10), the landlord appeals the First Department’s decision that statutes and regulations do not bar class certification. Counsel for Respondent in the instant case is also respondent’s counsel in Borden and presents its two briefs for this Court’s consideration. ii TABLE OF CONTENTS Page STATUS OF RELATED LITIGATION .................................................................... i TABLE OF AUTHORITIES .................................................................................... iv PRELIMINARY STATEMENT ............................................................................... 1 COUNTER-STATEMENT OF QUESTIONS PRESENTED .................................. 4 COUNTER-STATEMENT OF FACTS .................................................................... 6 I. The Parties and Their History .......................................................................... 6 II. Borden Moves for Class Certification. ............................................................ 9 III. The Supreme Court Decides Borden’s Motion for Class Certification. ....... 10 IV. The IAS Court’s Decision on Renewed Motion for Class Certification ....... 13 V. The Appellate Division Affirms Class Certification. .................................... 14 VI. Related Cases Repeatedly Uphold the Propriety of Class Certification. ...... 16 STANDARD OF REVIEW ..................................................................................... 19 ARGUMENT ........................................................................................................... 22 I. CPLR 901 (b) Does Not Bar This Case from Being Maintained as a Class Action Under RSL § 26-516. ............................................................... 22 A. Waiver of Penalty Damages Is Allowed Where a Statute Provides for Both Penalty and Non-Penalty Damages Depending on Defendant’s Culpability. ..................................................................... 22 B. The Different Statutes of Limitations Governing Actual and Treble Damages Make Respondent’s Waiver Eminently Reasonable. .......... 24 C. Respondent’s Waiver Does Not Amount to Much of a Waiver at All. ................................................................................................... 25 iii D. This Court’s Sperry Decision Dictates that Actual Damages Under RSL § 26-516 Are Not a CPLR 901 (b) “Penalty” ............................. 27 E. RSL § 26-516 Is Not a Mandatory Statute. ......................................... 31 F. Courts Allow Waiver Under Statutes that Are Analogous to RSL § 26-516 . .................................................................................... 35 II. New York Public Policy and RSC § 2520.13 Do Not Prevent Respondent from Waiving Penalty Damages. ................................................................... 39 A. RSC § 2520.13 Is Not Relevant Because Respondent’s Waiver Is a Unilateral Decision. ............................................................................. 40 B. Respondent’s Waiver Only Directly Impacts Herself Because Class Members May Opt Out to Pursue Penalties. ............................. 43 C. Waiver Aligns with the Policy Goals Behind the Rent Laws. ............ 46 III. This Action Satisfies CPLR 901 (a)’s Five Requirements for Class Certification. .................................................................................................. 49 A. Common Issues Predominate, and Class Treatment Is Superior. ....... 49 B. CPLR 901(a) (3): Borden’s Claims Are Typical of Those of Each Class Member. ..................................................................................... 53 C. CPLR 901(a) (4): Respondent Has Shown That She Will Adequately Represent the Class. ......................................................... 56 CONCLUSION ........................................................................................................ 60 iv TABLE OF AUTHORITIES CASES 390 W. End Assoc. v Harel (298 AD2d 11 [2002]) .................................................................................... 41, 47 Ackerman v Price Waterhouse (252 AD2d 179 [1st Dept 1998]) .................................................................. 11, 56 Asher v Abbott Labs. (290 AD2d 208 [1st Dept 2002], lv dismissed 98 NY2d 728 [2002]) ..................................................................... 38 Aurecchione v DHCR (98 NY2d 21 [2002]) ............................................................................................ 30 Brandon v Chefetz (106 AD2d 162 [1st Dept 1985]) ......................................................................... 21 Casey v Whitehouse Estates, Inc. (2012 NY Slip Op 51471[U], 2012 WL 3168689 [Aug. 6, 2012]) .................................................. 19, 24, 26, 52 Charron v Pinnacle Group N.Y. LLC (269 FRD 221 [SD NY 2010], affd sub nom. Charron v Wiener, 731 F3d 241 [2d Cir 2013]) .......................................................................... 55, 56 City of New York v Maul (14 NY3d 499 [2010]) .................................................................................... 20, 49 Cox v Microsoft Corp. (290 AD2d 206 [1st Dept 2002], lv dismissed 98 NY2d 728 [2002]) ..................................................................... 33 Cox v Microsoft Corp. (8 AD3d 39 [1st Dept 2004]) ........................................................................ 23, 24 Daniel v DHCR (179 Misc 2d 452 [Sup Ct, NY County 1998]) .................................................. 50 v Delano Village Cos. v DHCR (245 AD2d 196 [1st Dept 1997]) ......................................................................... 47 Downing v First Lenox Terrace Assoc. (107 AD3d 86 [2013]) ...................................................................................passim Drucker v Mauro (30 AD3d 37 [2006], lv dismissed 7 NY3d 844 [2006]) .................................................................. 41, 47 Estro Chem. Co. Inc. v Falk (303 NY 83 [1951]) .................................................................................. 39, 40, 42 Evans v Johnstown (97 AD2d 1 [3d Dept 1983]) ................................................................................ 21 Friar v Vanguard Holding Corp. (78 AD2d 83 [2d Dept. 1980]) ......................................................................passim Garay v Todros (282 AD 126 [1st Dept 1953]) ............................................................................. 47 Georgia Props., Inc. v Dalsimer (39 AD3d 332 [1st Dept 2007]) ........................................................................... 41 Globe Surgical Supply v GEICO Insurance Co. (59 AD3d 129 [2d Dept 2008]) ............................................................................ 55 Gudz v Jemrock Realty Co., LLC (105 AD3d 625 [2013]) .................................................................................passim Matter of H.O. Realty Corp. v DHCR (46 AD3d 103 [1st Dept 2007]) ..................................................................... 31, 32 Iglesias-Mendoza v La Belle Farm, Inc. (239 FRD 363 [SD NY 2007]) ............................................................................. 44 Klapak v Pappas (79 AD2d 602 [2d Dept 1980]) ...................................................................... 57, 58 Kolbert v Clayton (127 Misc 2d 1036 [NY City Civ Ct 1985]) ........................................................ 33 vi Krebs v Canyon Club, Inc. (22 Misc 3d 1125[A], 2009 WL 440903 [Sup Ct, Westchester County 2009]) ............................................................................ 43, 44 Krichman v J.P. Morgan Chase Co. (Civ No 06-15305, 2008 WL 5148769 [SD NY Dec. 8, 2008]) ................... 23, 38 Kudinov v Kel-Tech Constr. Inc. (65 AD3d 481 [1st Dept 2009]) ........................................................................... 49 Liechtung v Tower Air, Inc. (269 AD2d 363 [2d Dept 2000]) .......................................................................... 21 Life & Cas. Ins. Co. of Tenn. v McCray (291 US 566 [1934]) ............................................................................................ 27 Manocherian v Lenox Hill Hosp. (84 NY2d 385 [1994]) .......................................................................................... 46 Matinzi v Joy (60 NY2d 835 [1983]) .......................................................................................... 40 McLaughlin v Bd. of Police Commrs. of City of Yonkers (174 NY 450 [1903]) ............................................................................................ 45 Mohassel v Fenwick (5 NY3d 44 [2005]) .................................................................................. 30, 31, 32 MQDC, Inc. v Steadfast Ins. Co. (Civ No 12-1424, 2013 WL 6388624 [ED NY Dec 6, 2013]) ............................ 45 Osarczuk v Associated Univs., Inc. (82 AD3d 853 [2d Dept 2011]) ............................................................................ 50 Park W. Mgmt. Corp. v Mitchell (47 NY2d 316 [1979]) .......................................................................................... 41 Pesantez v Boyle Envtl. Servs. (251 AD2d 11 [1st Dept 1998]) ....................................................................passim Pludeman v N. Leasing Sys., Inc. (74 AD3d 420 [1st Dept 2010]) ..................................................................... 53, 54 vii Pruitt v Rockefeller Ctr. Props. (167 AD2d 14 [1st Dept 1991]) ..................................................................... 21, 55 Rebibo v. Axton Owner LLC (2012 NY Slip Op 30109[U], 2012 WL 252643 [Jan. 18, 2012]) ....................... 19 Ridge Meadows Homeowners’ Assn., Inc. v Tara Dev. Co., Inc. (242 AD2d 947 [4th Dept 1997]) ............................................................. 24, 36, 37 Riverside Syndicate, Inc. v Munroe (10 NY3d 18 [2008]) ............................................................................................ 42 Roberts v Tishman Speyer Props., L.P. (62 AD3d 71 [1st Dept], affd 13 NY3d 270 [2009]) .............................................................................passim Roberts v Tishman Speyer Props., L.P. (13 NY3d 270 [2009]) ...................................................................................passim Roberts v Tishman Speyer Props., L.P. (89 AD3d 444 [1st Dept 2011]) ........................................................................... 51 Russo & Dubin v Allied Maint. Corp. (95 Misc 2d 344 [Sup Ct, NY County 1978]) ...................................................... 58 Schatz v Cellco Partnership (842 F Supp 2d 594 [SD NY 2012]) .................................................................... 45 Semmen v Butterick Pub. Co. (166 NYS 993 [2d Dept 1917]) ........................................................................... 29 Sicolo v Prudential Sav. Bank of Brooklyn (5 NY2d 254 [1959]) ............................................................................................ 29 Small v Lorillard Tobacco Co. (94 NY2d 43 [1999]) ................................................................................ 19, 58, 59 Smellie v Mount Sinai Hospital (Civ No 03-805, 2004 WL 2725124 [SD NY Nov. 29, 2004]) ..................... 36, 38 Sperry v Crompton Corp. (8 NY3d 204 [2007]) .....................................................................................passim viii Standard Fire Ins. Co. v Knowles (133 S Ct 1345 [2013]) ........................................................................................ 59 Super Glue Corp. v Avis Rent A Car Sys., Inc. (132 AD2d 604 [2d Dept 1987], lv denied 77 NY2d 801 [1991]) ....................................................................passim Thoreson v Penthouse Intl. (80 NY2d 490 [1992], affg 179 AD2d 29 [1st Dept 1992]) ..................................................................... 20 Thornton v Baron (5 NY3d 175 [2005]) ............................................................................................ 47 Weinberg v Hertz Corp. (116 AD2d 1[1st Dept 1986], affd 69 NY2d 979 [1987]) ........................................................................ 23, 37, 44 DOCKETED CASES Borden v 400 East 55th St. Assoc., L.P. (Index No. 650361/09E [Sup Ct, NY County]) ...........................................passim Casey v Whitehouse Estate, Inc. (Index No. 111723/11 [Sup Ct, NY County]) .................................................... 18 Downing v First Lenox Terrace (Index No. 100725/10 [Sup Ct, NY County]) ................................................. i, 19 Gerard v Clermont York Assoc., LLC (Index No. 101150/10 [Sup Ct, NY County]) .................................................... 19 Gudz v Jemrock Realty Co., LLC (Index No. 603555/09 [Sup Ct, NY County]) .............................................passim Roberts v Tishman Speyer Props., L.P. (Index No. 100956/07E [Sup Ct, NY County]) ...........................................passim Stillman v Clermont York Assocs., LLC (Index No. 603557/09 [Sup Ct, NY County]) .................................................... 19 Rebibo v Axton Owner LLC (Index No. 105995/10 [Sup Ct, NY County]) .................................................... 19 ix RULES AND REGULATIONS CPLR 213-a ........................................................................................................ 24, 51 CPLR article 9 ...................................................................................................passim CPLR article 78 ........................................................................................................ 50 CPLR 901 (a) ....................................................................................................passim CPLR 901 (b) ....................................................................................................passim CPLR 902 ................................................................................................................. 51 CPLR 909 ................................................................................................................. 30 Emergency Tenant Protection Act (L 1974, ch 576, as encated) ............................ 34 Federal Rule of Civil Procedure 23 ......................................................................... 21 New York Admin Code § YY51-6.0.5 .................................................................... 33 NY Gen Bus Law § 340 (5) (“Donnelly Act”) .................................................passim NY Gen Bus Law § 349 ....................................................................................passim NY Gen Bus Law § 350 ........................................................................................... 45 NY Labor Law § 198 ............................................................................. 36, 37, 38, 44 NY Social Services Law § 131-o ............................................................................. 57 Rent Stabilization Code (“RSC”) § 2520.13 ....................................................passim RSC § 2526.1 ........................................................................................................... 48 Rent Stabilization Law ("RSL") § 26-504.1 .............................................................. 6 RSL § 26-504.2 .......................................................................................................... 6 RSL § 26-511 ............................................................................................................. 9 RSL § 26-516 ....................................................................................................passim 22 NYCRR § 500.13 ................................................................................................... i x OTHER AUTHORITIES Haig (3 Commercial Litigation of New York State Courts § 20:7 [3d ed., 2010]) .......................................................................................... 56 Siegel New York Practice § 141 .............................................................................. 49 PRELIMINARY STATEMENT The appeal brought by Defendant-Appellant 400 East 55th Street Associates, L.P. (“Landlord”) against its tenant, Plaintiff-Respondent Lorraine Borden, is without merit. Multiple times, motions for class certification in actions virtually identical to this case have come before the courts of this State. Each time that a court has issued a final ruling on the motion, that court has granted class certification: seven motions granted in New York Supreme Court and two at the Appellate Division. Yet Appellant in its brief makes no meaningful attempt to distinguish this long line of case law. Instead, Appellant asks this Court to misconstrue statutes, regulations, and policy to benefit Appellant and no one else. Regarding the State class action law (CPLR article 9), Appellant instructs this Court not to apply the law liberally to favor the maintenance of class actions. Although this construction is well-settled, Appellant asks this Court to interpret article 9 so narrowly as to make class certification impossible. But when a bar to class certification is at issue, mainly CPLR 901 (b) and Rent Stabilization Code (“RSC”) § 2520.13, Appellant shifts gears and asks this Court to sweep so wide as to make class certification, once again, impossible. This is a tailor-made class action. Respondent brings two causes of action: (1) damages for rent overcharges and (2) declaratory relief in the form of a 2 judgment that all class members’ apartments are subject to the Rent Stabilization Law (“RSL”). The class definition is straightforward. It includes current and former tenants in Respondent’s building who have been charged a market rent while Appellant has received J-51 tax benefits. A market rent, by definition, is not subject to the RSL. Class membership therefore ensures liability because the foundational decision, Roberts v Tishman Speyer Properties, L.P. (62 AD3d 71 [1st Dept 2009], affd 13 NY3d 270 [2009]), held that all apartments in a building receiving J-51 benefits are subject to the RSL (id. at 81). As a result, a single common issue (did a tenant pay a market rent while Appellant received J-51 benefits) determines liability. In addition, each class member’s damages can be determined by addressing common issues. By answering common legal questions, such as how to determine the base rent and how to account for lawful increases, a court can set a common formula to determine the overcharge owed to each class member. Appellant’s main argument is that class certification is barred by CPLR 901 (b), which prohibits the maintenance of a class action seeking to recover a “penalty.” Respondent, on behalf of herself and the class she represents, sues for rent overcharges under RSL § 26-516, which provides for two types of damages depending on the degree of a landlord’s culpability: (1) treble damages for willful overcharges and (2) actual damages for non-willful overcharges. Because 3 Respondent waived the former, and pursues only the latter type of damages, the § 901 (b) bar to certification does not apply. Waiver is permitted since absent class members who wish to seek penalty damages may opt out to bring individual actions. This is exactly the type of class action envisaged by the Legislature in enacting CPLR 901 (b). Respondent’s waiver of penalty damages prevents her and the class from recouping a windfall and unduly penalizing Appellant. Instead, Respondent and the class can obtain precisely the moneys they are owed through the efficiencies of class treatment. Appellant’s arguments to the contrary are baseless. First, Appellant cannot rationally claim that it is being penalized. Second, treble damages are not mandatory since RSL § 26-516 provides for both treble and singular damages depending on a landlord’s culpability. It is settled law for RSL § 26-516 and analogous statutes that waiver of penalties is allowed to maintain a class action. Third, even though willfulness is presumed under the RSL, if Appellant’s strategy is to refuse to disprove its willfulness, a court can still determine for itself whether Appellant owes actual or penalty damages. Fourth, given Appellant’s admitted good-faith reliance on regulations overturned by Roberts in overcharging tenants, it is likely that Appellant did not willfully overcharge Respondent or the class. Class members will be hard pressed to show that their overcharge was willful. Fifth, 4 because the limitations period for penalty damages is two years shorter than that for actual damages, there is no reason not to certify claims for the entire actual damages period. Finally, Appellant erroneously argues that a class action is barred by the public policy (codified at RSC § 2520.13) that prohibits agreements to waive a benefit under the rent laws. Obviously, Respondent’s unilateral decision to waive penalties is not an agreement. Therefore, it does not invoke the policy concerns of owners coercing tenants into paying unlawful rents or the parties collaborating to diminish prospectively the stock of affordable housing in New York City. Respondent’s decision directly impacts only herself. Absent class members will be given clear, court-sanctioned notice that they may opt out of the class to pursue treble damages. In the end, Appellant provides no cogent reason for this Court to grant its appeal. The Appellate Division should be affirmed. COUNTER-STATEMENT OF QUESTIONS PRESENTED 1. Although CPLR 901(b) bars a class action from being maintained where a plaintiff sues for penalty damages, a plaintiff may maintain a class action by waiving penalty damages and pursuing only actual damages. The first question presented by this appeal is whether a plaintiff may maintain a class action under RSL § 26-516, a statute providing for two types of damages, treble and actual damages, depending on a landlord’s culpability, by waiving treble damages and 5 pursuing only actual damages. The Appellate Division was not in error when it allowed this action to be maintained as a class action as a result of Respondent’s waiver of penalty damages. 