In the Matter of Kelley S. Boyd, Respondent,v.New York State Division of Housing and Community Renewal, et al., Appellants.BriefN.Y.June 24, 2014To be argued by: Robert E. Sokolski, Esq. APRIL 2013 TERM Cal No. New York County Clerk’s Index No. 110437-2011 New York Supreme Court Appellate Division – First Department MATTER OF KELLEY S. BOYD, Petitioner-Appellant, - against - NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL and 232/242 REALTY CO. LLC, 232/242 REALTY CO. LLC, A/K/A UPTOWN REALTY, C-UPTOWN REALTY, ROBERT CANDEE, OWNER Respondents-Respondents. APPELLANT’S BRIEF SOKOLSK1 & ZEKARIA, P.C. Attorneys for Petitioner-Appellant 305 Broadway - Suite 1004 New York, NY 10007 (212) 571-4080 sokolski.zekaria@mindspring.com PRINTED ON RECYCLED PAPER TABLE OF CONTENTS TABLE OF AUTHORITIES ................................................................................... i QUESTIONS PRESENTED……………………………………………………...1 PRELIMINARY STATEMENT ............................................................................ 2 STATEMENT OF THE FACTS ............................................................................ 3 ARGUMENT .......................................................................................................... 10 I. THE COURT ERRED BY FAILING TO REVERSE AND REMAND THIS CASE SO THAT THE VALIDITY OF THE BASE DATE RENT COULD BE ASCERTAINED. .............................................................................................................................. 10 CONCLUSION ............................................................................................................. 21 i TABLE OF AUTHORITIES State Cases: 72A Realty Assocs. v. Lucas, 101 A.D.3d 401, 955 N.Y.S.2d 19 (1st Dept. Dec. 4, 2012) ..................................... 9 72A Realty Assocs. v. Lucas, 32 Misc.3d 47, 929 N.Y.S.2d 349 (App. Term 1st Dept. 2011) mod, 101 A.D.3d 401, 955 N.Y.S.2d 19 (1st Dept. Dec. 4, 2012) ..................... 9, 16 Bogatin v. Windermere Owners LLC, 98 A.D.3d 896, 950 N.Y.S.2d 707 (1st Dept. 2012) ..................................................18 Dignam v. 305 Riverside Corp., 2012 WL 1410085 (Sup.Ct. NY Co. 2012) ...............................................................19 Grimm v. DHCR, 15 N.Y.3d 358 (2010) .............................................................................. 9, 10, 11, 17 Grimm v. DHCR,, 69 A.D.3d 29, 886 N.Y.S.2d 11 (1st Dept. 2009) ............................................... 10, 12 Levinson v. 390 W. End Assoc., L.L.C., 22 A.D.3d 397, 802 N.Y.S.2d 659 (1st Dept. 2005) ..................................................18 Pehrson v. DHCR,, 34 Misc.3d 1220(A), 2011 N.Y. Slip Op. 52487(U) (Sup.Ct. NY Co. Billings, J.) ....19 Roberts v. Tishman Speyer Properties, L.P., 62 A.D.3d 71, 874 N.Y.S.2d 97 (1st Dept. March 5, 2009) ............................... passim Thornton v. Baron, 5 N.Y.3d 175 (2005) ......................................................................................... passim 1 QUESTIONS PRESENTED Q: Whether DHCR should have looked beyond the four year statute of limitations for rent overcharge and assessed the validity of the base date rent and the landlord’s claim of individual apartment improvements totaling $39,000 in a single prior rent stabilization rider, where the tenant pointed out that, inter alia, her apartment largely resembled a pre-renovated unit in the building, the lease history did not match the registration history, the building received J-51 tax benefits and it was not clear that the apartment was treated as rent stabilized by the landlord, who improperly argued that the apartment was exempt from rent stabilization? A: Supreme Court answered “No” and incorrectly rejected the tenant’s challenge to DHCR’s refusal to examine the rental history for more than four years prior to her complaint. 