2. The public policy of this State, as codified at RSC § 2520.13, prohibits agreements between landlords and tenants to waive a benefit of the rent laws. The second question presented by this appeal is whether to permit a unilateral decision by a class representative to waive, on behalf of herself and the class she represents, the chance to pursue treble damages under RSL § 26-516 given that class members may opt out to pursue treble damages and that waiver comports with the policies behind RSC § 2520.13. The Appellate Division was not in error when it allowed this action to be maintained as a class action notwithstanding public policy and RSC § 2520.13. 3. CPLR 901 (a) sets forth five prerequisites for a case to proceed as a class action: numerosity, commonality, typicality, adequacy, and superiority. The third question presented by this appeal is whether a case can be maintained as a class action under § 901 (a) when all five requirements are met, particularly the predominance of common issues in determining both liability and damages. The Appellate Division was not in error when it allowed this action to be maintained as a class action under CPLR 901 (a). 6 COUNTER-STATEMENT OF FACTS The J-51 program, pursuant to RSL §§ 26-504.1 and 26-504.2 (a), grants tax benefits to landlords under the condition that “all apartments in buildings receiving J-51 tax benefits are subject to the RSL during the entire period in which the owner receives such benefits.” (Roberts, 62 AD3d at 81). This Court, in Roberts (13 NY3d 270), affirmed this reading of the RSL and accordingly overturned Division of Housing and Community Renewal (“DHCR”)1 regulations that stated otherwise. I. The Parties and Their History This case, like many others, was brought in the wake of the 2009 Roberts decisions.2 The action was commenced by Summons with Notice served June 16, 2009 (see R. 139). 3 On January 29, 2010, Borden, a residential tenant of Apartment 4F (the “Apartment”) located at 400 East 55th Street in the County, City, and State of New York (“the Building”), brought a Class Action Complaint (R. 34-43 (“Complaint” or “Compl.”)) on behalf of herself and others similarly situated against the Building’s owner (“Landlord” or “Appellant”). The Complaint 1 DHCR is now part of Homes and Community Renewal (“HCR”), which consists of all of New York’s major housing and community renewal agencies. 2 On April 11, 2013, a final settlement in Roberts was approved by Justice Richard B. Lowe, III, the Chief Justice of the Appellate Term, First Department. Counsel for Borden and the class was also co-lead counsel in Roberts. 3 Citations to Appellant’s Record are designated “R.” Citations to Appellant’s Brief are designated “Br.” 7 sought rent overcharge damages and a judgment that Borden and class members’ apartments are subject to the RSL. Landlord answered the Complaint (R. 45-49) and asserted numerous affirmative defenses. One defense Landlord asserted was that it “reasonably and in good faith [relied] on the then-existing statutory, administrative and regulatory law including, but not limited to, the pronouncement and conduct of the DHCR in determining whether the subject apartment could be deregulated” (R. 47 ¶ 17). Landlord, on behalf of the Building (Manhattan Block 1366, Lot 47), has been receiving J-51 tax benefits since approximately 1991 and will continue to receive said benefits through approximately 2025 (R. 76-95; Compl. (R. 35 ¶ 4, R. 38 ¶ 19)). Landlord avers that its J-51 benefits will expire in 2016 (Br. 9). However, the most recent New York City Department of Finance report in Appellant’s Record shows that Landlord received a J-51 abatement in tax year 2004-05 of 20 years’ duration, expiring 2024-25 (R. 95). When Borden moved for class certification, the Building contained 128 residential apartment units (R. 61), of which 75 were stabilized (R. 63), and 53 were non-stabilized (R. 30 ¶ 8).4 For the entirety of Borden’s tenancy, she has been unlawfully treated by Landlord as a non-regulated tenant despite Landlord’s receipt of J-51 benefits, a 4 R. 29-33 contains the Affirmation of Tania T. Taveras in Support of Plaintiff Lorraine Borden’s Motion for Class Certification, dated May 6, 2011, not including the exhibits attached thereto (“Taveras Aff.”). 8 practice clearly unlawful pursuant to Roberts (Taveras Aff. (R. 31-32 ¶ 9)). Borden moved into the Apartment under a one-year lease effective November 1, 2006 to October 31, 2007 at a rent of $2,650.00 per month (R. 173). Subsequently she signed a two-year lease renewal effective November 1, 2007 to October 31, 2009 at a rent of $2,875.00 per month (R. 183). Upon the expiration of this lease, Borden and Landlord could not agree on the lawful rent to be charged for the Apartment. Contrary to Landlord’s claims, Borden has not refused to pay her rent. Since 2010, Borden has submitted rent checks in the amount of $778.47 (R. 227- 29, 334-47), which reflects the last registered rent for the Apartment (R. 74).5 In December 2010, Landlord offered Borden three lease renewal options (R. 205-09). Each renewal lease option stated that the renewal was pursuant to the RSC; however, in reality, the leases were all unlawfully defective. For example, each lease option contained erroneous rent calculations, referring to the last regulated rent of $2,569.06 per month (R. 206-09). By contrast, the DHCR Report indicates that the last regulated monthly rent for Borden’s apartment was $778.47 (R. 74). The proffered 2010 renewal leases were also unlawful in many other ways. For example, neither contained the Rent Stabilization Lease Rider, which enumerates rights and duties owed to rent-stabilized tenants, and is required under 5 The parties have now reached an agreement whereby Landlord will accept Borden’s payments, based on the last legal regulated rent, without prejudice to its right to seek further alleged relief. In addition, R. 72-75 contains the Apartment’s “Registration Apartment Information,” a report of the Apartment’s annual registered rents generated by DHCR (“DHCR Report”). 9 RSL § 26-511 (d). Borden chose not to sign any of the defective renewal leases. She remains a monthly tenant without an active lease. II. Borden Moves for Class Certification. On May 6, 2011, Borden moved to certify a class of “all persons who are or were residential tenants at 400 East 55th Street and were charged, and/or continue to be charged, market rate rents during the period in which Defendant was participating in the J-51 tax benefit program” (the “Class”) (Compl. (R. 35 ¶ 7)). Landlord opposed by arguing that the action did not meet the requirements of CPLR 901 (a). Landlord also argued that class certification was barred by CPLR 901 (b), which bars actions to recover a “penalty” from being maintained as a class action. Borden had sought treble damages under RSL § 26-516 (a), but in moving for class certification, waived her right to seek treble damages, first through an attorney affirmation (Taveras Aff. (R. 33 ¶ 15)) and later by personal affidavit (R. 424 ¶ 15).6 Likewise, during a deposition, Borden affirmed her waiver of her right to treble damages (R. 556-57).7 Borden further testified at the deposition that she consulted with her counsel about waiving her entitlement to treble damages and considered the pros and cons of waiving them (R. 561-62, 574-75, 579-80). 6 R. 421-24 contains the Affidavit of Lorraine Borden, sworn to November 17, 2011, submitted in support of Plaintiff’s Renewed Motion for Class Certification. 7 R. 484-630 contains the transcript of Borden’s deposition held January 19, 2012 (“Borden Depo.”). 10 III. The IAS Court Decides Borden’s Motion for Class Certification. The “IAS Court” (Gische, J),8 by Decision and Order entered November 10, 2011 (R. 4-14), held that the Class satisfied the CPLR 901 (a) requirements for class certification except for Borden’s failure to show, by sufficient evidence, that she is an adequate class representative (R. 6, 13-14). Accordingly, the IAS Court denied Borden’s motion, but did so without prejudice to renew. In its decision, the IAS Court analyzed the five CPLR 901 (a) requirements, and held that Borden satisfied four of the five prerequisites (numerosity (R. 8-9), commonality (R. 9-10), typicality (R. 10-11), and superiority (R. 14)). First, the IAS Court held that “a class [of current and former tenants] that consists of 53 or more members is sufficiently numerous,” thereby satisfying § 901 (a) (1) numerosity (R. 8). Second, the IAS Court held that, pursuant to § 901(a) (2), common issues predominate (R. 9-10). The court explained: “At bar, the factual and legal issues associated with liability for each member of the proposed class are nearly identical” (R. 10). The court acknowledged that there were differences among tenants, but found that “those difference[s] are not sufficient to affect the predominance of common issues” (id.). Next, the IAS Court addressed § 901 (a) (3) typicality. The court held that “Borden’s claims are typical of the class, in that she is a tenant who entered into an unregulated apartment lease, that charged a 8 Justice Gische has subsequently been elevated to the First Department. Justice George Silver currently presides over this action at the IAS Court. 11 market rent, while the landlord was actually receiving a J-51 tax abatement for the building” (R. 10). Therefore, Borden’s claims are “based upon the same course of conduct and legal theories as all of the other members of the proposed class,” and § 901 (a) (3) typicality is satisfied (R. 10-11). Finally, the IAS Court found § 901 (a) (5) superiority satisfied, holding that class treatment of this action would be “an efficient and superior method of resolving the post Roberts issues” that this litigation presents (R. 14). While the IAS Court recognized that a class action is an appropriate procedural vehicle for this action (R. 6), it found that Borden did not set forth sufficient evidence to show that she possesses the “personal characteristics” of an adequate representative to satisfy CPLR 901 (a) (4) (R. 13-14). The court, citing Ackerman v Price Waterhouse (252 AD2d 179, 202 [1st Dept 1998]), enumerated three factors for determining adequacy of representation: (1) quality of counsel, (2) potential conflicts of interest between the representative and class members, and (3) the class representative’s personal characteristics (R. 11). The court held that Borden satisfied the first two factors, but did not provide sufficient evidence to support a finding that the third adequacy factor was satisfied.9 9 Addressing the first adequacy factor, the IAS Court held that Class counsel, Bernstein Liebhard LLP, was fit to represent the Class (R. 11). Landlord has not challenged this factor in its appeal to the Appellate Division or to this Court. 12 The IAS Court, addressing the second adequacy factor, held that there were no conflicts of interest that would render Borden an inadequate representative (R. 11). Landlord had argued that its counterclaim against Borden created a conflict of interest between Borden and the Class. The court rejected Landlord’s argument and explained that “[t]he counterclaim is for non-payment of rent and it is inextricably intertwined with the issues raised in the class action in chief” (R. 12). Furthermore, the IAS Court held that Borden’s waiver of treble damages did not impinge on her adequacy as a class representative (R. 12-13). The court explained “that should any class member wish to pursue a right to treble damages for willful overcharge, s/he may opt out and bring an individual action” (R. 12). The final adequacy factor considered by the IAS Court concerned Borden’s personal characteristics (R. 11). Here the court found that Borden did not set forth sufficient evidence to show that she “possess[es] an adequate understanding of the litigation, including a knowledge of the claims and progress of the litigation” (R. 13). The court requested “at baseline” a personal affidavit from Borden evidencing that she is “willing and able to serve [as class representative], that she has an adequate understanding of the claims in the litigation and that she is able to make decisions in both her individual and fiduciary capacity for the class” (R. 14). 13 IV. The IAS Court Decides the Renewed Motion for Class Certification. On December 9, 2011, Borden renewed her motion for class certification. Once again, Landlord opposed, making many of the same arguments that it had made in opposing Borden’s original motion. In support of her motion, Borden submitted a personal affidavit, the Borden Aff. (R. 421-24). In addition, Landlord deposed Borden specifically on issues regarding her adequacy to serve as class representative.10 The IAS Court (Gische, J.), by Decision and Order entered April 13, 2012 (R. 18-26), held that Borden satisfied all the CPLR 901 (a) factors (numerosity, commonality, typicality, adequacy, and superiority). This decision incorporated by reference the findings made in the IAS Court’s earlier decision (R. 21), and focused on Borden’s adequacy to serve as class representative. After a thorough analysis, the court held that Borden satisfied the § 901 (a) (4) adequacy requirement. The IAS Court found that Borden demonstrated, among other things, an “understanding of the general nature of the relief requested in the action”; “[t]he difference between a class action and an individual action” and “[h]er reasons for preferring one over the other”; and “the ramifications of waving [sic] the right to 10 Prior to renewing her motion for class certification, Landlord made Borden an offer to settle this action on an individual basis if she withdrew her class action. Borden rejected the offer – opting to maintain this action as a class action (Borden Depo. (R. 603-05); R. 818-19 (Settlement Offer Letter, dated Dec. 6, 2011)). 14 proceed on a claim for treble damages” (R. 23). The IAS Court further held that “there is no requirement that a class representative consult with other members of the class before making decisions about how to proceed in the litigation. Thus, Borden’s failure to do so will not disqualify her.” (R. 23). Finally, addressing Borden’s waiver of treble damages, the IAS Court held that the right to treble damages in the aftermath of Roberts is “completely speculative, and in reality, virtually non-existent” (R. 24). The court explained that “[t]he required proof of willfulness is almost impossible to establish in any Roberts overcharge case, because the initial rents were established in reliance on DHCR regulations and the law on how to calculate the rent stabilized rents is still emerging, without any fixed formula.” (R. 24). The court noted that, as stated in its prior decision, “the putative class members [sic] rights can be completely protected by allowing them to opt out.” (R. 25). Having satisfied all the CPLR 901 (a) factors, the IAS Court granted Borden’s renewed motion for class certification. V. The Appellate Division Affirms Class Certification. Landlord then appealed the IAS Court’s two decisions on class certification to the Appellate Division, First Department. On November 8, 2012, Landlord submitted its opening appellate brief. In its brief, Landlord repeated the arguments it had made in opposing class certification before the IAS Court. Borden opposed. 15 By Decision and Order entered April 25, 2013 (R. 894-97), the Appellate Division unanimously affirmed the IAS Court’s October 13, 2012 order granting class certification. The appeal of the IAS Court’s November 10, 2011 order was dismissed as academic. The Appellate Division explained that CPLR 901 (b) does not bar Borden’s class action because plaintiff has waived her right to treble damages under RSL § 26-516, and class members can opt out should they wish to pursue penalty damages (R. 894-95). The court also held that Borden was not pursuing a § 901 (b) “penalty” even though she did not waive her claim for overcharges, interest, and attorneys’ fees (R. 895). The Appellate Division emphasized that it was interpreting the class action statute liberally (id.). The court then held that the IAS Court did not abuse its discretion in holding that the Class satisfies the class certification requirements set forth in CPLR 901 (a) (id.). In particular, § 901 (a) (2) commonality is satisfied since the following common issues, or questions, predominate: when Landlord received J-51 benefits, whether Landlord deregulated units while receiving J-51 benefits, which tenants resided in those units, and whether Landlord unlawfully charged market rents while accepting J-51 benefits (id.). Next, the Appellate Division held that Landlord’s counterclaim for Borden’s alleged rent arrears does not defeat her CPLR 901 (a) (3) typicality (R. 896). Borden’s claims are typical since hers and the Class members’ claims each flow 16 from Landlord’s unlawful deregulation of apartments while receiving J-51 benefits (id.). The court dismissed Landlord’s argument that its counterclaim would add to the difficulty of resolving Borden’s individual claim. The court also found that Landlord’s suggestion that Borden may be inclined to settle her case individually to evade liability was “speculative.” (Id.). Finally, the First Department held that Borden satisfied CPLR 901 (a) (4) adequacy (id.). According, to the court, the record indicates that Borden possesses an adequate understanding of the case and that her attorneys can adequately serve as Class counsel (R. 896-97). The court was not troubled by Borden’s waiver of treble damages since any Class member who wishes to pursue such damages could opt out and bring an individual action therefor (R. 897). VI. Related Cases Repeatedly Uphold the Propriety of Class Certification. On the same day that the First Department issued its decision in the instant case, the court also held that class certification could go forward in two equivalent appeals (see supra Status of Related Litigation). First, in Gudz (105 AD3d 625), the First Department affirmed certification of a class that is defined identically as the Class in the instant case (except for the buildings’ addresses). The court in Gudz held that plaintiff’s rent overcharge claim did not seek a “penalty” within the meaning of CPLR 901 (b) because plaintiff had waived her right to treble damages. Instead, plaintiff sued for damages that the court described as “compensatory” (id. 17 at 626). The First Department went on to agree with the motion court that the CPLR 901 (a) requirements for class certification were satisfied. A dissent followed. The dissenting opinion argued that treble damages are, in fact, mandatory if a landlord overcharges a tenant. As a result, allowing waiver would circumvent the intent behind CPLR 901 (b), which is to bar a class action seeking a penalty. (Id. at 627). The dissent additionally found that waiver would be barred by RSC (9 NYCRR) § 2520.13, which voids an agreement by a tenant to waive a provision of the rent laws (id. at 627-28). Second, in Downing (107 AD3d 86), the First Department again held, in an equivalent case, that a class action could be maintained. The appeal considered defendant’s motion to dismiss, particularly whether certain statutes and regulations barred class certification.11 For a third time, the Appellate Division held that § 901 (b) does not bar a class action. The court explained that under RSL § 26-516, unlike New York General Business Law (“GBL”) § 340 (5) (the “Donnelly Act”), penalty damages are not mandatory (id. at 89). As a result, plaintiffs could waive penalties and pursue damages the court described as “compensatory in nature,” thereby bypassing the CPLR 901 (b) “penalty” bar (id. at 91). The First Department went on to refute the argument that plaintiffs had run afoul of RSC § 2520.13 by agreeing to waive a benefit under the rent laws. The court explained 11 In Downing, the Appellate Division did not evaluate whether the action satisfied the CPLR 901 (a) certification requirements. 18 that plaintiffs’ waiver was not an agreement, but rather, a unilateral action that did not implicate the RSC provision. (Id. at 89-90). A lone concurring and dissenting opinion followed. While agreeing that the motion court erroneously granted defendant’s motion to dismiss, the opinion found that the majority had prematurely addressed the merits of class certification (id. at 92-93).12 Even before the Appellate Division weighed in, the Supreme Courts of New York overwhelmingly approved class certification. Including this action, Respondent’s counsel is aware of seven times that a motion for class certification has come before the Supreme Court in a Roberts-type action prior to the Appellate Division’s resolving the issue. All seven times where the Supreme Court has made a final ruling on a motion for class certification, that motion has been granted. 12 The three Appellate Division decisions from April 25, 2013 amount to a veritable en banc sitting of the First Department on the issue now before this Court. Reviewing the above decisions, the eight justices that signed on to at least one of the majority opinions (Tom, Sweeny Jr., Gische, Andrias, Renwick, Freedman, Feinman, and Abdus-Salaam) all expressly held that CPLR 901 (b) did not bar a class action under RSL § 26-516. Two justices (Moskowitz and Manzanet-Daniels, dissenting in Gudz) disagreed. On the issue of whether RSC § 2520.13 prevented a plaintiff’s waiver of penalty damages under the RSL, four justices (Tom, Andrias, Renwick, and Abdus-Salaam) expressly held that the code provision did not. These four comprise the majority in Downing. Although RSC § 2520.13 was extensively briefed to the First Department both in this action and in Gudz, these two majority opinions did not expressly mention the RSC provision. The two dissenters in Gudz argued that RSC § 2520.13 barred plaintiff’s waiver. Seven justices (Tom, Sweeny, Gische, Andrias, Renwick, Freedman, and Feinman) expressly held that the CPLR 901 (a) class action requirements were satisfied. These are the justices in the First Department majorities in this action and in Gudz. The two dissenting justices in Gudz, once again, took issue with the majorities’ § 901 (a) findings. 19 Classes have been certified in: (1) Gudz; (2) Roberts (Index No. 100956/07E); (3) Casey v Whitehouse Estates, Inc. (Index No. 111723/11); (4) Stillman v Clermont York Associates, LLC (Index No. 603557/09); (5) Gerard v Clermont York Associates LLC (Index No. 101150/10); (6) Rebibo v Axton Owner LLC (Index No. 105995/2010); and (7) the instant case. 13 Now the propriety of an RSL § 26-516 class action comes before this Court. Respondent writes in opposition to show that Landlord’s appeal is groundless and that affirming the Appellate Division is warranted under a straightforward application of settled law. STANDARD OF REVIEW A decision on the merits of class certification “ordinarily rests within the sound discretion of the trial court.” (Small v Lorillard Tobacco Co., 94 NY2d 43, 52 [1999]). On appeal, the Appellate Division is vested with the same discretionary power as the trial court and may exercise that power even absent an 13 The decisions on class certification, all from Supreme Court, New York County, are: (1) Gudz (first decision at R. 316-20 (2011 NY Slip Op 31647[U], 2011 WL 2516324 [June 16, 2011]); second decision (granting class certification) at R. 794-97 (Decision/Order [Oct. 24, 2011]); (2) Roberts (class certification motion granted on consent) (R. 55-60, Order, Aug. 25, 2010); (3) Casey (2012 NY Slip Op 51471[U], 2012 WL 3168689 [Aug. 6, 2012]); (4) Stillman (Decision/Order, NYSCEF Doc. 53 [Aug. 6, 2012]); (5) Gerard (Decision/Order, NYSCEF Doc. 46 [Aug. 8, 2012]); (6) Rebibo (first decision at 2012 NY Slip Op 30109[U], 2012 WL 252643 [Jan. 18, 2012]; second decision (granting class certification) Decision/Order [Oct. 11, 2012]; and (7) the instant case (R. 5-14, 18-26). One decision not listed is the Supreme Court’s July 26, 2011 on-the-record dismissal in Downing (R. 861-90). Downing is not listed because the court did not decide a motion for class certification. Regardless, the First Department overturned the motion court’s granting the defendant’s motion to dismiss (107 AD3d 86). 20 abuse of discretion (id. at 52-53). With the matter now before this Court, its “standard of review . . . is far more limited. Where, as here, the Appellate Division affirms a Supreme Court order certifying a class, we may review only for an abuse of discretion as a matter of law.” (City of New York v Maul, 14 NY3d 499, 509 [2010]). Appellant’s burden is substantial. This Court observed in 2010 that “to date this Court has not found an abuse of discretion as a matter of law in the CPLR article 9 class certification context.” (Id. at 510 n 7). Nearly four years later, this observation still holds true. The trial court’s findings of fact are given due deference. In Thoreson v Penthouse International (80 NY2d 490, 495 [1992]), this Court explained: “‘[T]he decision of the fact-finding court should not be disturbed upon appeal unless it is obvious that the court’s conclusions could not be reached under any fair interpretation of the evidence’” (id. at 495, quoting and affg 179 AD2d 29, 31 [1st Dept 1992]). Courts are to give a liberal construction to the class action requirements set forth in CPLR article 9. In Maul, this Court observed that “‘the Legislature intended article 9 to be a liberal substitute for the narrow class action legislation which preceded it.’” (14 NY3d at 310, quoting Friar v Vanguard Holding Corp., 78 AD2d 83, 91 [2d Dept. 1980]). Friar is still a New York appellate court’s most thorough examination of the policy behind CPLR article 9. Written five years after 21 the 1975 enactment of article 9, the court confronted a landscape where courts narrowly construed the statute, failing to give it its intended effect (Friar, 78 AD2d at 92-93). The court in Friar observed that article 9 was based upon Federal Rule of Civil Procedure 23, and “[t]he policy of rule 23 is to favor the maintenance of class actions and liberal interpretation.” (Id. at 93). The Friar court then expounded on the importance of the class action device. Class actions provide collateral public benefits by inducing responsible behavior on the part of large institutions. Class actions also expand due process by affording groups of individuals a right to participate meaningfully in the litigation process. (Id. at 94- 95). Although it is the thrust of Appellant’s briefing, courts are not in the business of ratcheting up the article 9 standards to find ways to bar class actions. (Accord Liechtung v Tower Air, Inc., 269 AD2d 363, 364 [2d Dept 2000] (“Generally, CPLR Article 9 is to be liberally construed and any error should be resolved in favor of allowing the class action.”) (emphasis added)).14 In the First Department’s decisions in both this matter and in Gudz, the court properly emphasized that it was “[i]nterpreting the requirements of the class action statute 14 (See also Pruitt v Rockefeller Ctr. Props., Inc., 167 AD2d 14, 20-21 [1st Dept 1991] (same); Brandon v Chefetz, 106 AD2d 162, 168 [1st Dept 1985] (policy behind CPLR article 9 “is to favor the maintenance of class actions and for a liberal interpretation.”); Evans v Johnstown, 97 AD2d 1, 2 [3d Dept 1983] (“CPLR article 9 was enacted to liberalize the narrow class action legislation which preceded it by providing a flexible, functional scheme for certification of class actions.” (emphasis added))). 22 liberally” (R. 895; Gudz, 105 AD3d at 626). Instead, Appellant attempts to negate a class action by arguing for an overly broad construction of two provisions that do not apply to this matter. First, CPLR 901 (b) is not relevant because it applies only to actions to recover penalties. Second, RSC § 2520.13 and related public policy are not relevant because they void agreements that impact tenants and landlords prospectively. The matter before this Court involves none of these. Instead, it is a tailor-made class action brought by a class representative who has unilaterally waived her right to penalty damages. She represents a class of similarly-aggrieved tenants seeking to recover the amount they were overcharged under the RSL by their landlord — no more, no less. ARGUMENT I. CPLR 901 (b) Does Not Bar This Case from Being Maintained as a Class Action Under RSL § 26-516. A. Waiver of Penalty Damages Is Allowed Where a Statute Provides for Both Penalty and Non-Penalty Damages Depending on Defendant’s Culpability. CPLR 901 (b)’s prohibition of class actions seeking a “penalty” does not bar a class action under RSL § 26-516 for actual, compensatory damages. CPLR 901 (b) provides: Unless a statute creating or imposing a penalty, or a minimum measure of recovery specifically authorizes the recovery thereof in a class action, an action to recover a penalty, or minimum measure of recovery created or imposed by statute may not be maintained as a class action. 23 RSL § 26-516 (a), the statute under which Respondent sues, provides that: any owner of housing accommodations who, upon complaint of a tenant . . . is found . . . to have collected an overcharge above the rent authorized for a housing accommodation subject to this chapter shall be liable to the tenant for a penalty equal to three times the amount of such overcharge . . . . If the owner establishes by a preponderance of the evidence that the overcharge was not willful, the state division of housing and community renewal shall establish the penalty as the amount of the overcharge plus interest. While a suit seeking treble damages for a willful overcharge would likely amount to a “penalty” under CPLR 901 (b), Respondent has waived her entitlement to treble damages and has chosen to seek only actual damages (Taveras Aff. (R. 33 ¶ 15); Borden Aff. (R. 424 ¶ 15)). Should an absent Class member wish to pursue treble damages, he or she may opt out of the Class and seek individual relief. “New York appellate courts have repeatedly affirmed the right of plaintiffs to form a class after waiving statutory penalties available to them.” (Krichman v J.P. Morgan Chase Co., Civ No 06-15305, 2008 WL 5148769, *2 [SD NY Dec. 8, 2008]). The matter is settled in this State’s appellate courts where a statute provides for both penalty and non-penalty damages depending on a defendant’s culpability. (See Weinberg v Hertz Corp., 116 AD2d 1, 4 [1st Dept 1986], affd 69 NY2d 979 [1987]; Super Glue Corp. v Avis Rent A Car System, Inc., 132 AD2d 604 [2d Dept 1987], lv denied 77 NY2d 801 [1991]). The court in Super Glue stated that “the weight of authority holds” that “where, as here, the statute does not explicitly authorize a class recovery thereof [for penalty damages], the named 24 plaintiff in a class action may waive that relief and bring an action for actual damages only.” (Id. at 606). (Accord Cox v Microsoft Corp., 8 AD3d 39, 40 [1st Dept 2004]; Pesantez v Boyle Envtl. Servs., 251 AD2d 11, 12 [1st Dept 1998]; Ridge Meadows Homeowners’ Assn., Inc. v Tara Dev. Co., Inc., 242 AD2d 947, 947 [4th Dept 1997]). Each time a court has resolved a motion for class certification under RSL § 26-516, that court has held that the movant can proceed by waiving treble damages and seeking compensatory damages only. CPLR 901 (b) does not bar certification. This was the holding of the First Department in this case: “CPLR 901 (b) . . . does not bar plaintiff’s putative class action” (R. 894). It was also, repeatedly, the holding of other courts to consider the matter (see Gudz, 105 AD3d at 625-26; Downing, 107 AD3d at 88; Casey, 2012 WL 3168689, * 2; supra Counter-Statement of Facts, Section VI). B. The Different Statutes of Limitations Governing Actual and Treble Damages Make Respondent’s Waiver Eminently Reasonable. Permitting waiver is particularly justified in a rent overcharge claim because the treble damages claim and actual or compensatory damages claim have two entirely different statutes of limitations – the former is two years, and the latter is 25 four years. (RSL § 26-516 [a] [2]).15 Even if CPLR 901 (b) prohibits a waiver of the two-year willfulness treble damages claim (which it does not) and bars class certification of that claim, it could not by any interpretation prohibit class certification of a compensatory damages action for the first two years of the four- year statutory period for bringing such claims, during which treble damages are barred from being recovered altogether under RSL § 26-516. And since the first two years of the compensatory damages claims can be certified in any event, there is no logical or policy-based reason not to certify such claims for the entire overcharge period beginning four years before the commencement of the action. In light of the differing statutes of limitation under RSL § 26-516, the only rational way to read that statute in conjunction with CPLR 901 (b) is to conclude that rent overcharge cases can be certified as to actual damages claims even if they cannot be certified as to treble damages claims. C. Respondent’s Waiver Does Not Amount to Much of a Waiver at All. Because the lower courts have made plain that willfulness generally cannot be proved in Roberts-type cases, choosing to proceed with strong actual damages claims covering a longer overcharge period and waiving weak (at best) treble 15 The damages period begins four years before the complaint is filed (RSL § 26-516 [a] [2]; CPLR 213-a). However, the period in which these damages can be trebled only goes back two years before the complaint’s filing. Pursuant to RSL § 26-516 (a) (2) (i), “No penalty of three times the overcharge may be based upon an overcharge having occurred more than two years before the complaint is filed”. 26 damages claims that cover two fewer years of overcharges makes good sense from a class-wide litigation perspective. This is especially true given that any class member who would prefer to pursue treble damages can do so by opting out of the Class to bring an individual action. The Appellate Division in Super Glue was clear that “[s]hould any class member wish to pursue his or her statutory right to minimum and treble damages, he or she may opt out of the class and bring an individual action therefor.” (132 AD2d at 606). It is likely that actual damages are all that are available to Respondent and the Class. Landlord concedes this. For example, in its Answer, Landlord argues that it relied in good faith on the then-existing law in determining whether Class members’ apartments could be deregulated (R. 47 ¶ 17). Appellant confirms its good-faith defense in the opening of its Preliminary Statement (Br. 1-2). Yet, when Respondent agrees, Landlord accuses her of doing and saying anything to preserve this class action (Br. 51). This argument overreaches. Respondent simply recognizes the reality that it will be difficult to show that Landlord willfully overcharged the Class. The IAS Court agreed, explaining that the right to treble damages was “at best, completely speculative, and in reality, virtually non-existent.” (R. 24). (Accord Casey, 2012 WL 3168689, *4 (“[T]he treble damage provisions of the rent regulations simply do not apply under the facts alleged.”)). In Roberts, this Court observed that landlords “predict[ed] dire 27 financial consequences” from the Roberts ruling because they had relied on the overturned-DHCR guidance in deregulating tenants’ apartments and charging market rents (13 NY3d at 287). So by waiving her right to treble damages, Respondent really is not waiving much at all. D. This Court’s Sperry Decision Dictates that Actual Damages Under RSL § 26-516 Are Not a CPLR 901 (b) “Penalty.” Having chosen not to pursue treble damages, it is important to establish that actual damages are not “penalties” either. RSL § 26-516 uses the word “penalty” to describe what are actually compensatory damages: “the amount of the overcharge plus interest.” As Justice Cardozo noted, “‘[p]enalty’ is a term of varying and uncertain meaning.” (Life & Cas. Ins. Co. of Tenn. v McCray, 291 US 566, 574 [1934], quoted in Sperry v Crompton Corp., 8 NY3d 204, 213 [2007]). The First Department in Downing observed that notwithstanding the “penalty” label, whether actual damages constitutes a “penalty” under RSL § 26-516 “‘depend[s] on the context’ and ‘[t]he nature of the problem.’” (107 AD3d at 90, quoting Sperry, 8 NY3d at 213). A review of the foundations and judicial interpretations of CPLR 901 (b), as articulated in Sperry, demonstrates that a class action can seek non-willful, actual rent overcharges. In fact, this action is exactly the type of class action envisaged by the drafters of § 901 (b): individuals obtaining their actual damages through the 28 efficiencies of class treatment but not recouping a treble damages windfall and unduly penalizing a defendant. The legislative purpose behind CPLR 901 (b) was to preclude class actions based on statutes that, by providing economic incentives beyond actual damages, encourage individual plaintiffs to bring suit. Otherwise, a class of plaintiffs could reap a windfall by aggregating these penalty damages (Sperry, 8 NY3d at 213). This Court in Sperry held that the meaning of “penalty” in CPLR 901 (b) was limited to punitive measures that set an arbitrary or minimal amount of damages regardless of plaintiff’s actual damages (id.). The Sperry Court based its ruling on § 901 (b)’s legislative history, quoting the bill sponsor’s memorandum: “These penalties or ‘minimum damages’ are provided as a means of encouraging suits where the amounts involved might otherwise be too small. Where a class action is brought, this additional encouragement is not necessary. A statutory class action for actual damages would still be permissible.” (Id. at 211). Factors indicating a “penalty” under CPLR 901 (b) are where the remedy: (1) punishes or deters wrongdoing rather than redresses private injury, (2) incentivizes an individual plaintiff who suffered little actual damage to bring suit by guaranteeing a minimum measure of recovery, and (3) lacks a compensatory purpose (id. at 211-13). (See Downing, 107 AD3d at 90, quoting Alexander, Practice Commentaries, McKinney’s Cons. Laws of N.Y., Book 7B, 29 CPLR 901 at 104 (“‘[A] statute imposes a penalty when the amount of damages that may be exacted from the defendant would exceed the injured party’s actual damages.’”)). Sperry compels a finding that the overcharge Respondent seeks is not a penalty under CPLR 901 (b). First, the non-willful damages provision of RSL § 26-516 is not punitive; rather, it redresses a private injury (see Sicolo v Prudential Sav. Bank of Brooklyn, 5 NY2d 254, 258 [1959] (defining penalties as punitive and “not includ[ing] a liability created for the purpose of redressing a private injury”)). Second, the provision does not provide extra incentive for an individual plaintiff who suffered little damage to bring suit because the provision allows only for recovery of the actual overcharge. Third, the provision is limited to actual damages and is therefore compensatory (see Semmen v Butterick Pub. Co., 166 NYS 993, 995 [2d Dept 1917] (“[c]ompensatory damages and actual damages mean the same thing”) (internal citation and quotation omitted)). The First Department looked beyond labels to determine that the compensatory damages plaintiffs seek cannot be a penalty. In Gudz, the First Department, citing Sperry, explained: Although plaintiff did not waive her right to reimbursement for alleged overcharges and interest, these claims did not render her action an action for a penalty for purposes of CPLR 901(b), even though such recovery is denominated a penalty by the RSL, because they lack a punitive, deterrent and litigation-incentivizing purpose (see Sperry v. Crompton Corp., 8 N.Y.3d 204, 212–213, 831 N.Y.S.2d 30 760, 863 N.E.2d 1012 [2007] ) and are, in fact, compensatory (see Mohassel v. Fenwick, 5 N.Y.3d 44, 50–51, 799 N.Y.S.2d 758, 832 N.E.2d 1174 [2005]). (105 AD3d at 625. Accord Downing, 107 AD3d at 90-91). Respondent seeks her actual overcharge, along with interest, fees, and costs. None of these is a penalty under Sperry. The court below agreed, holding that “[a]lthough plaintiff did not waive her right to reimbursement for alleged overcharges and interest, and for attorneys’ fees, those claims do not render her action an action to recover a penalty for purposes of CPLR 901 (b) (see Downing; Gudz).” (R. 895). As for the overcharge, it is “compensatory,” giving back to Respondent what her landlord unlawfully charged her (Gudz, 105 AD3d at 626). As for interest, this Court has already held that substantial pre-judgment rent overcharge interest is “‘not a punishment’” but rather, “‘represents the cost of having the use of another person’s money for a specified period’” (Mohassel v Fenwick, 5 NY3d 44 [2005], quoting Matter of Aurecchione v DHCR, 98 NY2d 21, 27 [2002]). In Aurecchione, this Court repeated that “interest is not a penalty.” (98 NY2d at 27 [internal quotation and citation omitted]). Attorneys’ fees and costs are not “penalties” either because CPLR 909 expressly permits courts to award attorneys’ fees in class actions, which the Legislature would not have done if it deemed attorneys’ fees to be a “penalty” that would preclude a class action 31 altogether. If costs and fees were CPLR 901(b) “penalties,” class actions would likely disappear from New York State courts entirely. E. RSL § 26-516 Is Not a Mandatory Statute. Evaluating a rent overcharge claim under RSL § 26-516 is a two-step process. First, a court must objectively determine whether an overcharge occurred (Matter of H.O. Realty Corp. v DHCR, 46 AD3d 103, 106-07 [1st Dept 2007]). Second, if an overcharge is found, a court then must decide which type of damages should be imposed (id. at 107). These are two discrete steps: “the issues to be resolved in determining if the rent is unlawful and whether the landlord thereby acted willfully are very different.” (Id.). RSL § 26-516 provides for two distinct types of damages depending on a landlord’s culpability: (1) treble damages if a landlord’s overcharge is willful and (2) actual damages for a landlord’s non-willful overcharge. While willfulness is presumed, “[i]n the absence of willfulness, DHCR [or the court] ‘shall establish the penalty as the amount of the overcharge plus interest.’” (Mohassel, 5 NY3d at 50, quoting RSL § 26-516 [a]). Landlord devotes much briefing to discussing theoretically when the absence of willfulness can occur (Br. 25-30). The tenant, according to Landlord, has “no option” and “no say” over whether damages are non-willful (Br. 26). Neither does this Court, as Appellant argues that “RSL § 26-516(a) gives a Court no discretion as to whether to award treble damages.” (Br. 27). 