2 PRELIMINARY STATEMENT This brief supports the appeal of Petitioner-Appellant Kelley S. Boyd (“Petitioner” or “Tenant”) from the Decision and Judgment of the Supreme Court of the State of New York, County of New York (Barbara Jaffe, J.) dated May 11, 2012 and entered May 18, 2012 (R. 5-12)1, which denied and dismissed an Article 78 proceeding commenced pro se by Petitioner-Appellant Kelley S. Boyd to challenge Respondent DHCR’s July 19, 2011 Order and Opinion Denying Petition Administrative Review (“PAR”) (R. 27-32) brought by Petitioner to challenge DHCR’s October 4, 2010 Order Pursuant to Reconsideration which correctly found that the Petitioner’s apartment was rent stabilized, but rejected her claims of overcharge. This case not only screams for an investigation into the legitimacy of the base date legal rent due to fraud, but it also demonstrates a failure of DHCR to recognize and investigate owner fraud and abide by the precedent of this Court and the Court of Appeals in fraud cases and in cases where owners received J-51tax benefits for their properties and attempted to deregulate their units unlawfully. For these and the following reasons, Petitioner respectfully requests that this Court reverse and/or vacate the Decision and Judgment of the Supreme Court of the 1 Citations to “R” refer to the Record on Appeal. 3 State of New York, County of New York (Barbara Jaffe, J.) dated May 11, 2012 and entered May 18, 2012 (R. 5-12), and grant Petitioner’s Article 78 proceeding, reverse, vacate, revoke and/or annul DHCR’s July 19, 2011 Order and Opinion Denying Petition Administrative Review and DHCR’s October 4, 2010 Order Pursuant to Reconsideration and remand to, inter alia, ascertain the validity of the base date rent and any increases in legal rent for the subject premises in 2004, and award Petitioner such other and further relief that this Court deems just, equitable and proper. STATEMENT OF THE FACTS On or about March 1, 2007, Petitioner-Appellant Kelley S. Boyd (“Petitioner” or “Tenant”) commenced occupancy pursuant to a written lease for the apartment commonly known as (“subject premises”) for the rent of $2,000.00 per month. (R. 137). Although the lease did not unambiguously expressly state that her tenancy was rent stabilized, the lease was presented with a rent stabilized lease rider. (R. 147-54). However, Petitioner was presented with another ambiguous vacancy lease without a rent stabilization rider, not a rent stabilized renewal lease on a form approved by DHCR, when her lease was extended on March 20, 2009 for the term March 1, 2009 through February 28, 2010 at the monthly rent of $2,152.70. In or about the fall of 2008, Ms. Boyd obtained the rental history of her 4 apartment from DHCR after attending a community board meeting and learning about rent stabilization. (R. 176). Petitioner wrote her landlord requesting an explanation of rent increases that were well in excess of applicable Rent Guidelines Board increases. (R. 174, 177). She accepted the Landlord’s offer to freeze her rent at $2,060.00 for the 2009 lease term, and received a “renewal” lease in March, 2009. On or about April 7, 2009, Petitioner filed an overcharge claim with DHCR, claiming that the $2,060.00 charged by Respondent-Respondent 232/242 Realty Co. LLC a/k/a UpTown Realty, C-Uptown Realty, Robert Candee, Owner (“Respondent” or “Landlord”) was unlawful. (R. 169-73). On or about May 20, 2009, Owner Robert Candee submitted a response to DHCR, claiming, just over two months after this Court’s highly publicized decision and binding precedent in Roberts v. Tishman Speyer Properties, L.P., 62 A.D.3d 71, 874 N.Y.S.2d 97 (1st Dept. March 5, 2009), that the subject premises were exempt from rent stabilization. (R. 165-67). Mr. Candee explained that his counsel at Rappaport, Hertz, Cherson & Rosenthal, P.C. provided the analysis and concluded the unit was exempt. Id.¸at (R. 165). However, the Tenant pointed out in her response delivered to DHCR on March 1, 2010 that the building in which the subject premises is located was receiving J-51 tax benefits, and Petitioner presented DHCR with the website address to a J-51 benefits 5 history page of the New York City Department of Finance website demonstrating the receipt of J-51 tax benefits for the subject building. (R. 54). Ms. Boyd also pointed out in her response that the Landlord could not have raised the rent for the subject premises from the last reported legal rent of $571.00 on April 1, 2004 to $1,750.00 charged to a prior tenant on April 1, 2005, because there was no way the landlord spent nearly $40,000.00 renovating the subject premises. (R. 54-55).2 Indeed, Ms. Boyd had raised the fraudulent IAI increases in her very first letter accompanying her overcharge complaint on April 7, 2009. (R. 183-84). Mr. Boyd expressly stated that her apartment had “original fixtures, floors and doors, including doors and door knobs.” (R. 183). The kitchen was updated, but only with a few appliances of the “lowest caliber”. Id. Petitioner estimated the costs of the touch ups to the paint at $400-$600, after she received an estimate of “significantly less