32 Respondent disagrees. The facts are as follows: Respondent seeks only actual damages. Landlord, having argued for years that its overcharges were not willful, now changes course and accuses Respondent of saying anything to maintain a class action (Br. 51). However, it is still evident that “willfulness” likely does not describe Landlord’s overcharge.16 And regardless of either party’s litigation posture, a court has discretion not to award willful damages under the RSL. To argue otherwise is to argue for an abdication of a court’s necessary role in a rent overcharge proceeding. Courts have substantial discretion to evaluate whether an overcharge is willful or non-willful (see e.g. H.O. Realty, 46 AD3d at 106-09; Mohassel, 5 NY3d at 50-51 (noting with approval Rent Administrator’s decision to award penalty damages “after determining that owner’s conduct was willful”)). Likewise, in Gudz, the Appellate Division allowed tenant’s waiver of treble damages since “treble damages are not the sole measure of recovery” (Gudz, 105 AD3d at 625). Appellant argues that RSL § 26-516 is a mandatory statute (Br. 22). This is error because to establish that the statute is mandatory, Appellant would have to show that once liability is found, a court may award one remedy only, regardless of culpability. Appellant cannot make this showing and therefore cannot credibly 16 The facts make clear that this is not the “‘end-run around’” CPLR 901 (b) that Landlord makes this out to be. (Br. 55, quoting Napolitano, Avoiding the Minefields in New York Practice, NYLJ, May 18, 2009 at 57 col 1). 33 argue that RSL § 26-516 is a mandatory statute. The dissent in Gudz is also in error in stating that “it is inescapable . . . that treble damages are mandatory in the event that the owner is found to have overcharged the tenant.” (105 AD3d at 627). An actual mandatory statute is the Donnelly Act (see Cox v Microsoft Corp., 290 AD2d 206, 206 [1st Dept 2002], lv dismissed 98 NY2d 728 [2002] (“[T]reble damages under the Donnelly Act are . . . mandatory, i.e., neither discretionary nor contingent upon a finding of bad faith.”)). Utterly unlike RSL § 26-516, the Donnelly Act provides that for antitrust violations, courts can award only treble damages regardless of degree of culpability: [A]ny person who shall sustain damages by reason of any violation of this section, shall recover three-fold the actual damages sustained thereby, as well as costs not exceeding ten thousand dollars, and reasonable attorneys’ fees. The First Department correctly recognized the distinction between the two statutes. In Downing, the court stated that “under [the Donnelly Act], treble damages are awarded upon a finding of liability; the statute does not require a finding of willfulness or bad faith. In contrast, Rent Stabilization Law § 26–516(a) only requires treble damages where the landlord cannot demonstrate that it did not act willfully” (107 AD3d at 89). (See also Gudz, 105 AD3d at 625 (same)).17 17 If penalty damages under RSL § 26-516 (a) are mandatory then how would one describe penalty damages under the Donnelly Act? Are they extra mandatory? An analogous comparison arose in Kolbert v Clayton (127 Misc 2d 1036 [NY City Civ Ct 1985]), where the court considered whether an award of treble damages for a sublessor’s rent overcharges was mandatory (damages then codified at NY Admin Code § YY51-6.0 [c] [14]). The court drew a 34 The dissent in Gudz was also persuaded by the fact that RSL § 26-516 (a) postdates CPLR 901 (b) (105 AD3d at 627). However, the relevant RSL language has been the law since before the 1975 enactment of CPLR article 9 and § 901 (b) (see Sperry, 8 NY3d at 210). For example, the foundational Emergency Tenant Protection Act, as enacted in 1974, provided that an owner found: to have collected any rent or other consideration for a housing accommodation in excess of the rent authorized for such housing accommodation by or pursuant to this act shall be liable to the tenant for a penalty equal to three times the amount of such excess. If the owner establishes by a preponderance of the evidence that the overcharge was neither willful nor attributable to his negligence, the state division of housing and community renewal shall establish the penalty as the amount of the overcharge. (L 1974, ch 576 § 12 [a] [1], as enacted).18 The language that provided for rent overcharge damages before the enactment of CPLR 901 (b) was almost identical to today’s RSL § 26-516 (a).19 Landlord even tells this Court that the Legislature “created” the treble damages penalty in 1983 (Br. 36-37). This is wrong. The enactment dates of CPLR article comparison with the statute providing damages for an owner’s rent overcharge (then codified at NY Admin Code § YY51-6.0.5 and equivalent to RSL § 26-516 [a]). The two statutes both provided that plaintiffs were entitled to three times the overcharge, except only the owner, not the sublessor, was given the right to show non-willfulness to be liable only for actual damages. Based on this distinction, the court observed, “A fair reading of the statute indicates that trebling of damages in subletting overcharges is mandatory, not discretionary.” (127 Misc 2d at 1037). 18 Respondent attaches the entire ETPA (L 1974 ch 576), as enacted in 1974, to the end of this brief. Respondent directs this Court’s attention to Section 12a (1) (Enforcement) on pages 1521- 22. 19 The only notable difference is the requirement that an owner disprove, not just willfulness, but negligence as well to be liable for actual damages. 35 9 and RSL § 26-516 do not strengthen Appellant’s argument. Neither does the fact that the rent laws’ overcharge language has remained the same since the enactment of CPLR article 9, as “[l]egislative inactivity is inherently ambiguous and affords the most dubious foundation for drawing positive inferences.” (Roberts, 13 NY3d at 287 [internal quotation and citations omitted]). RSL § 26-516 is not the Donnelly Act, where the treble damages provision was added “shortly after” the adoption of CPLR article 9, and therefore, “[c]learly, the Legislature was aware of the requirement of making express provision for a class action when drafting penalty statutes” (Sperry, 8 NY3d at 214). (See also Gudz dissent (R. 470), citing Sperry, 8 NY3d at 212-13; Br. 57). 20 F. Courts Allow Waiver Under Statutes that Are Analogous to RSL § 26-516. Appellant discounts the entirety of the lower courts’ CPLR 901 (b) analysis because the courts cited only to cases involving what Appellant deems to be optional penalties (Br. 31-34). However, in Downing, the First Department cited a long line of appellate authority for the holding that CPLR 901 (b) is inapplicable where the class representative waives penalty damages, seeks actual damages only, and class members are allowed to opt out to pursue penalty damages (107 AD3d at 20 Further, GBL § 349 (h), which penalizes deceptive business practices, was enacted in 1980. Although the statute post-dates CPLR 901 (b), and does not make express provisions for class actions, courts allow GBL § 349 class actions to proceed. (see e.g. Super Glue, 132 AD2d at 606). 36 89, citing Cox; Pesantez; Ridge Meadows; Super Glue). Landlord is mistaken because the statutes involved in these cases are analogous to RSL § 26-516. Class representatives may waive penalties to pursue a class action under GBL § 349 and New York Labor Law (“Labor Law”) § 198.21 Both statutes, like RSL § 26-516, contemplate multiple types of damages depending on defendant’s culpability. Pursuant to GBL § 349 (h), an injured person may sue for actual damages or $50, whichever is greater. A court may increase the award to three times the actual damages if defendant acted knowingly or willingly. Labor Law §§ 198 (1-a) and (3) provide for actual damages and 25 percent of total wages due if defendant acted willfully. Appellant fails to distinguish either statute (Br. 31- 33). 21 GBL § 349 (h) provides: [A]ny person who has been injured by reason of any violation of this section may bring an action . . . to recover his actual damages or fifty dollars, whichever is greater . . . . The court may, in its discretion, increase the award of damages to an amount not to exceed three times the actual damages up to one thousand dollars, if the court finds the defendant willfully or knowingly violated this section. Labor Law § 198 (1-a) has recently been amended several times. The relevant law that was in effect when Pesantez, Krichman, and Smellie v Mount Sinai Hospital (Civ No 03-805, 2004 WL 2725124 [SD NY Nov. 29, 2004]) were both commenced and decided provided: In any action instituted upon a wage claim by an employee or the commissioner in which the employee prevails, the court shall allow such employee reasonable attorney’s fees and, upon a finding that the employer’s failure to pay the wage required by this article was willful, an additional amount as liquidated damages equal to twenty-five percent of the total amount of the wages found to be due. (Labor Law § 198 [1-a] (prior to L. 2009, c. 372 amendment)). At the time, Labor Law § 198 (3) allowed employers to sue “to recover full wages, benefits and wage supplements accrued during the six years previous to the commencing of such action.” (prior to L. 2010, c. 564 amendment; not amended in 2009). 37 First, Appellant cannot distinguish GBL § 349. In Cox v Microsoft, the First Department affirmed class certification under GBL § 349 because representative plaintiffs “sought only actual damages, rather than minimum damages” (8 AD3d at 40). However, the statute seems to mandate a $50 minimum measure of recovery if $50 is greater than actual damages. And the $50 clearly is a “minimum measure of recovery” under CPLR 901 (b). Regardless, the court allowed plaintiff to waive this minimum measure of recovery, as well as treble damages, thereby allowing class certification (see id. at 40 (§ 901 (b) not applicable because plaintiffs “expressly seek only actual damages”)). (Accord Super Glue, 132 AD2d at 606; Weinberg, 116 AD2d at 4; Ridge Meadows, 242 AD2d at 947). Second, Appellant cannot distinguish Labor Law § 198, which is also analogous to RSL § 26-516. Appellant speculates that the First Department in Downing, and presumably Pesantez, relied on the wrong version of the Labor Law (Br. 31-32). The basis for Landlord’s speculation is not clear. First, in Pesantez, the extent of the court’s CPLR 901 (b) analysis is: “[t]o the extent certain individuals may wish to pursue punitive claims pursuant to Labor Law § 198(1-a), which cannot be maintained in a class action (CPLR 901 [b]), they may opt out of the class action” (251 AD2d at 12).22 Second, in Downing, the court simply 22 In fact, the punitive remedies of Labor Law § 198 (1-a) are not permissive once willfulness is found: “In any action instituted upon a wage claim . . . in which the employee prevails, the court shall allow such employee . . . upon a finding that the employer’s failure to pay the wage 38 observed that Labor Law § 198 (1-a) is analogous to RSL § 26-516 (107 AD3d at 89). Regardless of the burden of proof, when statutes provide for both penalty and non-penalty damages, a plaintiff can maintain a class action by waiving the former and seeking only the latter (accord Krichman, 2008 WL 5148769, *2). In Smellie, the Southern District of New York was clear: The penalty provision of section 349(h), like that of Labor Law 198(1- a), turns on a finding of wilfulness [sic]. Nothing in Pesantez or related caselaw, or in either statute, indicates that a plaintiff cannot chose to forego the opportunity to prove wilfulness and thus, in effect, waive the penalty provision. These statutes are thus unlike the Donnelly Act provision that was held unwaivable in Asher v. Abbott Laboratories, 737 N.Y.S.2d 4 (1st Dep’t 2002). (2004 WL 2725124, *5 n 12). Just like RSL § 26-516, GBL § 349 and Labor Law § 198 attempt to remedy both public wrongs and private injuries. Appellant repeatedly insists that waiver cannot be permitted because the rent laws serve no purpose other than to redress public wrongs (Br. 27, 30). However, the public wrong/private injury distinction is no more than a guise for Landlord to argue for a constrictive reading of CPLR article 9. For example, Labor Law § 198 prohibits employers from under-paying wages. Clearly underpaying wages causes private injury, but it is just as much a public wrong. Nonetheless, a class action may be maintained under the statute. required by this article was willful, an additional amount as liquidated damages equal to twenty- five percent of the total amount of the wages found to be due.” 39 Similarly, it is evident that landlords that overcharge their tenants cause both private injuries and public wrongs. II. New York Public Policy and RSC § 2520.13 Do Not Prevent Respondent from Waiving Penalty Damages. Respondent’s waiver of her right to pursue penalty damages is not a violation of public policy, nor is it a violation of RSC § 2520.13. The waiver is a unilateral decision by Respondent to bring claims for herself, and on behalf of the Class, by pursuing one remedy over another. The choice is the Respondent’s, and it is well within the confines of the law. For Landlord to argue otherwise is plain error. But to do so, Landlord coins the phrase “the Estro doctrine” (Br. 41) to argue for an overly broad application of this Court’s decision in Estro Chemical Co. Inc. v Falk (303 NY 83 [1951]). In Estro, this Court held that a tenant may not waive “by agreement” his or her right to recover excess rent (id. at 87). This Court based its decision on holdings that a statutory right conferred on a private party, but affecting public interest, cannot be waived if said waiver contravenes the statutory policy (id.). Similarly, RSC § 2520.13 provides that “[a]n agreement by the tenant to waive the benefit of any provision of the RSL or this Code is void.” The Estro holding is not nearly as inviolate as Appellant argues. Estro, likewise, does not subsume the RSC either. (Br. 42-43). For example, RSC § 2520.13 expressly permits negotiated settlements between parties approved by 40 DHCR or a court of competent jurisdiction. In addition, this Court held that its decision in Estro “does not prohibit an agreement to surrender possession of the apartment and resolve incidental differences.” (Matinzi v Joy, 60 NY2d 835, 836 [1983] (cited in Br. 39 n 5)). In Matinzi, this Court upheld a stipulation where a tenant agreed to surrender possession of his apartment in exchange for withdrawing his answer to a dispossess action by his landlord. Also pending at the time, was the tenant’s administrative challenge that his landlord’s order to decontrol his apartment had been procured by fraud. This Court held that, in view of the stipulation, there was no need for a remand to determine issues of fraud. (Id. at 837). Surely if this Court had applied Estro as broadly as Appellant desires, this Court would have barred the landlord in Matinzi from stipulating its way out of answering allegations of fraud. By contrast, the facts before this Court are more mundane. Respondent simply seeks that which she is overcharged, a decision that accords with State public policy. A. RSC § 2520.13 Is Not Relevant Because Respondent’s Waiver Is a Unilateral Decision. There are three main flaws with Appellant’s contention that the policy set forth in Estro and the RSC bar Respondent’s waiver. First, although both the Estro holding and the RSC apply only to an “agreement,” Respondent’s decision to waive treble damages is a unilateral action. Case law is clear that whether a 41 tenant’s action is the result of an agreement is a critical element of whether that action is void as against public policy. (See Drucker, 30 AD3d at 40 (“The prohibition against avoiding, by agreement, protection afforded by the rent stabilization scheme could not be stated more plainly [in RSC § 2520.13].” (emphasis added)). The First Department, in Georgia Properties, Inc. v Dalsimer (39 AD3d 332 [1st Dept 2007]), explained: We have previously held that “an agreement in purported or actual settlement of a landlord-tenant dispute which waives the benefit of a statutory protection is unenforceable as a matter of public policy, even if it benefits the tenant” (Drucker v Mauro, 30 AD3d 37, 38 [2006], appeal dismissed 7 NY3d 844 [2006]). Such agreements undermine the “viability of the rent regulation system,” and we have consistently prohibited “landlords and tenants from making private agreements to effectively deregulate applicable housing units” (390 W. End Assoc. v Harel, 298 AD2d 11, 16 [2002]). (39 AD3d at 334 (emphasis added)). New York jurisprudence speaks clearly of the need to prevent landlords and tenants from unlawfully collaborating. This meeting of the minds can foist unlawful leases onto tenants as well as strip tenants of RSL protections (See Park W. Mgmt. Corp. v Mitchell, 47 NY2d 316, 325 [1979] (“landlords [are] in a vastly superior bargaining position, leaving tenants virtually powerless to compel the performance of essential services.”)). For example, in Jazilek v Abart Holdings LLC (10 NY3d 943 [2008]), this Court voided a so-ordered stipulation between a tenant and landlord that set a rent that exceeded the legal limit of the RSC (id. at 42 944). And in Riverside Syndicate, Inc. v Munroe (10 NY3d 18 [2008]), this Court voided an agreement between tenants and their landlord that effectively deregulated a rent-stabilized apartment, thereby “distort[ing] the market without benefitting the people the rent stabilization laws were designed to protect.” (Id. at 23). Appellant cannot point this Court to a single case where a court voided a unilateral decision by a tenant under Estro or RSC § 2520.13. Landlord misstates the facts in 85 Eastern Parkway Corp. v DHCR (297 AD2d 675 [2d Dept 2002]) (Br. 46-47). That case did not involve a unilateral election by a tenant. In fact, like the other cases cited by Appellant, it involved an agreement between a landlord and tenant. In Eastern Parkway, two co-tenants filed with DHCR both a rent overcharge complaint and a complaint that services had been decreased. One of the co-tenants purported to withdraw the complaints upon the landlord’s agreement to make repairs in the apartment. The court, invoking RSC § 2520.13, accordingly held that this was an impermissible waiver of benefits and that it was invalid as a matter of public policy. (Id. at 676-77). 