than $1,000” for painting the entire apartment in different colors. Id. Petitioner also recognized that “[t]here had been no refinishing of the window sills, the doors or door 2 The landlord never provided any information or evidence to substantiate any qualified individual apartment improvements (“IAIs”) made after a prior long term tenant vacated sometime in 2004, but the tenant, having learned about increases to the legal rent, estimated that the Landlord would have had to have spent nearly $40,000.00 to bring the rent from $571.00 on April 1, 2004 to $1,750.00 for a new tenant on October 1, 2004. Indeed, an earlier rent stabilization rider (R. 115) claimed a rent increase for “New Equipment, Service, Improvement for this Apartment” in the amount of $975.35, which would have required approvable IAIs totaling $39,014.00. 6 frames.” Id. Ms. Boyd also maintained that her kitchen was “populated with very inexpensive Home Depot cabinets, and counter space that totals no more than 48” broken up into sections that are 15”, 14” and 18”.” (R. 183). Moreover, the tenant reported that the kitchen sink “appears to have been recycled (or used) as the clips at the bottom are broken and the sink does not fit properly in the cut out.” Id. Petitioner also noted that the kitchen and bath faucets were low grade, and “cost about $30 each.” Id. She also reported that her bathroom “cabinet” also appeared to be discarded or recycled, because it was damaged on the bottom portion. Id., at (R. 183-84). Ms. Boyd also stated that her bath tub was original, but “painted with refinishing paint that is now peeling.” (R. 184). Ms. Boyd contrasted her unit with her neighbors, which appeared to have had a “quality update to their kitchen, including really nice faucets” and pointed out that other persons told her the Landlord renovated his own apartment in or about 2004. Ms. Boyd estimated the cost of renovations to be approximately $5,000.00. (R. 183)3. The tenant also inquired, in her initial April 7, 2009 letter, whether the building was receiving J-51 benefits, “and if so, what impact does that have on this claim, and 3 Ms. Boyd, of course, did not appear to know, nor would she be expected to know on April 7, 2009, that ordinary repairs and maintenance, such as painting and refinishing floors, do not qualify for any IAI increases – her estimate of the cost of the Landlord’s “renovations” following the vacatur of the long-term tenant in 2004 would likely have been even lower if she had expertise litigating IAI rent increases. 7 for the other tenants in the building?” (R. 184) The Landlord claimed, falsely, that the subject premises were exempt from rent stabilization due to vacancy deregulation. On March 12, 2010, DHCR issued an Order Denying Complaint of Rent Overcharge, finding that: The apartment/ building [sic] is no longer subject to the Rent Stabilization Code because the legal rent exceeded two thousand dollars at the time the complainant took occupancy. Therefore, it is found that there is no overcharge, and it is ordered that the relief requested is denied. (R. 56) On April 13, 2010, Petitioner filed a PAR. (R. 61-62). On April 15, 2010, DHCR issued an Order Reopening Proceeding to Reconsider Rent Administrator’s Order Issued Under Docket No. XD410053R due to the fact that the owner was receiving J-51 tax benefits on the subject building when the tenant took occupancy. (R. 103) On October 4, 2010, DHCR issued an Order Pursuant to Reconsideration revoking the March 12, 2010 order, and finding: The subject building is receiving J-51 benefits. Therefore, the rents are subject to rent regulation. This apartment remains subject to the Rent Stabilization Law and Code. (R. 92). The October 4, 2010 Order makes no mention of the Petitioner’s overcharge, but contained a notation, after the Rent Administrator’s signature, of “Attachment(s): Rent Calculation Chart” which did not indicate any overcharge. (R. 92). 