23 In Downing, the First Department held that RSC § 2520.13 is inapplicable because plaintiffs were waiving treble damages unilaterally, not through an 23 One could also reasonably ask whether the right to seek penalty damages that are difficult to prove, unavailable for the first two years of the damages period, and that pose a bar to maintaining a class action is a “benefit” at all. 43 agreement. The court found that a tenant’s unilateral waiver did not frustrate the RSC’s policy of barring landlords from circumventing the benefits of the rent laws. (107 AD3d at 89-90). However, the dissent in Gudz believed that whether waiver was done unilaterally or by agreement was immaterial. What was material to the dissent was that plaintiff’s waiver would directly impact numerous absent Class members. (105 AD3d at 628). B. Respondent’s Waiver Only Directly Impacts Herself Because Class Members May Opt Out to Pursue Penalties. Respondent disagrees. The second reason why her waiver does not violate public policy is that her waiver only directly impacts herself. The Gudz dissent is seemingly concerned that Class members will unwittingly forfeit their right to sue Appellant for treble damages (see Gudz, 105 AD3d at 629 (“allowing waiver under these circumstances arguably does not satisfy due process”)). However, this concern is groundless because Class members may opt out to bring individual actions to seek treble damages. Respondent’s counsel will provide clear, court-sanctioned notice of the remedies available to Class members and how to pursue them by remaining in the Class or by opting out. This case will not result in a penny settlement that will be overlooked by Class members. Rather, Class members’ damages for years of overcharges may be substantial. Absent Class members will diligently consider their options. The ability to opt out was referred to by one Supreme Court as an 44 “elegant solution” to preserving a class action pursuant to a statute providing for penalties. (Krebs v Canyon Club, Inc., 22 Misc 3d 1125[A], 2009 WL 440903, *15 [Sup Ct, Westchester County 2009]). In Iglesias-Mendoza v La Belle Farm, Inc. (239 FRD 363 [SD NY 2007]), “[t]he court s[aw] no problem with plaintiffs waiving their liquidated damages [under New York Labor Law] as long as notice is provided to the Rule 23 class instructing individuals how to opt-out in order to preserve their claims for liquidated damages.” (Id. at 373-74). Appellant wholly dismisses the idea that an absent Class member may opt out to seek treble damages. It even questions whether waiver should ever be allowed without express statutory authorization. (Br. 54-58). However, waiving statutory penalties in class actions has been the settled law in this State for almost 30 years, starting with the First Department’s 1986 Weinberg decision (116 AD2d 1). (Accord Iglesias-Mendoza, 239 FRD at 373 (“This argument [that New York labor law does not permit class actions for liquidated damages unless expressly provided for by statute] has been repeatedly rejected by the courts.”)). The Legislature is surely aware of this construction when it enacts statutes that provide for penalties. In Sperry, this Court addressed the meaning of “penalty” under CPLR 901 (b) (8 NY3d 204). What constitutes a penalty, and accordingly cannot be the basis for a class action, is circumscribed by § 901 (b). What Respondent seeks does not 45 fall within the statute’s parameters (see supra Argument, Section I.D). Further, Landlord cannot credibly argue that Respondent requires express authorization to waive penalties (Br. 56) since “[i]t is well settled by authority that a man may waive any right that he has, whether secured to him by contract, conferred upon him by statute or guaranteed him by the Constitution.” (McLaughlin v Bd. of Police Commrs. of City of Yonkers, 174 NY 450, 456 [1903]).24 As for whether this reasoning opens the door to the waiver of penalties under genuine mandatory statutes, this Court expressly declined to address the matter when considering the Donnelly Act in Sperry (8 NY3d at 215). However, the Donnelly Act reflects a legislative judgment that treble damages should be the sole remedy for violations of the State’s antitrust laws. No such judgment is evident in RSL § 26-516. 24 Despite an individual’s freedom to waive his or her rights, Landlord argues that waiver of penalty damages should never be allowed unless expressly authorized by statute (Br. 54-58). Appellant advances its argument throughout its brief. For example, Appellant cherry-picks dicta from two federal arbitration cases that have no bearing on the issue before this Court (Br. 37-39). In Schatz v Cellco Partnership (842 F Supp 2d 594 [SD NY 2012]), the court affirmed that “waiver [of penalty damages] is necessary to allow a class action under [GBL § 349 (h)]” even though that statutory right affects the public interest (Id. at 612 & n 14). And in MQDC, Inc. v Steadfast Ins. Co. (Civ No 12-1424, 2013 WL 6388624 [ED NY Dec 6, 2013]), the court adopted a Report & Recommendation from Magistrate Judge Marilyn Go granting a defendant’s motion to compel arbitration. In her Report, Judge Go suggested that whether a commercial entity could waive statutory damages under GBL §§ 349 and 350 was to be determined by the arbitrator (id. at 13). Judge Go also confirmed that an individual plaintiff may waive the right to treble damages in order to allow the individual to bring a class action (id. at *12, citing Super Glue, 132 AD2d 604). 46 An honest reading of RSL § 26-516 is that the legislature believes that landlords overcharging rent in a non-willful manner should be liable for actual damages only. Appellant simply presents a tortured reading of the statute. Landlord’s strategy is that by abdicating its good-faith defense against willfulness, it can argue that it failed to disprove willfulness, leaving Respondent seeking a penalty that is barred by CPLR 901 (b). This gamesmanship cannot defeat class certification. C. Waiver Aligns with the Policy Goals Behind the Rent Laws. The third reason why Respondent’s waiver aligns with public policy is that the waiver comports with the fundamental goals behind the rent laws. These polices are best expressed in RSC § 2520.3 (Construction and Implementation), which lists the three main intentions of the RSL: (1) to prevent the exaction of unlawful rents, (2) to forestall disruptive practices threatening the public welfare, and (3) to preserve regulated rental housing. Landlord focuses exclusively on the first of these and fails to consider the overarching import of preserving an affordable stock of housing. In Manocherian v Lenox Hill Hosp. (84 NY2d 385 [1994]), this Court explained: “The central, underlying purpose of the RSL is to ameliorate the dislocations and risk of widespread lack of suitable dwellings.” (Id. at 395). 47 (Accord Garay v Todros, 282 AD 126, 128-29 [1st Dept 1953] (residential rent laws invoke “fundamental” public interest of “basic shelter for human beings”)). RSC § 2520.13 is squarely aimed at guaranteeing a sufficient amount of affordable housing by protecting the rent stabilization system prospectively. In Thornton v Baron (5 NY3d 175 [2005]), this Court, pursuant to RSC § 2520.13, barred an illusory lease agreement that deregulated an apartment in exchange for tenant’s agreement not to use the apartment as a primary residence (id. at 179). The Court explained that unlawfully removing apartments from rent stabilization would “undermin[e] the [RSL’s] very purpose of preserving a stock of affordable housing.” (Id. at 181-82). Likewise, in 390 West End Associates, the First Department observed that private agreements in violation of the rent stabilization laws “injure[ ] the public by removing affordable housing from the market” (298 AD2d at 416 [internal quotation and citation omitted]).25 Appellant’s waiver has zero negative prospective impact. Her waiver mainly affects her, as well as the ability of current and former tenants, who do not opt out, to collect past overcharges. Yet certifying the Class would still help to 25 Even though the agreement in Drucker nominally benefitted the current tenant (Gudz, 105 AD3d at 628, Manzanet-Daniels, J., dissenting; Br. 41-42), the court voided the agreement based on its prospective impact. The First Department explained: “Permitting parties to a rent- stabilized lease to stipulate to a rent that exceeds the statutory lawful regulated amount can adversely affect both the legal rent and the regulated status of the dwelling unit for future occupants.” (30 AD3d at 40 (emphasis added)). This policy also best explains another case Appellant cites, Delano Village Cos. v DHCR (245 AD2d 196 [1st Dept 1997]) (Br. 29 n 3). In Delano, the court says clearly: “Prospective waivers of rent stabilization rights in a settlement agreement are invalid as a matter of public policy.” (Id. at 197 (emphasis added)). 48 maintain affordable housing prospectively. In her Complaint, Respondent seeks a declaration that hers and all Class members’ apartments remain subject to rent stabilization. This cause of action clearly helps enhance the stock of affordable housing. Importantly, it is when a Class-wide claim for damages is added to this declaratory judgment claim that sufficient incentive is provided for counsel and tenants to bring a class action. This aggregation of claims ensures that all Building apartments will rightfully be declared rent stabilized.26 The policy against extraction of excessive rents is also best served by maintaining a class action. Landlord will undoubtedly have to compensate more of the rent it overcharged if faced with a class action. If the Class is not certified, many Class members will fail to bring individual actions, and those that do will be hard pressed to obtain treble damages. A landlord-tenant class action is also a powerful incentive for landlords not to overcharge tenants in the future. (See Friar, 78 AD2d at 94 (class actions enhance “public benefits” by inducing responsible behavior)). 26 The claim for Class-wide damages also upholds the public policy of preserving an affordable housing stock. If the Class is not certified, Landlord will continue to charge unlawful rents to tenants who do not later bring individual actions. In addition, to determine damages, the IAS Court will need to determine the rent that should have been charged. That is the rent charged on the base date plus any lawful adjustments (RSC § 2526.1 [a] [3] [i]). This rent that should have been charged would then become the prospective rent going forward for Class members’ apartments, again resulting in a more affordable stock of New York City housing. Determination of a prospective rent would not be altered by whether a tenant remained in the Class or opted out to pursue treble damages. However, a tenant’s correct prospective rent would never be determined if the Class is not certified and that tenant then fails to bring an individual action. 49 III. This Action Satisfies CPLR 901 (a)’s Five Requirements for Class Certification. This action comfortably meets the five requirements set forth by CPLR 901 (a): numerosity, commonality, typicality, adequacy, and superiority. Borden has established each § 901 (a) criterion by “providing an evidentiary basis for class action certification.” (Kudinov v Kel-Tech Constr. Inc., 65 AD3d 481, 483 [1st Dept 2009]). Of the five CPLR 901 (a) criteria, Landlord argues that Respondent has failed to satisfy commonality, typicality, adequacy, and superiority. Commonality and superiority are merged into one argument, as Appellant opines that analysis of one is inseparable from the other (Br. 62). A. Common Issues Predominate, And Class Treatment Is Superior. This action is replete with common issues and therefore comfortably satisfies commonality. This Court has explained that: [C]ommonality cannot be determined by any “mechanical test” and that “the fact that questions peculiar to each individual may remain after resolution of the common questions is not fatal to the class action” (Friar, 78 A.D.2d at 97-98, 434 N.Y.S.2d 698). Rather, it is “predominance, not identity or unanimity,” that is the linchpin of commonality (id. at 98, 434 N.Y.S.2d 698). (Maul, 14 NY3d at 514). As for the superiority requirement, “‘[a]ny device which would allow one action to do the job, or a good part of it, that would otherwise have to be done by many, must be considered ‘superior’’” (Friar, 78 AD2d at 100, quoting Siegel, New York Practice, § 141 at 180)). 50 Landlord’s commonality/superiority section (Br. 58-63) relies almost entirely upon a DHCR advisory opinion letter (“DHCR Letter”) that is part of the record in the Roberts litigation (R. 239-41). The DHCR Letter is simply not the smoking gun that, as Landlord believes (Br. 58-62), shows that each Class member’s damages must be determined individually. As the IAS Court noted: “The DHCR Letter, relied upon by the owner, is not legal precedent and does not otherwise persuade the court of the absence of uniform formulas in setting post Roberts levels of rents for affected apartments.” (R. 10). In Roberts, after the Supreme Court granted class certification (R. 55-60), the court asked DHCR for guidance on how to determine damages. DHCR was not asked for, nor did it provide, any opinion on class certification. Instead, it provided in the DHCR Letter a “non-binding, advisory opinion” that recited issues that could arise in calculating a tenant’s overcharge claim (R. 239). The DHCR Letter does not impact whether common issues predominate. 27 This case is tailor-made for class certification since common issues predominate in determining both liability and damages. First, liability can be 27 The cases cited in Landlord’s commonality section (Br. 61-62) can be easily distinguished. (See Daniel v DHCR, 179 Misc 2d 452, 454-55 [Sup Ct, NY County 1998]) (denying class certification in an Article 78 proceeding where tenants alleged that DHCR had uniformly denied thousands of legitimate overcharge complaints, because the court held that DHCR denied these claims for various unrelated reasons); Osarczuk v Associated Univs., Inc., 82 AD3d 853 [2d Dept 2011] (complex questions of causation and extent of damage resulting from emission of toxins were individualized and precluded class certification)). 51 determined by answering the common questions recognized by the Appellate Division: The issues of when defendant received J-51 benefits, whether defendant deregulated apartments while receiving those benefits, which tenants resided in those apartments during those time periods, and whether defendant wrongfully charged market rents while accepting J–51 benefits are common issues that “predominate,” thereby meeting the commonality requirement of CPLR 902(a)(2) [sic]. (R. 895).28 These questions define the parameters of Class membership. The inquiries are easily answered by common evidence: the Building’s J-51 history and rent records. If a tenant is a Class member then he or she has a cognizable claim for a rent overcharge pursuant to RSL § 26-516, and that tenant merits a judicial declaration that his or her lease is subject to the RSL. This was also the conclusion of the IAS Court, which held that “[a]t bar, the factual and legal issues associated with liability for each member of the proposed class are nearly identical, involving the identification of an apartment as deregulated and the receipt of a J– 51 tax abatement.” (R. 10). In addition, damages can be determined entirely through answering common questions with common proof. These questions include but are not limited to: 28 The First Department has already answered an additional important question regarding liability, that is, whether this Court’s decision in Roberts applies retroactively. The First Department’s 2011 decision in the Roberts litigation (89 AD3d 444 [1st Dept 2011]) answered this question in the affirmative. By doing so, the court ensured that Landlord was liable to Class members whose tenancies predate the 2009 Roberts decision. 52 (1) How to determine the base rent for calculating damages? (2) How to apply the CPLR 213-a four-year limitations period? (and 3) How to factor lawful increases in determining the rent Appellant should have charged? Accounting for each type of increase, such as Rent Guideline Board increases and Major Capital Improvements, presents common issues that when resolved will be the same for the entire Class. By answering these questions, the court can devise a formula, common to each Class member, to determine damages. The rental history of each Class member can be plugged into this common formula to arrive at that tenant’s damages. In a related case, the Supreme Court held: The question of damages are dominated by common issues. To determine damages, this Court must answer two questions common to each class member: 1) how to determine the tenant’s base rent; and 2) how to devise a formula for calculating damages. Accordingly, the commonality requirement has been satisfied. (Casey, 2012 WL 3168689, *5). The existence of potentially individual issues, as recognized by Appellant (Br. 62), does not defeat commonality. The Appellate Division recognized that “[t]he need to conduct individualized damages inquiries does not obviate the utility of the class mechanism for this action, given the predominant common issues of liability.” (R. 895-96). Similarly, the motion court in Gudz held that “[i]ssues such as: when individual apartments were deregulated, the last regulated rental amount of each apartment, and the method of calculation to be used, need not 53 prevent certification, as ‘[c]lass certification is appropriate even when there are questions of law or fact not common to the class.’” (R. 811-12, quoting Pludeman, 74 AD3d at 423). Class treatment is also the superior method of resolving the claims of Respondent and the Class. Landlord no more than argues that this action does not satisfy CPLR 901 (a) (5) because it does not satisfy CPLR 901 (a) (2) commonality. The Appellate Division disagreed, holding that the presence of individual issues “does not obviate the utility of the class mechanism for this action” (R. 896). This was affirming the IAS Court, which held that “a class action is an efficient and superior method of resolving the post Roberts issues” (R. 14). A class action offers substantial efficiencies. Failure to certify, on the other hand, would lead to individual actions that would be wasteful for Respondent, Appellant, the Class, State agencies, and the courts. B. CPLR 901 (a) (3): Borden’s Claims Are Typical of Those of Each Class Member. Landlord’s sole argument against typicality is that its counterclaims against Respondent make her atypical. (Br. 52-53). Appellant deems Respondent atypical because, Landlord claims, she owes rent. As the First Department held, Appellant’s argument is groundless. Typicality ensures similarity between the claims of the representative plaintiff and the class members. The requirement is satisfied if the “plaintiff’s claim derives from the same practice or course of 54 conduct that gave rise to the remaining claims of other class members and is based upon the same legal theory.” (Friar, 78 AD2d at 99). To satisfy typicality, “[i]dentity of issues is not required and that the underlying facts of each individual plaintiff’s claim vary, or that [defendant’s] defenses vary, does not preclude class certification.” (Pludeman, 74 AD3d at 424 [internal citation omitted]). The Supreme Court in Gudz found the class representative to be typical, explaining, “[h]ere, plaintiff’s claim is typical of other potential class members, because her grievance is based on the central issue of [landlord’s] illegal receipt of tax exemptions for a building which contained unregulated apartments.” (R. 812). The Appellate Division cited to both Friar and Pludeman in holding that Respondent satisfies typicality. The court explained: Defendant’s counterclaim for rent arrears does not cause plaintiff to be an atypical member of the class. Her claim is typical of the claims of all class members in that each flows from defendant's alleged unlawful deregulation of apartments while receiving J-51 benefits . . . . Defendant’s counterclaim does not materially add to the complexity or difficulty of resolving plaintiff’s individual claim, and defendant’s suggestion that plaintiff might be inclined to settle her case to evade liability on the counterclaim is speculative. (R. 896). The mere existence of a counterclaim does not preclude class certification. Were it otherwise, every motion for class certification would be defeated simply by filing a counterclaim against the named plaintiff. As recognized by the IAS Court, “[t]he counterclaims interposed against Borden do not create a conflict between her 55 and the other potential Class members. Nor does it raise any prospect that Borden will be preoccupied with defenses unique to her” (R. 11). Landlord’s counterclaims are “inextricably intertwined with the issues raised in the [class] action in chief, that being the level of permissible regulated rent that may be charged to each class member.” (R. 12).29 In the case at bar, should Landlord’s alleged counterclaim reach fruition, it would not affect Respondent’s representation of the Class. The counterclaim would merely offset Respondent’s damages claim. The law is settled that the potential need for individual determinations of each tenant’s damages is not a ground for denying class certification. For example, in Charron v Pinnacle Group New York LLC (269 FRD 221 [SD NY 2010], affd sub nom. Charron v Wiener, 731 F3d 241 [2d Cir 2013]), the court certified a large class of tenants seeking to recover rent overcharges. The court found that even though individual damages determinations were necessary, because the landlord’s common cause of conduct caused the overcharge, it would be “highly inefficient” 29 In Globe Surgical Supply v GEICO Insurance Co. (59 AD3d 129 [2d Dept 2008]), cited by Landlord (Br. 52-53), the court rejected the adequacy of the class representative, an individual with several personal legal problems. Globe Surgical is not analogous to the case at bar. For example, during a deposition the class representative put his own interests above those of others by refusing to answer certain questions on Fifth Amendment grounds (59 AD3d at 144). Finally, his participation as class representative would trigger the possibility of a counterclaim against him and the class. The court cautioned that the merits of class action counterclaims should be scrutinized lest they be misused as tactical weapons to preclude certification. Nevertheless, in Globe Surgical, the proposed class representative would be preoccupied with defenses unique to him, thereby detracting from his time and effort on behalf of the class as a whole. Thus, class certification was denied without prejudice to renew. (Id. at 144-45 & n 4). 56 to force individual class members to “repeatedly litigate the liability questions common to their . . . claims.” (Id. at 241). (Accord Pruitt, 167 AD2d 14 at 23 (“[i]n any event . . . the complexity of the damage issue is not a bar to class action certification.”)). C. CPLR 901 (a) (4): Respondent Has Shown That She Will Adequately Represent the Class. Adequacy requires that representative plaintiffs and their counsel are “up to the job” of representing the absent class members. (Haig, 3 Commercial Litigation of New York State Courts § 20:7 [3d ed., 2010]). “The factors to be considered in determining adequacy of representation are whether any conflict exists between the representative and the class members, the representative’s familiarity with the lawsuit and his or her financial resources, and the competence and experience of class counsel.” (Ackerman, 252 AD2d at 202). Respondent satisfies these criteria. Respondent can and will adequately represent the Class. In this appeal, Landlord does not challenge Respondent’s familiarity with the lawsuit, her financial resources, or the competence of her counsel.30 Landlord, instead, argues that Respondent’s waiver of her entitlement to treble damages renders her an inadequate Class representative (Br. 48-52). The Appellate Division correctly rejected this argument, holding that: 30 The Appellate Division held that the record shows that Respondent possesses a sufficient understanding of the case to serve as Class representative. The court also held that Respondent’s counsel was adequate to serve as Class counsel (R. 896-97). 57 Plaintiff’s intent to waive treble damages on behalf of the class does not render her an inadequate representative, given that any class member who wishes to pursue a claim for treble damages for willful overcharge may opt out and bring an individual action therefor (see Gudz). (R. 897). Landlord feigns outrage that Borden would waive treble damages without consulting the absent members of the Class (Br. 48, 53). Landlord’s indignation, however, overlooks the fact that absent Class members will be notified that they may opt out of any resolution of this action should they wish to pursue treble damages. As explained in this brief’s section on public policy (see supra Argument, Section II.B), Respondent’s decision to waive penalty damages directly impacts only herself. This possibility that Class members may opt out is never even considered by the court opinions on which Landlord relies. In arguing against Respondent’s adequacy, both Appellant (Br. 49) and the dissent in Gudz (105 AD3d at 629) cite to Klapak v Pappas (79 AD2d 602 [2d Dept 1980]). However, Klapak is expressly limited to one specific statute, Social Services Law § 131-o (3) (id. at 602-03). Klapak also conflicts with and predates the settled law of this State, which allows for waiver of penalty damages, and Klapak does not contemplate the possibility that absent class members may opt out of a class should they wish to pursue 58 penalty damages (id.).31 This is no longer good law (see e.g. Downing, 107 AD3d at 91 (class action allowed to proceed provided class members allowed to opt out to pursue individual actions)). Further, not even Klapak or Russo & Dubin holds that a representative plaintiff must contact absent class members before choosing to seek actual damages. The IAS Court dismissed this argument: “Contrary to defendant’s position, there is no requirement that a class representative consult with other members of the class before making decisions about how to proceed in this litigation.” (R. 23). The IAS Court further explained that, “[i]n any event, as the court stated in its prior decision, the putative class members [sic] rights can be completely protected by allowing them to opt out.” (R. 25). In addition, the matter before this Court is not Lorillard, a comparison both the dissent in Gudz and Appellant strain to make (105 AD3d at 629; Br. 63-64). Lorillard is easily distinguished because the class representatives were not just refusing to pursue penalty damages; they were hardly pursuing any damages. The named plaintiffs acted contrary to the interests of approximately five million absent class members when they sued cigarette manufacturers for deceptive practices. In pursuit of class certification, the named plaintiffs sought only the purchase cost of 31 Appellant also cites to Russo & Dubin v Allied Maintenance Corp. (95 Misc 2d 344 [Sup Ct, NY County 1978]) (Br. 49). Like Klapak, this outdated decision does not consider the possibility of opt outs, but instead, finds the class representatives inadequate because they “demand[ ]” that absent class members forfeit their right to seek penalty damages (id. at 349). 59 cigarettes that they claim they would not have bought, but for defendants’ deceptive practices. (94 NY2d at 51). The class representatives did not seek potentially lucrative personal injury damages, and they even failed to pursue claims stemming from approximately 30 years of defendants’ deception (id. at 54). This Court found plaintiffs’ legal theory to be “de minimis,” the intended recovery to be of “negative value,” and the plaintiffs themselves to be inadequate class representatives (id.).32 Lorillard is no more than a foil to the facts before this Court. Landlord’s opinion that “Respondent will do or say anything to preserve the class action” (Br. 51) should, instead, be directed to the class representatives in Lorillard. In the case at bar, by contrast, Respondent seeks the actual overcharges she is owed, mindful that penalty damages will be hard to come by. Such action does not put Respondent in conflict with the Class. Nor does Respondent’s decision render her inadequate. 32 Another case cited by Appellant, Standard Fire Insurance Co. v Knowles (133 S Ct 1345 [2013]) (Br. 50-51), is somewhat similar to Lorillard, yet not relevant to this appeal. In Knowles, the Court considered whether a federal court had jurisdiction over a putative class action where the class representative stipulated to cap class-wide damages at $5 million where thousands of class members each had potentially significant claims (id. at 1349). Plaintiff did so to keep the action in state court by coming under the Class Action Fairness Act’s $5 million federal jurisdiction threshold. The Court held that the stipulation did not defeat federal jurisdiction. The Court also observed, without discussing the possibility of opt outs, that a court “might find” that the stipulation rendered plaintiff an inadequate class representative (id.). The Court’s dicta is not analogous to Respondent’s decision not to seek more than the actual amount that she and the Class have been overcharged. CONCLUSION For these reasons, Respondent respectfully requests that this Court affinn the order of the Appellate Division, First Department, affinning the lAS Court's order granting class certification. Dated: New York, New York March 20,2014 BERNSTEIN LIEBHARD LLP BY:~~ Gabriel G. Galletti Heather V. Lynch 10 East 40th Street New York, NY 10016 (212) 779-1414 Attorneys for Plaintiff-Respondent 60 ADDENDUM •~ 1510 F,.~d~•~ nr \~r:~~~ 1'c~ttn, 15~7~ ~Ctr.~r. C~IAP'1'CR 5?G~° AN r1CT to nn~rni! the emer~;enc~• Lousing rent control ln~~ nncl the locnl emcr- ~eney hotesin~ rent contro] nct, in retntion to cli~i~inatin~ ~•acnnct decontrol in eertnin niuitiei~3nlities: to ennet the ~mc~r~enc~~ tenant protrction nct of niiiMr~~c► 1ni~idrodt ne~•enty~foi~r; to ~~u~end tli~ nduiiui~trnti~~e ende ~f the city of \Tear York in relation to co:iforr~~in~ tl~~~ ~Te~~• Yor1: ait}• rrnt ~tnbilization la~v of ninetern hundred si~t~~-nine to aucli tenant ~~rotcetion art and to repeal nncl con~olicl,ite sttUdivisiony n, 1► nnci d of sectiat~ 1'i'o;l-~.0 thereof, relating thereto; tcF nu~rnd t}~~ public li~ugin~ ln~ti~ in relation to deposit ~f funds recei~•al l~~• the ~li~•ision of housing and comnn~nit~• r~ne~rnl for ncimin• istrntion of st~rl~ ~tcE; to amend tLe real prapert}• t~ix ln«~ in relation to making contorminr nmenciments to pro~•isians thercaf ~uitl►orizin~ senior citizen rent increase exemptions and tax nh;~tementy; and to continue the Nc~v fork city conciliation and nppcnla board nncl to cnnQrn~ nnci r~pnnd it:~ po~~•crs and dutie9 T3ec»nee n ]n~~• ►ln~• °~~, l~i•3, ~~•ttl► tlu~ nr~n•nrnl of this rm•~~rnm~. Pnfised on mesca~e of necessit~~ pursuant to _lrticle III, aeeEian 24 of the conetitufion by n mnjoritr ti•ote, tl~rce•fiftliA Leine presenfi, The YeoE►te of the Stato of A'cio Yorl~, represe~itcd in Sc~ratc and :1RRemb1U, do eisact as jalto~os: Seetioii 1. I'nr~~;r~pli (i} ~f Sitbdi~~ision t~ra of seetiou t~;o of cht~~~ter tt~'ll ~1i1I1(Il~ed se~~r~tt}~_fotn~ of the l:t~~~5 of »iiieteen hundred fort3~-Sis, l!011Stltllt111~; tI1C enier~.;cneti' ~I~~UCllly i•e~it control ln~v, AS last nt~~~»clecl b;~• chapter three htu~clred ~~~r~it;~•-one of tl~e la~tis of tiinet~en lmndr~cl se~~c~ntti•-one, i5 hereby nm~ncle~l t~ reed as fol- lo (i) liousi~i~ t~c~c~on~m~d~ttiou~ ~~•liic~h b~~r~nie ~'!1('tillt ])l~a~~iciecl, ho~~•. ever, that lliis e~ei~iptio~~ shell i~ot t~~~ply ~i• become cf~ective where the coinmi5sio~i cletertiiinc~ c►r fiuclti that the l~ottsin~ accoiT~tnoda- tions bec~tnie ~•.i~~:iirt bec~autie the i~inellarcl or tuiy person uetin~ an leis behalf, «itli i~itent to c~ni~se il~e ten:u~t to ~a~nte, e»~abed iii nn3~ course of eoncluct (iiiclii~iin~;, but not limited to, interruption or discontiuut~nce of cssenti:il ser~~iti~es) ~~~hieli lll~('l~fet~ed ~ritl~ or dis- turbecl or «•as itstended to interfere with ~r disturb the eonifort, repose, pence or quiet of tl~e tenniii 111 115 11G(' Ot~ occupancy of the }101iBlll~ ~ICCOlI11IlOtlElt1011~; ll)!Cj ~if)'t~!('i' ~)•a~~icic~l that hoTtsi~i~ accom- nzotlatior~s ns t~ ~u1~icli a ho~isi~i~ c~~i~:rrycrtcy has Ucen declared ptcr- stta~tf to the c.~iicr~e~~c~ tc~itr~rt pj'OfCCtlO?J RCS of ~~i~ictcc~t seve~itf- foitr shad be s~cL,ject fn ~li~ pronicior►s of such act far floc clzcrat~o~~ of such c~ucr~c~ic~; or ~ 2. The seeoud uiidesibnntecl p:~r~~r~~pl~ of subdivisiai five of seetio~i one 4f chapter t~~•euty-on~~ of the la~~'S Of 1111TCtCP11 1lUli(~l~ed silty-t~~•o, constitirtine the Deal en~eroenej~ housing rent control net, t~s anicncietl by clinpt~~r tlu~ee l~u»dred Se~~~nty-oue of the In~vs of ~iineteen liunclred se~~ent~•-aiie, is lier~b~~ ntne»cled to reed r~s £ollo~vs: "\Tm`F:.—fiuhdirision~ n, L rind d ~►f Section ~ti'~l-a,0 of the Adminirtrnti~•e Code of tl~e City of \Tc~«~ 1 ork, r~~~enled b~• ~e<~ti~m Sl ~f this nit ~ir~~ re•<~nnetcc omitted. 5x2 i,.«vti o~~~ Nr:~v Yoni:, 19"r~ [Cxnr. appeals board us licrein provided, the provisions a~ sections seven, eight and ten, ~vlienever they refer to tine city 1~ousin~ rent agency, shall be deemed to refer t~ [tlie stnte division] s:ccli board. In such action the Inndlord shell be linbtc to the tei~nnt .for three times the dnmages sustained on nccount of such coucluct plus rc~sonable attor- ney's fees ttnd costs as determined by the court, Tn ~;ddition to any other damages tine cost of removnl of property Sl~ali be ~ l~~vful measure of damnges. § 4. T}~e emergency tenant protectiatt net of nineteen seventy- four is hereby enneted, to rend n~ follows ~iIIER(~rNCY '~'~Nl~V'r PI~OT~CTI0~1 ACT 4F NINE'i'~E~T SEVENTY-FOtll~i, Section 1. Short title. 2. Legisltttivc fii~din~. 3. Loenl determintttioii of emergency; end o~ omergeney. 4. Establishment of rent guidelines boards; duties. 5. Housing neeommodations subj~et to re~iilation. 6. Regulation of rents, 7. 11~'ainten~nee of services. 8. ~.dministrntion, ~. Application for adjustment of initial le~~l re~ult~ted rent. 10. Regulations. 11. Non-~vuiver o£ rights, 12. Enforcement. 13, Cooperation ~vitli other ~o~c~ernmentt~l nge~~cies. 14. ~pplieation of act. Section 1. Short title. This act sl~all be lcno~rn and may be cited as the "emer~eney tei~a2~t protection net of nineteen soventy-four". § 2. Legislative finding. The le;islnture horeby finds and declares that a serious public emergency continues to exist in tl~o housing of a eonsider~ble number of persons in tl~c state o£ Nc~~ York ~vhieh eraer~eney ~vns nt its inception created by ~vur, tho effects of ~var and the ~ftermttth of hostilities, that such emergene3• necessitated the intervention o£ £ederul, state and local goverziment"' in order to prevent speculative, un«~Arranted and Abnormal increases in recta; that there continues to exist in many areas of the state an acute shortage of housing accommod~tiona caused by continued high demand, ~ttribut~ble in dart to new liauscl~old formations and decreased supply, in Iurge measure attributable to reduced ays►il- ability o£ federal subsidies, and increased costs of construction and other inflationary factors; that a substantial number of peraous residing in Iiousii~~ not prese~itly subject to tlio provisions aP the emer~eney housing rent control lnty or the local emergency lzousin~ • ~o in original. sN 576] T,a«~~ .,r~ \'L~v YO1tIi~ 197 1513 rent eoutrol yet are being cltttrged escessiv~ ~ncl tui~~~urranted rents and rent increases; that preveizti~~e ficiioii Uy the legislature eon- tinues to Ue imperntis+e in order to prevent elaetion o£ unjust, unreusonuUle Ai2d oppressi~~e rents end rentnl agreements end to forestall profiteering, speeulatioii and other disruptive practices tendiizg to produce tluents to the public health, safety and general welfare; that in order to prey►eat uucertaint3►, IlArdship and dislo- catiou, the pro~~isions of this ttet ire neeess~ry nna designed to pro- tectthe public I~ealth, safety and ~enerul tiselfure; that the trt~iisition from re~ulatiou fo ~ x~orinal market of free bur~~inin~ between landlord and tenant, ~vliile the ultim~ts objective of state policy, must take place «•itli due regard for such emer~eiicy; and that the policy Herein c~pressed shall be subject to determination of the esistei~ce of n public enier~ei~cy requiring the regulation of residen- tial rents tivithin any city, to~ti*u or ~~illane by tine local legislative hods► of such eit3~, to~ti a or village. § 3. Local rleterminatioii o£ emergency; end of emergency. a. The existence o~ public euicrgei~cy requiring the regulation of resi• dential rents for all or any class or classes of housing aeeommoda- tiona Heretofore destabilized; lieretufore or hereafter decontrolled, esenipt, not subject to control, or exempted from regulation and control under tl~e provisions of the emergency housing rent control la~v, the local emergency housing rent control act or the Netiv York city xQiit stabilizutiai lu~v of nineteen liuudred sixty-nine; or sub- ject to stabilization or control under such rent stabilization law, shall be a matter for local determination ~ti~itl~in each city, town or village. Any such deterniinatian shall be made by the local legis- lative body of such city, ta«~n or villt~ge oti the basis of the supply of housins uccommadations within such city, to«•n or village, the condition of such aeeammodations and the aced for re~uluting and controlling residentirtl rents nithin such city, town or village.. A declaration of emer~eney may be made as to any class of housing accommodations if the vacuucy rite for the I~ousin~ accommodations in such class tiritl~i~i sueli inuiiieipality is not in excess of flue per- eent and a declaration o£ emergency may be made as to all housing accommodutians if tho vact~ney rate for the housing ~eeommoaations within such municipality is riot in e~ceess o~ five percent. b. Tlie 2oca1 go~~er~iiug body of a city, town or village leaving declared an en~erge~iey pursuant to subdivision a of this section may at any time, on the basis of tine supply of. housing aecommoda- tions ~vithiu such city, to~vu ar village, tl~e condition of such aceom- modations and tl~e need for eoi~tiuued regalation and control oP residential rents tivitl~in such municipality, declare that the emerg- ency is either wholly or partially abated or that the regulation of rents pursuttnt to this stet does not ser~~e to abate such emer~eney and thereby remove one or more el~sses of uceommod~tions from regulation u»der this set. The emergency must be declared at an F.XAI.ANATION --- ~I5ttC1' 111 ifGllfl IS II~W ~ matter in b~nckcts [ ] is old 11w to Inc omlttcd. 151 T,.ti~~•, ot~~ N~:w 1'onh, 1~}7~ [C~np. end once tl~e ti~Ac~ney rate described in subdirision r~ of this section ~SCCC{19 fi~~e peeeeirt. c. No resolution cieelnrino they existence ar ~nci of nn emergency, us uuthorizecl b~' Sll~l(~1~'1Si0I19 Fl tUl(j ~ 0~ t111S SCCt1011~ Il]nV bC i1C10ntCCI except after public he~rin~ lielcl on not less tlinn ten days public notice, ~s filie local le~islati~~e body ma~~ rensonr~bly pro~~ide. ~ ~. ~stnblisli~iir~2t of rent gttici~liiics bottrds; duties. a. In each eountS~ n~l~erei~i aiiv city l~n~•iz~b << popt~lntion of less tliun one mil- lioii or nay to~~~n or ~~illtiac leas detcrminecl the e~istenee of nn eineroency pursu~iut to section three of this act, there shall be ereatecl n i'Cll~ 4UICICIIIIp:i VOEII~d to eoixsist of nine inetnbers appointed by ttte co~niuissioi~er of liousii~~ aitd eon~iiittuity rene«gal upon rCCO111111CI1(~ittI0I1 0~ tl~e c~ounty~ le~islntu►~e ~~•l~icli reconinieudntion siratt be mftde «•itltii~ thirty dn}•s niter the first Local ~~CCIi1TAt10tl 0~ tt~i emers~»cy iii such c~auntti~; t~~•o such itic~i~Uers shall be representa- ti~e of tenn~its, t«o shall be z•eprese~itutive of owners of property, and fi~~e ~hnll be public members eneh of «'~10I11 S}]~11I ~1A1•e l~~d ttt least fire yenrs experience in eiti~er fiixunee, eeououiics or housing. Oise public ►ueinber sl~~li be desi~uatcd b3~ tl~e commissioner to serve as ehttir~zittn nncl slinll I~alcl no athcr public office, No member, officer or e~uplovee of :tnS• ~iiiti~ieiianl rent reaul~tion tt~eney or the state cli~•isiai 0~ IIOIISIIIa a»d COIlllllillllt3' I'CI1C~{•al acid uo person ~vIio o~vcis or ~u~ttiases ret~l est~ite co~•erecl by tliis la«• ox ~vlio is an of~ieer of any o~`•iier or te~»iit or~niiix~tio~y S~IAI~ 5Crve an a rent guideli~ies board. Oise Public ~i~ernbei•, oiie member representative of teiit~nts t~iid aye memUer represeiitati~•e of o~ri~ers sl~nll ser~~e for ~ term eudii2~ tiro }~e~rs franc Jnnunr} first uert succeeding the date of their nppoiiitmenY; o~ie public a~iembei•, Dice member repro- setitttti~~e of tenants ~incl o~ie n~en~ber representnti~•e of o«Hers shall serve far terms endiu~ three ti•e~rs Prom the Jt~ciunry first next sue- ceedin~ the clnte of their nppointnient n~id tln~ee public members shall ser~~e for terms e~iclino four 3~e~trs from January Srst next 8UCC6@(1111 ' tI1C C~At~9 Of t~1~1P Aj)nOl11ti1lCllt. 'rlierenfter, all members shall serre for terr~is of Foui• years e~te1~. 11leinbers sli~ll continue in office until their ~uecessors lrnti•e been n~poiiited tend qualified. Tl~e commissioner shall fill ~~iy ~•iieancti• ~~ l~iel~ iaay occur by reason o£ death, resinuation or other~~•isc iii tt mflmier cai~sistent tivith t1~e ori~innt ttppoi~atnient. 11 ~i~ember may be rc,movecl Uy tl~e eommis- siouer for e~ttse, but not «~ithout an opportunity to be Beard in person or by counsel, its his clefeusc, upon fiat less that ten days notice. Compeiisntioii for tl~e nieiubers of the board slit~li be nt the r~tQ of one htuidred dollar~ per dn~•, for no more tl~~n tea days a year, eteept tiiut the cli~irn~tiii sl~nll be compensated ~t the ~~ate of ane hundred t«•ents•-fi~•e dollars t~ clay for no niot~e than Rfteen days a yeas•. Tl~e bonrcl slinll be pro~~ideci Stn~k' assistn~iee Uy the division of housing cud eammunity reiie~~stl. The conipe~isntion of such members a»~l tl~e costa of sti~f~ nssist~itice slinil be paid by tl~e divi- 81011 0~ 210USl~ln ~ucl co~iuiiuiiity reuc~~•r~l ~~•hieh sli~ll bo reimbursed in the manner prescribed in section four of this act. ,57G] La~~•s oF~ \'~«• I'oii~:, 1Ji~ 1515 b. A county rent ~uiclelines hoard sl~nll establish ~nnuAll3• ~uide- li~ies for i~e»t t~djustmeiits, nticl in cicteriuiniiin t~•hetlier rents for housing ttecotntnodtitions ~5 to ~t•hieh st~i en~ertiency lips Uee~i declared pursuant to this yet shall be tidjustecl, slitill consider t~mona other thins (1) the economic conc~itioii of tl~e residential real estate industry iii the affeetecl tires inclu >nhieii this act becomes u law ar required to be furnished by any la~v, ordinance or ra~ulation ttpplie~bie to the premises. In additio~i to nay other remedy at~orded by la~v, any tenant may apply to the state division of Housing and community rene~ral for n reduction in the rent to tl~e level in effect prior to its most recent adjustment, and the state division of hous- ing and community renctival may so reduce the rent i~ it finds that the owner l~~s failed to maintain such services. The otivner shall be supplied tivith n copy of the application and shall be permitted to frle ~n stns«per thereto. .A hearing may be held upon the request oP either pttrty, or the state divisipii of housine and community rene~ral may }gold a ]gearing upon its o~vn motion. Tl~e state division o~f housing end community renewal may consolidate the proceedings for t~vo or more petitions applicable to the same buildxn~, If tbo state division of housing and community rens~ti~al finds that the owner l~~s ki~o~vin~ly filed a false certification, it shall, in addition to abating the rent, ~ssesa the owner ~vitli the reasonable costa of the proceeding, including reasonable attorneys' fees, and imposo a penalty not in excess ofl t~vo hundred fifty dollars for each Pulse certification. :.