8 Petitioner filed a PAR on November 22, 2010, with an explanation and telephone records (R.72) proving she called DHCR in time to file the PAR but was given inaccurate information that she could not file a PAR from the October 4, 2010 Order. (R. 51-55). DHCR accepted and processed Petitioner’s PAR. On July 19, 2011, DHCR issued an Order and Opinion Denying Petition for Administrative Review. (R. 27-32). Deputy Commissioner Woody Pascal rejected the Petitioner’s claims of fraud by the Landlord and refused to investigate the validity of the base date rent by, inter alia, requesting proof of IAI’s from the landlord for improvements presumably4 made one year before the four year base date. Instead, in the face of all undisputed evidence to the contrary, the Deputy Commissioner speculated: Therefore, the Commissioner finds no justification for setting aside the four-year rule and putting the owner to its proof as to the cost of IAIs; especially when it would not be difficult for anyone with any experience in this industry to believe that it could have taken $39,000 in IAIs to update the appearance and equipment in an apartment which had not changed hands for thirty-two years. Accordingly, the Commissioner finds that nothing in the decisions issued in the Thornton case or the Grimm case, or anything in this record, warrants a determination in this 4 Notably, the Landlord never claimed in this proceeding to have made $39,000 in improvements to the subject premises after the vacatur of the long term tenant in 2004. Instead of contesting Petitioner’s specific observations rejecting such alleged expenses made from the very first day she filed her overcharge complaint or her assessment that, at most, the Landlord spent $5,000.00 in repairs, maintenance and improvements, the Landlord merely argued that the four year statute of limitations insulated the Landlord from any inquiry into this issue. 9 case which is different from that which is contained in the appealed order. Petitioner filed an Article 78 proceeding. (R. 17-234). Respondent DHCR argued that it was not required to investigate whether the base date rent was reliable under Grimm v. DHCR, 15 N.Y.3d 358 (2010) or Thornton v. Baron, 5 N.Y.3d 175 (2005), and relied upon 72A Realty Assocs. v. Lucas, 32 Misc.3d 47, 929 N.Y.S.2d 349 (App. Term 1st Dept. 2011) to accept the base date rent without further inquiry.5 The Supreme Court denied and dismissed Petitioner’s Article 78 proceeding. Even though the owner did not provide a shred of proof to validate the increase in rent from $571.00 to $1,750.00 in 2004, the Supreme Court held, inter alia, Petitioner’s assertions regarding the cost of the repairs provide no basis for disturbing the decision, as the Commissioner evaluated the building owner’s proof in light of his experience and expertise in the field, and I may not substitute my judgment for his. (R. 10)6 Petitioner appeals, and respectfully requests that this Court reverse and/or vacate the Decision and Judgment of the Supreme Court of the State of New York, County of 5 This firm is counsel for the tenant in Lucas. On December 4, 2012, this Court modified Lucas to specifically reject the acceptance of a market rent charged on the base date as the “legal rent” for an apartment treated as exempt from rent stabilization while the building was receiving J-51 tax benefits, and remanded for, inter alia, the Court to ascertain the validity of some $30,000 in renovations claimed, but not proven, by the landlord. 72A Realty Assocs. v. Lucas, 101 A.D.3d 401, 955 N.Y.S.2d 19 (1st Dept. Dec. 4, 2012). 6 Emphatically, no proof was ever submitted by the Landlord of any IAIs for DHCR to evaluate. 10 New York (Barbara Jaffe, J.) dated May 11, 2012 and entered May 18, 2012 (R. 5-12), and grant Petitioner’s Article 78 proceeding, reverse, vacate, revoke and/or annul DHCR’s July 19, 2011 Order and Opinion Denying Petition Administrative Review and DHCR’s October 4, 2010 Order Pursuant to Reconsideration and remand to, inter alia, ascertain the validity of the base date rent and any increases in legal rent for the subject premises in 2004, and award Petitioner such other and further relief that this Court deems just, equitable and proper. ARGUMENT I. THE COURT ERRED BY FAILING TO REVERSE AND REMAND THIS CASE SO THAT THE VALIDITY OF THE BASE DATE RENT COULD BE ASCERTAINED. Supreme Court erred by failing to reverse DHCR’s determination and remand so that the validity of the base date rent in this case could be ascertained, because the evidence demonstrated fraudulent increases in the legal rent and an intent to evade the requirements of rent stabilization applicable to the subject premises. In Grimm v. DHCR, 69 A.D.3d 29, 886 N.Y.S.2d 11 (1st Dept. 2009), aff’d, 15 N.Y.3d 358, 912 N.Y.S.2d 491(2010) this Court held that “…if the rent in 2001 [on the base date] was established at an illegal rate, that lease as well as petitioner’s lease at the same rate is a nullity, and the default formula would be the appropriate mechanism for determining the base rent [emphasis added].” The Court of Appeals, in affirming 11 Grimm, expressly rejected DHCR’s argument that Thornton was limited to schemes involving illusory tenancies. The Court of Appeals squarely held: DHCR contends that our holding in Thornton should be constrained to the narrow set of circumstances described in that case and that we should limit its application to cases involving illusory tenancies. We disagree and conclude that, where the overcharge complaint alleges fraud, as here, DHCR has an obligation to ascertain whether the rent on the base date is a lawful rent [emphasis added]. Accordingly, here, as the Appellate Division concluded, DHCR acted arbitrarily and capriciously in failing to meet that obligation where there existed substantial indicia of fraud on the record. Id., at 366. Nevertheless, DHCR continues to argue for limitations of Thornton and Grimm while it ignores its obligation to ascertain the validity of the base date rent when, as here, an overcharge complaint not only alleges fraud. More importantly, the overcharge complaint at issue did not just mention the word “fraud”. Rather, the tenant provided her specific observations as to the condition of the apartment, her comparison of her apartment to one that received a “quality” renovation and one unit that she viewed prior to renovation. Petitioner concluded, based upon her observations that her apartment had “original fixtures, floors and doors, including doors and door knobs.” (R. 183). Moreover, her kitchen was updated, but only with a few appliances of the “lowest caliber” and her kitchen was “populated with very inexpensive Home Depot cabinets, and counter space that totals no more than 48” broken up into sections that are 15”, 14” and 18”,” and the sink appeared to be reused. 12 Id. Petitioner also recognized that “[t]here had been no refinishing of the window sills, the doors or door frames.” Id. Petitioner compared her faucets to a “quality” renovated unit, and found her bath and kitchen faucets were low grade, and “cost about $30 each.” Id. She also reported that her bathroom “cabinet” also appeared to be discarded or recycled, because it was damaged on the bottom portion, and her bath tub was original, but “painted with refinishing paint that is now peeling.” Id., at (R. 183-84). Ms. Boyd estimated the cost of all renovations, including maintenance and repairs such as painting – which are not entitled to IAI increases in the legal rent – to be approximately $5,000.00. (R. 183). Moreover, here, Petitioner was given a lease which was equivocal as to the regulatory status of her apartment and did not inform her at all that the building was receiving J-51 tax benefits. While Petitioner’s initial lease may have been accompanied by a rent stabilization rider, the Landlord did not offer Petitioner a rent stabilized renewal lease on a form approved by DHCR as required by Rent Stabilization Code §2523.5(a). Instead, the Landlord improperly offered Petitioner a one year vacancy lease without the prescribed forms or any of the mandated notices of the tenant’s rights under rent stabilization contained therein. (R. 186). There was even mention made about a period of time in which Petitioner was a “month-to-month” tenant, a tenancy not contemplated at all by rent stabilization. 13 Here, as soon as the tenant made a complaint of rent overcharge, the Landlord, at claimed, at first successfully, that the subject premises were not rent stabilized, but instead, exempt based upon vacancy deregulation. Here, the Landlord, who still purportedly possessed a 1972 lease agreement for a long term rent stabilized tenant of the subject premises, did not even attempt to dispute Petitioner’s denial of approvable IAIs of some $39,000.00 necessary for the massive increase in rent from $571.00 to $1,750.00 in 2004, or produce any evidence of such expenditures. Here, the Landlord did not dispute Petitioner’s physical observations that except for very minimal work performed in the kitchen, and maintenance and repairs in the bathroom, the Landlord made no improvements to the subject premises that would come close to an expenditure of $39,000.00. Here, the Landlord, despite having made no such improvements, fraudulently claimed on one rent stabilization rider in 2004, purportedly to a tenant who allegedly stayed for three (3) months, that “New Equipment, Service, Improvement for this Apartment” permitted the Landlord to increase the legal rent by $975.35. (R. 115). Thus, the tenant