~ w 576] T~,~«~ or \'~«• l'aizx, 197 1519 b. TYt order to collect rt ~'C'llt ti(~atlStIllCllt authorized pursuant to the pro~'f510213 OF SUb(IIVl510t1 C pf fiCCt]OIl f011l~, the m~~ner of itiausin~ aecommod~tians loented iii ~ cit~~ lin~~in~ n population aF more than one million s}inll comply with the requirements ~vitls respect to the maintenance of serviceq of titc Ne~v fork city rent stt~biliz~tion law o£ nineteen hundred sistyaiine. § 8..AdministraEion. n. ~V}iene~~er ~ city having a population of less than one million, or ~ to~~~n ar villn~e has determined the e:cistence of an emer~ei~ey pursuant io section three of this ttct, the atate division of dousing ~sul community rene«~til shall be desi~nnted us the sole ttdmi~iistrutire agency to administer i,he regulation o£ residential rents ns provided in this yet. The costs incurred by the state division o£ l~ot~siiti~ and community renc~~ nl in ndminister- in~ suet regulation shall be paid by such city, town ar i~illu~e. Such locttt resolution shall forth~vitli be transmitted to the state clirision of housing• and community reiie«al uud shall be necompttniecl by un initini payment in un amount pre~~iously~ determined by the commissioner of hau9in~ tti~d community retie`~~ul as necessary to defray the division's uuticip~ted first }•ear cost, for depogit in the revolving fund establisl3ecl by section t~~ el~ e•~ o£ tiie public housing la~v. Thereafter, annually, after the close of tl~e fiscal ~~ear of the state, the coiuinis~ioi~er of I~ottSi»~; and rc~nu2~wiity rene«t~l sht~ll determine the amount of ~tll costs incurred n~id sI~all certify to each such city, town oi• villnde its proportiotinte slinre of such costs, after first dedt~etin~ there£roin the nmaunt of such initial payment. The amount so certified 51~~11 Ue Enid to the commissioner by such city, town or villu~;e ~vithiii ninety duy~s nfier the receipt of such certi$et►tioii acid shill be denositeci iii such re~~olvin~ fund. Tn the event that the r~maunt thereof is not paid to the commissioner ~s herein nreseribed, the eommissiot~er shall certify t3~e unpaid amount to the comptroller, iill(Z t~1C CQitl~troller shall withhold such amount from the nest succeeding payment of per capita ~ssistnuce to be apportioned to such city, to«~n or ~•iIlu~e, b. The legialati~~e bod3~ of any city l~a~~in~ ~ population of less than one million or of any to«•n or vill~~e acting to impose re~ula- tion of residential rents pursuant to the provisions of this act may im~oso on tl~e o~~~ner of e~~ery Uuildit~~ eout~inin~ ltousin~ u~ecommodntians subj4et to such repulatiaii ati annual cl~urge for C8c11 Si1Ch t1000I112110CIitt1011 i~i such amount ns it determines to be necessary For the exgei~ses to be incurred in the administration of such re~ul~tion. e. '6'Vl~eiiever n city having ~z populntioii of one million or more leas deterniinecl the existence of nn emergency pursuant to section three of this act, the pro~~isians of this yet shall be administered as provided in the tTe«~ York city relit stnbilizatio~i law of nineteen hundred sixty-iliac ar ns otherwise provided by law. ~xn~.~Nertas+— ~tattcr in italics is nc«•; inattcr in brackets [ ] is old law to ba omitted. o~ 152Q L~~~vs ar New Yorcx, 1974 ~Cs~►p, § 9. Application for adjustment of initial legal regulated xent. a. The o~vner or tenant of a housing t~ecommodation described in paragraph one or t~vo of subdivision b of section six may, tivituin sixty days of the lout effective du,to of this act ar the commence- me~tt of the flret tenancy tliereufter, ~cvhiehever is Inter, file with tho state division of housing and community rene~vul an applieatiun for adjustment of the iuitinl Iegal regulated rent for aneh housing accommodation. The state division of housing and community rene~val may adjust such iiiiti~l legal regulated rent upon a finding that the presence of w~ique or peculiar circumstances mnteriully effecting the iYiitial legal re~uluted rent his resulted in ti rent which is sabstantially dif~crent from the rents generally prevt~ilin~ in the same urea for 5ubstantir~lly similar housing accommodations. b. The tenant oP a housing Aeeommoc~ution described in pars- graph t~vo, subdivision b, of section six may file with the atata division of housing And community renewal, within ninety days after notieo has been received pursuant to subdivision c of this section, ~,n ~,pplicution for adjustmetxt o~ the initial legal regulated rent for such housing Aceommodtt~ion. Such tenant need only allege tlt$t such rent is in excess of the fair market rent and shall present each ducts ~vhieh, to the best of his information and belief, support such allegation. Tlie rent guidelines board shall promulgate as soon as practicable after its ereatiou guidelines for the determin~- tion o~ fair marl~et rents far Housing accommodations as to ~vhiah an applieu~tion maybe made pursaant to this subdivision. In render- ing a detormin~,tion o~i nn t~pplication filed pursuant to #hip sub- di~'381QI1 b, the state division of housing and community renewal shall be guided by ancli guidelines. Where the state division of housing and community reue~val leas determined thttt the rent ehai•~ed is in excess of the fair market rent it shAll order a refund, of any e;ceess paid si;ice January first, nineteen hundred seventy- four or the date of the commencement of the tenancy, Znhiehever is Inter, Sueli refu~id shall be made by the landlord in cash or ae a credit udainst future rents over a period not in excess of nix months. e. Upon receipt o~ any application filed pursuant to this section n~ue~ the 8tAt8 division o~ housing and community rene~vul ~haU notify the otivner or tenant as the ease may be, and provide ~ copy to him of such application. Such a~vner or tent~nt shall be afforded a reasonable opportunity to respond to the application, A hearing may bo heid upon the request o~ either party, or the division may Bold a hearing on its o~vn motion, The division aha11 issue a written opinion to both the tenant and the owner upon rendering its doterminution, d. Within thirty days after the local ef~eetive date of this net the owner of housing uceommodatione described in ;paragraph two of subdivision b of section six, as to ~vhieh an emer~eney hay been declared pursuant to this act, shall give notice in writing by certified mail to the tenant of each such housing accommodation on a form y ^;~.. ,. w 57&] Laws o~ New YoRx, 1974 1521 prescribed by the yt~te di~~i5io2~ of housing acid coniinunity renewal of the initial le~Al regulated rent for such howsin~ ~ecommodation and of such tenant's right to $lean application for adjustment of the initial legal regulated rent of such housing aeeommadation. e. The initial legal regulated rents for hot~tsing accommodations in a city having a population of one million or more shall be subject to udjuetment in accordance with the provisions of the New York city rent stabilization law as amended. § 10. Regulations. a. For cities having a population of less titan . ono million and towns and villages, the state division o~ housing and aommnnity renewal shall be empo~rered to implement this sot by appropriate regulations. ~Sueh regulations may encompass such speeu2ative or manipulative practices or renting or leasing practices as the state division of housing and community renewal determines constitute or are likely to cause eireumvention of this uot. Such regulations shall prohibit pr~atiees rvhieh are likely to prevent any person from asserting any right or remedy granted by this a,ot, ineludin~ but not limited to retaIiutory termination of periodiv tenancies, and shall require owners to grant a ne~v one, t~vo ar three year lease, or such rene~vul lease at the option of the tenant, egeept where a mortgage or mortgage commitment existing as of the local ' , effective date of this act provides that the owner shall not grant a one~year lease ; and shall prescribe standards with respect fo the terms and conditions of ne~v end renewal leases, additional rent ~. and such related matters us security deposits. advance rental pay ments, the use of escalator clauses in leases and provision far increase in rentals for ~~rti~es and other ancillary facilities, ~o a~ to insure that the level o£ rent adjustments ~uthori~ed under this Ia~v will not be subverted and made inef~eetive. b. Pcr cities having a population of one million or raore~ this stet i~in3• be implemented by regulations adopted pursuant to the No~~~ York city rent stabilizaYiau la~v of nineteen hundred airty-nine, as amended, or as otherwise provided by la~v, § 11. Nan-~vuiver of rights. Auy provision of a lease or other rental agreement which purports to waive a tenttnt's rights under this set or regulations promiilgated pursuant thereto shall be void us contrary to public policy. § 12. Enforcement, a. (1) Subleet to the conditions and limita- tions of this paragraph, any owner of housing accommodations in a city having a population of less than one million or a town or villAge as to ~nhich An emergency htta been declared pursuant to section threef ~vho, upon complaint of a tenant, or of the state division of housing and community renewal is found by the state division of housing and community renercui, after a ressanttble opportunity to be lieurd, to have collected any rent or other consideration for a housing ~ecommodation in excess of the rent authorized for such EXPLAkAT10N -- Atattcr in italics is ne~~•; matter in brackets [ ] is old law to be omitted. 1522 T~.~tivs aF New YoRx, J~97~ [Cxnr. housing accommodation by or pursuant to this aet shall be liable to the tenant for n penalty equal to three times the nmaunt of such excess. If the owner establishes by n preponderance o£ the evidence that the overehur~e tiPAB neither willful nor attribuEable to his negli~enee, tI~e state division of housing end community renewal alinll establish tlic penalty as tl~e amount of the overcharge. (n) The order of the sttttc division of housing and community reno~val ~iiall apportion tl~o o~timer's liability between or among two or more tenants found to have been overcharged by such owner dur- in~ their pttrtietllttr tenancy of u, unit. {b) ~ complaint under t}tis subdivision must be filed with the state division of Housing end community rene~ral within two years of the first overeliarge alleged and no pent~lty may be based upon an overei~ar~e having occurred more than ttivo years bofore tl~e eam- plt~int is ftled. (e) Any af~eeted tenant shall be notified of and liven nn oppor- tunity to join in tray complaint ftled by an officer or employee of tl~o state di~~ision of housing► and community renenral. {d) ~lii a«ner found to have orerchnr~ed sl~nll be assessed the reasonable costs nticl attorney's fees of tl~e proceeding. (e) Tlie order of the statQ dirision of housing and eammunitti* re- ne`~al a«ttrdin~ peunities mt~y~, upon the e~cpirtttion of the period in `rliic}i the a~ruer ratty institute a proceeding pursuant to urtiale se~•enty-eight of the ei~►ii prae~ice la« and rules, be filed nnd en- farced by a tenant in the same mttiiner as a judgment or not in e:ceesq a£ t«~enty pereet~t thereof per month may be onset against any rent there~tfter due the o~rner. (2) Tn nciditio~i to 15S11111~► #~lE~ specific orde~:5 prnvid~d for by other pra~'1S10IIS OP t~11Y t1Ct, tiie st~tie division oZ ~iousi►~~* nii~i com- munity rene~~•nl shill Ue empo«~ered to e:iforee this ael nu~i its t~e~,►u- lations by issuing, upon notice ttnd n r~nsonable opparttu~it~• ~~~~• the at~eeted party to Ue l~et~rd, saeii other orders as it mny~ deeru .:~~prn- priate. (3) Violations of this yet, or of the regulations and orders issued pursn~nt thereto may he enjoined by tl~e supreme court itpon pro- aeedin~s commenced by the state division of housing end commttnit~~ rene~ral ~rhich shttil not be required to post bond. {4) In furtliernnce of its responsibility to enforce t]iis act, tl~e crate division of ]iousin~ t~~id cammunit~• rene~rnl shall Ue empo~~~ered to AdIt11111StE'I` ontlis, 1S.5L1C subpoenas, eo~~dttet im•esti~~tions and designate officers to hear and report. Tlie dirision slittll s~fe~iittrd the confidentinlit~ of information furnished to it Ott the request of the person fttrnisliing st~me, uni~ss sneh information mast be made public in the interest of est~Ulishing ~ record for the future ~uid- unce o£ persons subject to this yet, b. ~Pithin ~ city hn~~ii~r ~ population of one million or more, the Neer York city concili~tiot~ niicl ~p~et~is board shall hn`~e such pourers to enforce this act as shall be pro~~ideci iti tl~e Ne«~ Yorlc city relit ,;:~:, , 576] L.t~vs o~ :~TE~v Y'orex, 1174 1529 stabilization la~cv of nineteen hundred sixty-nine, ag amended, or ~s shall other~vise be provided bylaw. ~ 18. Cooperation ~vitl~ other governmental agencies. The state division of liousin~ and community renewal, any rent guidelines board and the Ne~v York city conciliation and appeals board may request and shall receive cooperation and ussiatance in e~eetuating the purposes of this act from uli departments, divisions, hoards, bureaus, commissions or ~e~eneies of the state and political gubdivi- sions thereof. § I4. Application of net. The provisions of this act shall only be applicable a. in thQ city of New York; and b. in tho eoanEies of Nnss~tu, ̀CVestchester and Rockland and shall become And remain effective only in a city, town or village Iaeated therein us provided in section three of this t~et, § 5, Subdivisions three tend £our of section t~rQtve-a of tl~o public housing In v are hereby renumbered to be subdivisions four and Svc and a ~~e~i~ subdivision three is hereb3• added thereto, to read as follows 3. b~ separate acco~cnt therein, for ~tse in pad»tenf of the necessary . , acid proper eontpe~isat4on a~:d expe~ises, i~~cicrred b~ fhe division of ,' /cousins a~td co»:zn~tritt~ re~~cwal p~crs~tant to fhe provisions of fhe i e»zcrga~icy tc~iunt protectio~t oat of nineteen seventy-foatr. :' G, a. Tire Ne~~~ Park city conciliation and appeals board ' established puraunnt to the provisions of section YY51-6.0 of the administrative code of t1~e city of Neer York is hereby continued ttie a nine member board to be appointed by the mayor jvith the approval of the city council. Four ~uembers sl~~ll be representative of tenants, four members shill be representative of owners, and one member shall be deai~znnted by the mayor to serve as the impartial Chair- man and shill hold no other public oflSee. Ttivo members representa- tive of tenants and t~ti~o members represen#ative of owners shall ,. serve for terms ending #«o years from January Srst next succeeding the dates of their• appointment; t~vo members representative of tenants and t~vo members representative o£ o«~ners shall serve far ~~ terms ending three yeArs from January first next suceeedin~ the dates of their rtppointment and the impartial chairman shall serve for n term ending four years from January 8rs~ next succeeding the date of his appointment. ~1I1 successor members sh$ll serve for terms of four years each, Members shall continue in of~Ice until their suceessorq hn~►e been nppoi~rted ~~id qualifted. Tlie mayor shall ftll any vt~en~iey ~rhich ma3• occur by reason of death, resignation, or ather~vise in n manner consistent n~ith the original appointment. A member mt~y be retno~•ed by the mayor for e~use, but not without ttn opportunity to be het~rd in person or by counsel, in his defense, upon not less than ten days notice. ~;~PGAVAT10:7 -- \Inttc~ in itali~i is nca•; matecr in brackets (] is old law to be omitted. ►~ _ 152 Ln~vs aF Nr~v Yot~x, 1~??4 [Cn~~p. b. The po~vers o~ the board shall be vested in end exercised by no less than Rve of the members thereof then in of~co two o~ whom shall be representativo of tenants; t~vo of whom shAli be represent,~i, tine of owners and one of whom shmli be tl~o impartial chairman ox a member acting on his behnlf. Tho board may dele~atd to one ox more of its members, a~eers, agents or employeeq such powers and duties as it may deem proper. e. The board shAll continuo until terminated by Iaw. d. The board eh~Il have power to appoint o~eere, agente~ and employees, prescribo their duties and fix their campeneation And to do uny and X11 think necessary or convenient to administer the regulation and control of residential rents as provided in the rent stabilization law of nineteen hundred sixty-nine and the emer~eney tenant protection stet of nineteen seventy-four; nottvith- ~tandin~ any provision of lay► to the contrary. e. The board's powers shall iizelude but shall not be limited to, the potivers {1) To sue and be sued ; (2) To hive a seat and Ater the same At pleasure; (3) Ta ms~ke ~i1d execute contracts and ill other instruments necessary or eonvenieut for tl~e exercise o~ its powers and functions under this act ; (4) To make nud alter by-laws for its organization and internal management, to make rules and re~ulntion~ governing the use of its property end facilities; (5} To acquire, hold And disposo of personal property; (6) To procure insurt►nco against Any loss in connection with its property And other assets in such amounts, end from such insurers, as it deems desirable; (7) To accept any gifts or grunts or loam of funds or property or Snaneial or other aid in any £orm from the fedcrai government or any agency or instrumentality thereof or from the state or the city or from any other source and to eomp~yt subject to the provleions of this act, with the term$ and conditions tl~ereaf ; (8~ To enrage the services of privato consultants an ~ contraQt basis for rendering professional And tcehnicai assistance and advice; (9) To Administer oaths, take evidence, issue subpoenas, conduct investig~tians and designate officers to hear t►nd report; (10) To do any and all things necessary or convenient to carry ant the purposes end exercise its powers. f. The New Yark Qity conciliation ttnc~ appeals board shall admin- ister its regulation of residential rends As provided in the rent stabilization law of nineteen hundred arty-nine and the emergency tenant protection pct of nineteen seventy-fear. § 7. 9eetion Y"Y51-3.0 0~ the administrative code of the city o~ New Y'ork~ ns added by local l~~v number sixteen o£ the city o~ New York of the year nineteen l~undrecl si:ctyaiiiic, is hereby nmendec~ to read ae follows 576] L,~~vS o~~ 1'rty YoreF., 1974 1525 § YY51-3.0 Application,--This lu~v shall apply to a. Class A multiple d~valliu~s not o~vned a~ a cooperative or us a condominium, containing six or more dwelling units tivhich [u.) (1 J were completed after February firat, nimeteen hundred forty-seven, except dwelling units ~1~ (a) owned or leased bq, or financed by loans from, a public agency or public benefit corporation, [2~ (b) subject to refit regulation under the private housing finance Iuw or any other state Ia~v, [3] (c} aided by government ineuranee under any provision of the National fI'oueing Act, to the extent this local la~v or any re~~ilation or order issued thereunder is ineoneiatent therewith, or C4] (d) looted in n buiIdin~ for ~vhieh a certificate o$ occupancy ie obtained after March tenth, nineteen hundred aizty- nina ; or [5] (e) any class A muItiplo d~vellin~ which on June Hrst, nineteen hundred sixty-eight vas and still is commonly regarded ae a hotel, transient l~atel or resideutiui hotel, and which customarily provides hotal service shah as maid service, f~irniahin~ and Iaunder- ing oP linen, telephone and bell boq service, secretarial or desk service ttnd use and upkeep of furniture ttnd fixtures; or [b.~ (aJ were decontrolled by the city rent agency pursuant to section Y51--12.0 of the city rent and rel~ubiiitation la~v ; or [e.) (3) are exempt from control by virtue of items (1}, (2), (6) or (7) ofl eub- pnragrnph (i) o~ p~ragr~pli 2 of subdivision e of section Y51--3.0 oP such lu~v; and b, othar laousi~ic~ acco~~i~nadafions ~iiada subject to this law pur- suant ~o flca en:erpe~:cy te~iant prolectdo~i act of ~ii~seteen seaenty- f oscr. ~ $. Subdivision a o£ section YY51--4.0 oP auoh code, us Amended by local la~v number fifty-o~ie of the city of Ne~v York of the year nineteen hundred sixty-nine, is hereby amended to read as follows: u. Dwelling units covered by this la~v as provided in section YY51-3.0 or section YY51--3.1 shill be deemed to be housing aeeom- modatian subject to control under the provisions of title Y of chapter Sfty-one of tl~e administrative code not~vitliatanding any provision of such title to the contrary, unless the owner of such unity is a member in good ata~iding of any association registered with the housing and development administration pursuant to section YY51—G.0 or section YY51-6.1, For the purposes oP this law a "member in food standing" of suer nn association shall mean an owner o~ ~. housing accommodation subject to this laSv ~vho joined sack an association ~vitl~in thirty days of its registration with the housing and development ndministrntioii or within thirty days after becoming such owner or lvithin sixty days after szccli Housing acconiniodatio~ti bcco~r:es srcbjecE to re~iclatiou picrsTcant to floe emer- ~e~ic~ tena~tt pratectio~ti act of ~~i~tetee~t sevo~tt~-fotcr, whichever ie later, pro~'I(~P(1 SIICII 21C(0211111(}C~RtlO11V ~1~crc not tn~der ach~al control of the city rent ngei~cy ~vheii lie became t~~e owner thereof, end furtl~ar provided such owner complies with prescribed levels of fix~w~ttertoty -- ~intter in ifafirt i. neH•; matter i~ti brackets [ 1 is old law to br amltted. .~ xis • _ _ , , 1 26 1~.~~vs of N~~v 1'a~h, t97~ [CFt.ir. fair rent increases estnblished under this lntiv or cuiEl~ ~tcidel~~tos for rent adjust~ricnts aictlaorixcd ~icrszca~if io tlzo a~►icr~enc~ Ee~sant faro- ~ectzon act of nineteen seve~zt~•fozar and ibis law, does not violate any order oP the eoncilintion and appeals board and is not found by the conciliation nnci ~ppcals board to have ht~rnssed n tenant to obtain vact~ncy of leis housing nccommodntion. § J. Subdivisions u, U un~ d of section YY51-5.0 of such code are hereby repet~led, sttbdivisians e and f ire hereby relettered to be subdivisions d and e, respectively, and two ne~v subdivisions, to be subdivisions A A11C1 U ire hereby added to such soetion~ to read, respectively, as £ollowa a. There shall Le a resit r~icidelines board fo co~isist of ntine mem- bers, appoi~ttcd b~ tl~e ~~ta~or. Z'wo mc»:Lers shalt Lc represc~~tativa of te~ia~its, two slcall be representatiuc of ownars of property/, a~:d fcve slcall bo ~~aLlic ncc~ribcrs cacl~ of zolcon~ s)calt liavo had at leasd fire dears cxperiericc ire eiticer fina~icc, acotio»iios or Iiortsinq. Ono p:iblac me~~tber shall Le clesi~tiated b~ tlac nia~ar to sonic as eliairnta~ti aitd skall hold ~~o otlear p:iUlic otjicc. No ~zem~ier, o~cer ar e~~zployee of and siui~iicipnt rant req:tlatian a~e~:c~ or files stata ddvision of ho:~sinq and con:»i~a~~id~ rcnczval and no perso~z Tuho otu~is or manages real estate covered b~ this laiv or luho zs aye o~jicer of a~ly owner ar tenant organixafzoie shall serve 04Z l~ rent gacidedi~zes board. One pttblia mamLer, oaie ~~:cmber rcprescr:tativc of tenants and one naem- ber represeiitatiuo of otut~ers shall servo for a term ending iwv years fro»: Ja~aztary first ~:ext s:cccecdi~:~ the date of thedr appointment; one ~z~blic ~~iembcr, o~tc n:e»ibcr rcpresc~stativa of tc~~ants a~:d one me»tber rcprescntativc of oiu~:crs slzatl• servo for farms andinq thres years from ilee Jani~ar~ first ~icxt sitcceedin9 tlao date a f ~laeir ap- posntmenf a~td troo p:cblic mantbers shall seruc for Perms endznfl fortr dears from Ja~izcar~ first ~iext saccceedin~ the dates of ticeir appoi~tt~iienf, Tlac chairman shall ccrve at f):a pleasure of the mayor. Tl~ereu~'ter, alt ~iamLers shall conti~izta tin o,1J~oe ~ctitil their successors Itauc bee~i appoi~:tcd acid ~italifted. Tho Mayor shall fill ang/ vacancg/ ivl~icl~ uia~ ncczcr b~ reason of death, resi~natton or otheriviso iii a ~~~a~i~ier eo~isiste~i~ iuitl~ the original appointment. A meneber ~sa~ be re~~ioved b~ floe nia~ar for eattse, L~ct tot auithout an oppordunit~ to Le Beard in ~crsou or by cozanset, an 1~is defense, upon not less than ten dais notice. b. The rent guidelines board slcall establislc a~i~iscatly ~ttidelines for rent adjacstmersfs, ai:d i~z defcrani~iin~ wlictl:er rents for housing accommodations sicb,ject io floe enicr~e~icy te~ia~tt protection ae~' of ninetec~b sevent~~fozcr or flail la~v ~lit~tt bo adj:csted shall cansider~ ur►ton~ other t)zi~t~s (i) floe eeononiie condition of the residential real estate andzistr~ in flee a~`eeted aroa inclz~dinq stccl~ factors as the prevailing acid pra~ectcd (iJ real estate taxes and sewer and water rates, (ii} dross aperatan~ ntaintena~iea costs (inelzedin~ insurance rates, cost of flcel acid tabor costs}, (iii) costs and availRbilit~ of finanain~ (inelzcdin~ e,~eotiva rates of i~iterestJ, (avJ ovar-ail stcpply of housing acco»i»iodations acid over-old vacancy rates, (2) rotevant data front flee cacrrent a~:d projected cost of Living indices for the {., ;.. ~ . .i7G ] r~.~H•s oi~~ \ ~:~~• ~'~rth, l J7~ 157 a,~'ecferl area, (3) stech afhcr data as nia~ ba ~~ia~le available to it. Not later than ~I~tl~ ~rrt of cacli Vicar, the re~zt ~tcidcda~tes board slcatl file iuiflz 11te city clerk its ~~idi~tgs far tl~e precedi~ig calendar dear, a~ad shall acconcpa»~ sTcch fi~idi~r~s z~iih cc statement of the »ta~isrttc~~t rate or rates o/ rent a~ljustme~tt, if and, for one or more classes of accou:n:a~latio~is sicbject to ilais law, atctliorized for leases or oticcr re~ital aryreemenfs ca»~~ne~ici~t~ d~irin~ ilcc ~:ext st~cceedi~t~ tsuclva zrtonths. S:ccli fi~~di~~~s acrd state~ncnt sleall be published in the eil~ record. 10. Clause h~•o o~ su~di~c~isian e of section YY51-6,Q of such code, ns added by local I~«• number sixteen o£ the city of Ne~v York of the year nineteen hundred ~istti~•nine is hereb3~ amended to read r~s fotlo«•s (2) binds the members of the association not to exceed the Ievel o£ fair rent increases ttndcr piny ]ease rene«•~1 or ne~v tenancy bear- in~ an ef~ectire date on or after June first, nineteen hundred sigty- ei~ht for ci~vellina units eo~•erecl by t~115 ~A~P or, ova or after tha local effecti~c date o~ tlic ~~ncr~eucr/ te~~a~it protection aat of nineteen seve~i~~-four ~o co»:pl?/ tuith tl~e prouisio~is of sectto~i YF51-6.0.1, provided that nothing herein shall supersede or modify the rent increase permitted by the city rent rt~ene~• following decontrol pur- suant to section Y51-12.0 of the city rent end rehabilitation l~~v nncl tine re~ulntion5 adoPt~d thereunder; 11. Such code is hereb~~ amended by adding thereto a new section, to be section YY~1—GA.1, to ~~end as follows ~'3';i1—G.O.t SfaUili:~fio~t proz~isto~:s.-- a. 71'a ozvtter of prapert f stabject to dais laze shatd claar~e or collect a~ii/ rail iii excess of flee initial Ic~at rec~rttatad rent or ad,~zcsted i~:itiat tc~al re~ulate~i rc~tt u~itit the end of and tease or other renfat anreernent in c~'cef o~i the local c,~cetiva date ~cntid sscch ti»ia as a ~i~'ere~tf legal regulated r~nf sliatl be a:ithorazed pursuant to ,~zc~de- iines adopfad b~ a rc»t hrcidcii~~es board. b. Tlic. ittifia! rc~itlatcd a~r»t fo~~ hausiri~ accam~itndatto~ts srtb- jFCt t0 ~~LIS FUJI' o~i 11~r. tncal cJ~cctit~e daf~ of tltc emerge»c~ te~ta~tt protection act of liinetce~: sct~er:t~-foacr or wJ~icli beca»ic sttbjeet to tleis ta:v tlierca`ter, prrr•sua~~t fo st~cla act, shall be: (i) Tyr ltnra.ci~1~~ acc~ntmn~lnlio~~s tohich i(~fPc r~gtclat~d p~rrsrta~~t fo this la~u ~r~ flae eit~ rent n»d relinUilifatiou laty prior to Jatly first 1ti~1C1CC)t 1t1[ltCIrP(~ cCUCtt~1/-o~~c, ar~d ~uliicl~ became vacant o~ti or of ter s:~clz date acid prior la tltc local e~'ccfivc data of flee e»ier~e~toy tee:aril profectiatt nc~ of ~iinctce~i severit~~fatcr, the relit reserved i~a tlic last e,~cclive lease ~r otltcr ~•cr~fat a~rcement; provided tltaf szccl~ i~~iticzt rc~:t »ia~~ lac ac~j~~stcc~ o~: appl~cafio~i of tica tc~ta~~f p~cr- stca~tl to sttl~dit~tsion b of s~ctimi ~'Y~i—G.0.2 of tJtis tatu. (a) For l~or~si~~~ acco~rin~Rdatiar~c iulizcl~ here re~ttlatec~ pt~rsi~crrif f0 IItC Clf1/ ~•en! «ntl ►•chnbilafatior~ la~~~ n~~ Elie local e~'cctiac elate of Nia ~mcr~~~~c~/ t~r~a~rt prnf~cfin►i apt n/' rii►~~t~~» s~i~~~~ft/-faux. attd l:rrt ~v~T~o:: - • \laltcr in ihriicr ig nr~~~; m:~ttrr iii hrackctc [ 7 ii ~~ld la~~• to br omitted. k,;~ .x: ]~28 T~,~«~s a~~~ i~T~:ti~• 1rORK~ 1~}7~4 (C~tar. tlecrcaf tee• bcco»ic zaca~zt, the rc~it agreed to b~ tlia landlord a7id iltc te~iatit artd reser~ucd sra a lease or provided fa' z~i a rental a~res- ~tac~at; p~~ovidecl that such ~nitzal r•cut ~~aa~ be ad~~tstcd an ap~licafio~t of the ~e~~ant ps~t;s~ra~it to st~Ltlivisi~~r b of seatiott YY51—G.U.2 of this laiv. (3J Fvr hoiisi~~~ accouiynodafrons offer tl:a~a thosC [lCSCrillCd ti93 parapraplas (1) a~tcl (2J of this scat4oa~, tl~a ~~cue ~•cse~~ved in f~ia last efJ'eetivo lease or other recital. nr/rce~r:o~~t. c. ~Vitli raspcct to acc~runtodntioiis ~'o~~ rvlazcli flic a~iitial le~nl re~►tcla~ed ~•ent is ~overrtcd Ur/ y~arar~raNh tsuo of s~cL~livisiou b hereof, no i~:crease o~ s~tcla ~ftitial Icgnl re~ialafcd rc~it ptcrsuc~~lt to a~t~tual ~za~dcli~~cc adoptc~t L~~ the ~•c~~t r/iricIcliaics b~a~~d sleald becor~ta e~J`act%vc until the cxpiratioii off' thn first lease or ra~ilal aq~~centetit taki~s~ c~`'cct nftcr the local• e~cotiuc clalo of tkc e~~icr~cr~c~ to~~n~it pratec- iio~i act of ~ir~tetee~~ sevc~,rt~-/'ntn~, b2r~ ~n Rio cve~tt be~a~o o~cQ year after ilea eo~rimcaiccmc~►t of such 2•~»~al. a~recir~e~st. ci, ~Viili ~~espect to nccnin~trntlntzoi~s~ ntlicr dhntt tltosc raferred to in suLdivisio~i c, for avhich a Jcasr is c~itc~~ccl i~rio afte►• tlaa local e,~`cctiuc laic ~~ the e»icrt/e~1e~! tciiatll pratectio~s aCE of ~:ino#eon seveaat~-four, bait Lc~'nre the cf~'ccti~►c claie of the ~rs~ r~iiddela~zes applicaLlc ~o wick accom~~iodatin~r~, the lcasa niay provida for an adjiis~»iant of re~zt p~w~sircr~ri to strcli ~reicicl~nes to Uo e,~oot~va o~i tha first dad o/' !h~ uio»th ~~cxt succecdi~i~r t)tc c,(~eoti~a data of such ~tcideli~icr, ~ 12. Such code is Hereby anieucled ley adding tlzereto t~vo new seetians, Eo be sections YY51--G,0.2 and YY51-6,O.S, to read as follows § YY51-6.0.,2 1lpplzcatia~r fo~~ adjicslme~it of s~iztial resat.-c~. Tho ~e~iant or oiu~trer of a ]to~tst~~n ctcco»s»todadio~t ntado stcLject fo this law by ilia c~~tcr~c~tc~ telini~t ~rofectiori act of ~ti~iateen seuonty- fo~ar zua~, ~oitlai~a sixth cta~s off' tl~c local c~'ectivc date of tlids oat or dhe co»~~lie~~c~nie~rt of Ihr fci:st te~ia~ic~ thereafter, zuhicltever is layer, fila avitlt tlic co~iciliat~o~: acrd ap~cals Lonrd ~c~a application for adjtist~~ic~:t of tl~c ~~:i~~c~l lc~al t~egtal~eted ra~zt for sztcla laa~csi~tg t1CCOt1tt)20[~a~~09~. Tlcc co~~cilialio~t c~r:d appaals board ~~iay adJtcs~ suala z~:tidal legal ~~c~zclate~l ~•c~at ~cpo~a a findi~in that tl~a prese~iaa of st~tizgtcc or ~cotcliar circrc~~ista~:ccs »tatci•iall~ aJ~cctz~a~ ilea a~iitdal legal re~zalatcd rartit has resulted iaa a ~~eut ~iulaiol~ ds s~cLsfa~i~iatly dti~J'crent fronti the re~~ts gcricrall~ Prcvaili7sg iii Clio sa~~~a area for stabstan~ialdy ss~nilar ltozcsi~i~ aacor2i~nodatzo~is. b, ~. Tl~e tana~it of ~ l~o~cci~i~ aceo~iif~sodcrtr~~r that zuas re~iciated pursiea~ad to tlee city re~id a~~~l rcr~abriztaElo~i laiv or ticis laiu prior to Judy first. ~ii~ietcc~t It~c~ic7r~d sevant~-o~~a c~~:d float bcott~rio vacant on or after Jan~cc~r~ ~~•st, ~ii~iatce~a lz~c~idrecl ceUent~-faztr ~~tav fila ~uifh the Co~ioilraiioa~ acid a~pealr board zuatlain ~~z~iady days ofto ~:otzae has bac~~ rccciue~l p~trsuant to sicbcdiuisia~t'c~ of tliic sea~io~i, an appli- eation for adjrest~~:c~~t n~ the i~ai(ial legal ~•a~~clated ra~st for suelc hotcsa~i~ accorn~~todaEzv7t. Srccla tc~ra~rt ncc~l oz:ly alte~/a that sztch rent ds iii excess of tico fair a~tarked resit oriel shall presa~tt such facts whiale, to tl~a bast of Itis a~efar~tiatio~e ~c~irl beliaf, stcppart sttoh alle~a- -~, ~• _. 9 576] L.~~vs or iV~~v ~o~x, 1974 X529 lion. Tltie rent gaczdolines board shall pronzacl~ato as soon as ~rac- tiaabla after tlaa local e~ectiva date of tl~a ea~ier~e~ic~ ta~taatt ~arotee- tionact of ninetec~t setie~tity-four• ~icidcli~ics for tlzo determi~ration of fair s~iarkct re~ifs far' l~ottsi~t~ acco~~i~~~oclaiions as to zultzcl~ any application ~~:a~ be ~na~le p~c~•sz~a~it fo this stcbdivgsion. I~z ren- deri~iq a ctetersiaiaiation o~z a~a applicalio~i ~ded pacrsua~at to dais s~cbdivisio~a L tha co~:ciliaiio~~ c~~~cl appeals board slaatb be gZaided by slick ~/icadcli~:es a~ic~ b~ tlaa rc~~zts ge~tcrall~ prevailing a~z the same area for sz~bsta~:t~al~~ similar 1~ottsi~:~ accor~tnioda~io7is. ~Vltiere the conciliatao~i a~id appeals board loos claterncined ticat tlae rest cicarp~ed is in excess of tice faia~ ~~iarket a•erat if sliaZl ordor a raflt~id of any access paid si~~ca Ja7zTcary first, ~ii~~c~ce~ti li~c~:dred seventh-fortr or tha dato of tl~a coanmence»ie~it of the te~ia~ic~, 1ul~zcicaver zs later, S•ttclt ref~cnd shall be ntnda b~ the la~~dlord in cash or ~s a credit agai~ist futza~a rends over' a period ~:ot i~a excess of six ntantTcs. 2. T7~8 pravisio~~s of para~ra~la (1) of tliis subdzyisio~a shall not apply to a ta~ia~it of a liozcsinfl acco7rilnociatiora for zulalcla tlae inztzat legal re~zclated react is no greate~~ tica~b tice ncaxi»tizcnz rent that wolcld havo bean i~a affect ztncier tl~zs lazu o~i Decs~nbcr fliirty-first, ni~ieteen Izundrec~ setie~it~-trace, or for the period contarie~:ci7b~ Ja~tz~ary first, nineteen lczcndred seve~it~-fo~c~~ acid a~idinp Dece~~:ber thzrdy-first, ~:inoteen Tezc~~dred seuc~~t~-f uc as calculated pZ~rsiaa~a~ to the city rent and relcabilitatio~z 1•aiu (if ~:o st~cla ~riaxi~tiz~~~i re~zt loos been calazilated for ~c particula~~ zt7iit far tl~e period comr►~enci~iq Ja~tziary first, ~tinatee~z hundred. scuclttJ-for~r ~c~id eaidi~:~/ DeccutUe~• tlttirty- first, nip:etecati hzcnclrecl sevent~~five, tlic eo~tciliatio~i and ap~eais hoard slcall re~tcest the ~lepa~•fr~icrif of ~•eait and rehabi'Ii~aiio~ti to eule~clate and f~c~~a~zslz such a rc~ct, n~id sucle departatient s)eall do so it~ti»:adiatel~J, as tice case ~»a~ be, z f stccl~ apa~~tnte~tit lcad not beaonza vaea~it opt o~• offer Ja~szecc►•~ rrst, ~ii~cetee~a li~endred seve~sty- fozcr, plzts fhe antotctit o~ a~t~ nt~jttshtte~tt 1t~leicli auolcdd hava been azitleorized zc~t~ler tltrs Icc:u for rc~~eiunl leases or atl~e~• ra~tfat agree- mant, zvlaeticcr or Fiat szccic lioi~si~:g nccont~nodatiate svgs s:ab3ecf to dais lazu, for• leases ot• other rcnfal a~lrce»ie~tits co»~tne~ici~ig ore or after J:~l~ ~rst~ 9~2?tCtCC9L ~L~t)!C7)•cd sevcaity-foicr. a. U~o~t receipt of ccn~ applicatio~t filed p~crsica~zt to t1~is sectzo7c, tlto co~tciliafia~~t a~ttl appeals board shall notif y t ae otv~ter or te~iant, ac tice case ~~ia~ bc, acid pravit~r~ cc copy to laiai of sucic application. S~~cic o:u~cer• or' fcrtct~tt shell be n~j'ordc~ a r•caso~iable opportia~~it~ !o ~~espond to floc application. d lccat•i~i~ ~~tct~ be held ~cpo~z floe ret~ttest of citlacr party, or• tl~e i,oard nta~ Bold a lceari~~g o~z its oiun ~iotio~z. Tlac Uoard vliall. issrrc a 2vr•itte~i opi~aio7t to both flee ~e~ia~it un~l the o~v~rcr zcpo~~ re~~d~rr~i~ zts dete~~~~aittation. c~. 1VitJcia~ thirty dais after fhe Incnl ef~ecliae date of the enter- gc~ic~ ~'c~ia~tt ~ratectioaa act tlic occ~~cr of lioicsi~rq c~ccorra~nodRttons as ~o zulttcla ~n ca~plicalzon for ~~Ijirsh►ic~zt of floc i•nifial legal rc~u- lated rc~it ~na~ be s~iadc pu.~;ci[ftltt t0 Sltb(ItU1StOri b of this section sltall give aioticc iii zuriti~t~ L~ cerfificrl i►carl fa floc tcrin~it of caclt ~7tPLANA7ION —.l(nttcr in i~alitf is nc~v; mnttcr in br:~ckrts [ ] is old law to be omitted. M i~• ,~ t ~, .. ... , 1530 Ta.11VS OF NI.~v Yotzh, 1h74 [Cg~r. s:tclz lao:csa~:q accam~~iodatio~ti o~z a fa~ita presc~•ibcct b~ tl~a co~tciliw tzoat c~~id appeals boa~•d of tltc iaiifial lc~al ~•e~ttlatc{J retie for s~tcli ltortsi~i~ acco»unod~tiora a~ttl of sttclz tc~ia~at's i•i~kt to Ala apt ccp~li- catioaa for adp:cst~~ae~at of the i~citiat legal ~~c~rcl~ctecl ~•e~zt of s:ccic lto:tsi~s~! acca~~~~riadation, § YY51—G.4.3 ~1lcta~tfe9tp~tCa of services.--~X~i o~~c~er to cod2cot ca ra~et ad3zcstnzc~it aiitlaot•ize~l purstcaaet fo the provisions of sub- divasion tt of seetaorya Y7~'S.1-5,0 a~z o:u~cer ~tiztst fcle zvitrc tlra coy:eilia- tio~i a~td appeals Loa~•~l o~i• a forn~ ~Ukacl~ z~ shall pr•cscribe, ~ wrat~e~z certificatia~a that laa is ~~iai~:tai~ci~i~J cc~~d 2vill continue fo ~r:~cti~af~i~a all se~~vices f tc~~~tislecct ors the date ~cpo~t ~oh~ol~ tlaa e~aiergc~tcy tona~t~ proteateor~ aat of ~ii~iedcc~a scac~it~~fortr becorises a lazu or req~cire~l to be fzar~iishe~l b~ n~a~ stato la~~ or~ local lazu, orcli~iaiica ar rc~acla- tio~t applica~ilc to flae pra~raises. Ira ndd4dto92 t0 (Ltt~ ot]i~t• ra~~tod~ cafforclerZ b~ laiu, a~a~ ie~iant ~u~c~ apply to t1~e coxcilzatio7a aazd appeals board far a redtccfio~t iii tlic ~~c~xt ~o t1~e level i~t ej~'ect p~~ior to its mast ~~eeettd acZjicst~~zent and tl~a eo~ieildatio~i acid ccppQals hoard ~~~a~ so ~•ed:tce the rc~tt ~f it fr~cls fleas the o~u~acr~ Ices failed to ~fiai~ttccizt stccic services, TJtc ototter~ slrall ba stcpplied zuidli a copy of tke applicatro~z a~i~l shall be peru~ittc~ to plc a~~ c~aistuc►• fAcreto. 4 lceari~t~ aitay Le hclrt icpo~:• ticc request of either parf~, or tlia co~iciliatia~ti ~~i~X appeals ban~•d ~~ia~ lioi~l a hcaf'191~ 76x1091 Z~5 OZU~b ~rzotzo~~. Tlco c~~:ciliatiori aritl appeals boar~tZ ~i~a~ aansolidatc tice proceedings for tiuo or utoro petitio~~s ~cpplicablo fo tlia same b~cild- inq. If tlac eoiseilic~tior~ ar:cl appeals board ~~rtcls tlaat the azv~zer has k~totui~t~t~ flea a false ccrti~catio~:, it slca~l, i7a addition to abating the rent, assess the niu~ier fuith tlaa reasonable costs of t1~e proceeding, i~sclzt~li~:~ ~•easoriablc c~ttort:e~s' fees, a~td i~raposa a pe~ialfy ~~iof iu cxcccs al' ttvo la~cndi~cd ~ft~ dollars for eucli false cert if cat io~a, § 13. Section foiir h~~ndrrd si t}--s~ve~i•b of the real property ta,~ Zu~v, as added by chapter s~~ hunclreci eighty-nine of the ln~vs o~ nineteen hundred seventy-tnTo, is hereby amended to rend ns follows: § X67-b. Tax ubateme~~t for rent-eo~itrolled acid rent rc~itlated property occupied by senior citizens, 1. Definitions. A~ used in this section ~. "Dwelling whit" means thnt pert a~ a d~vellii~g in which a head o;E tho household resides anci ~rhich is subjee~ to either tlia emergency l~ousin~ rent control ln~~ or to tJce rent tuul rehttbilitatian laZv of the city of Ne~v Yorlc ei~r~etecl pursuant tto the loci l~,w onaeted ~ur~uunt] to the local emergency ]lousing rent eantrol Iuzv, or to tice emergcnc~ fc~iant ~raicctiorz act of ~ti~ictccaa sauc~tity- fozcr; b. "$eud of the houselfolcl'' meAns ~t person ~vho is aixtytrvo years of age or older, is not ~ recipient o£ public assistance pursuant to tha social sorviees Ia~v and is entitled to t1~e possessio~t or to tho usfl or occupancy o~ n d«~elliizg unit; ~votlii~iq Iaereirz coa:tainecl sleall re~tde~• ~~ialigibde fo~~ benafits per- ,sa~is reccivi~zp sicpplcartc~:tal scctc~~ita~ ~~~co~t:c o~• additio~:aZ slats pay- ~a:eats, or botTi, ~cndcr n proQra»ti ad~~ii~iiQEcrc~l b~ tltc Untied States M 576] T~.~«~s or \'~~v I'o~x, 1~7~ 1531 depart»ce~af of lacalili, edtieatio~z aitd lucdfara or b~ sircli clepnri~iie~~f and tic Neiv York state cicpard~nent or social serviccr.• c, "Tneame" manna income from X11 sources after deduction o£ all income and social security taxes u~id iiieludes social security and retirement benefits, interests, dividends, net rental income, salary or eurnin~~, And »etiv i»eorae from se1P-emplo3•ment, but shall not inelu~e lifts or inheritances; d. "Income t~.~ year" means a t~vel~~e ~i~ontli period for ~vhieli the bend of tl~e liouseliold filed a fedes•~l persannl i~~come tax return, or if i~o such return is filed, the ealeiiclnr S•enr; e. "Increase in ma~imuni rent or Ic~al ~~c~/tclatcd rc2it" means any increase iii the maximtun rent ol• the ic~al rc~iclatcd rci:t for the dwelling unit in question pui'SUtlllt to the ap~lieable rent control la~v or to tha cmcr~csu~ i~riar~l protecfio~i act of ~ii~tetee~ti scve~tt~-faztr, 9~cspcctivcly, or 5u~i~ classes of inerenss thereunder ' . as may be speciflecl in a local lK~~~, ordinance oz• resolution enacted ' pursun:nt to this seeti~ui, arer such base period rent as shall be provided therein ; f. "li~~> >he~~s of the l~onsehold" meu~is the Bead of the honsehald ~i~c1 ntir Pierson, other thou n boi~u fide roomer, boarder or sub- ~' ~~:n,itifi «~i~o is not related to tl~e head of the household, p~rmuneutly ~~::iciin~ in the d~~•ellin~ unit. 2. Tho ~overninb bacly of any [ait~►, to~vii or village) ~titc~iiainat corporufiort is hereby uttthorized and empo~t~ered to adopt, after public Bearing, in aeeardttnee ~~~itl~ tlic pro~~isiozis of this section, ~i local la~v, ordin~nee or resutution pro~~idin~ for the abatement of tales of said intuiicip~t corporation imposed on real property containing a d«~ellin~ unit as defined herein by nu amount not in excess o£ that portio~i o£ t~i~y iiicreAse in musimu~n rent or Icgal ~- rcflulated rc~:t «~hich ct~u~es such m~xiitn~m rent or lc~lal rch~tlated rent t~ e:~ceed pne-third o£ the combined income of all members of the household. 3, Any such lacnl l~~v, ordinance or resolution shall prop►ide tl~ut ; a, no taa abatement sl~s~ll be ~rnnted if the ca:nbiued income of all members o~ the household far the ineouie tus 3•ear immediately ~,~' precedii~~ the date of 111A~{lllf; applientian exceeds [threes f ottr thousand dollars, oi• sueli other sum not more fihan (fives six thousand fire leic~idred dollars ns may be proti~ided b3* the local lu~v, ordinance or resolution adopted pursnnnt to this aeetioii, pra~~ided that molten the head of the household retires Uefore the comme~lce- ment of such year auci the date of filing the application, the income far such yetti• ratty be ndjustec] by e~eludin~ salary or earnings and projecting his retirement inca~iie over tl~e entire pci~iod of Sue1~ year, ', b, upon issuttnee of r~ ttt~ abatement certificate t~s provided in ~ , subdivision font` OF t~115 SCGtIOII~ the ~nion»t of i»erense iii ma~iinum ~' rent or legal regtrtatcd rc~it set forth in said certificate shall be dec~ueted from t}ie le~~tl Il1ilXUAl1Il1 rent a~ le~nl rc~lt~lated ~~cnf ehAr~eable for n d~vellin~ emit of ~t bend of tl~e hauseholci. Isx~4nanr~ox -- \inttcr in italics i, ~ic~r; nt~ttcr in brackcte [ ] i. ul