did not, as DHCR suggested to Supreme Court, merely allege the word “fraud” without specifics. To the contrary, the Petitioner here pointed out that the Landlord fraudulently increased the rent by claiming IAIs that could not have cost $39,000.00 based upon her own observations, which revealed original fixtures and 14 minimal appliance and cabinet changes in the kitchen and bathroom. The facts also show that the Owner misreported the prior legal rent to prior tenants Marilyn Ramos and Aleksey Teplitskiy. The rent stabilized lease rider for Ramos and Teplitskiy falsely stated that the registered rent on April 1, 2004 was $1,750.00, when the rental history shows that the legal rent was $571.00. See (R. 125)(claiming legal rent on April 1, 2004 was $1,750.00); compare, DHCR registration history (R. 81)(showing legal rent $571.00 on April 1, 2004). DHCR’s attempt to minimize this misrepresentation by deeming it harmless error because the Landlord was using an old form of the Rent Stabilization Rider and the new form only required landlords to state that last legal rent, is beside the point, to wit, that the Landlord falsely reported the legal rent on April 1, 2004 to prior tenants. 7 Misrepresenting the legal rent on the Ramos/Teplitskiy rider in the space that required and reported that information permitted the Landlord to escape scrutiny of its claim of an increase in the legal rent of $975.35 due to alleged IAIs by tenants who were to stay in the apartment on a longer basis than, purportedly, three months. The registrations filed with DHCR for 2007 (R. 156) also misreports the legal rent as $2,000.00 when the 7 Conveniently, the Landlord claimed that a tenant occupied the subject premises for three months, from July 1, 2004 through September 30, 2004, and that tenant, Leeta Harding, was provided with a Rent Stabilized Lease Rider that claimed $975.35 in IAI rent increases. (R. 115). This cannot be verified, because Ms. Harding cannot be found in the DHCR registration history. 15 2007 rider issued to Petitioner claims a legal rent of $2,119.17. The Tenant’s observations and information provided in her verified complaint with DHCR, the inaccuracies in the registration history for the subject premises and the un-verifiable but convenient three-month tenant clearly put DHCR on notice to investigate the validity of the base date rent. Clearly, the tenant’s undisputed and specific rejection of the purported IAI rent increases taken by the instant Landlord alone were sufficient to warrant further review into the reliability of the base date rent – the certainly did not invite speculation by the Deputy Commissioner on PAR that the Landlord spent at least $39,000 in renovations that was not only completely unsupported by the record and not even claimed by the Landlord in this proceeding, but ruled out by the tenant’s observations. Grimm, supra, clearly required that DHCR assess the validity of the base date rent. Clearly, the Tenant here has made a prima facie claim of fraud sufficient to warrant further inquiry. Instead of investigating, DHCR turned a blind eye to the Landlord’s fraudulent claims of IAI increases. Indeed, DHCR counsel’s Affirmation opposing Petitioner’s Article 78 (R. 235-48) does not contain a single word mentioning this fraud, or that the tenant specifically disputed that anything near $39,000 was spent in renovating the apartment that would constitute approvable IAI increases in the legal rent. Counsel’s affirmation is proof positive that DHCR continues to turn a blind eye 16 to Landlord fraud, in clear violation of Grimm. DHCR’s heavy reliance upon the case of 72A Realty Assocs. v. Lucas, 32 Misc.3d 47, 929 N.Y.S.2d 349 (App. Term 1st Dept. 2011) was erroneous. (R. 269, 271-72). Lucas was modified by this Court to reject the base date market rent and remanded for consideration of, inter alia, the legitimacy of the landlord’s claims of $30,000 in renovations well outside the four year statute of limitations for overcharge, the very same inquiry sought by the instant Petitioner. Lucas stands precisely against DHCR’s attempt to use the four year statute of limitations to turn a blind eye to fraudulent rent increases. Here, the Landlord also claimed that the subject premises was exempt from rent stabilization due to vacancy deregulation while the apartment was in receipt of J-51 benefits. In fact, the Landlord actually obtained DHCR’s initial denial and dismissal of Petitioner’s overcharge claim based upon its forceful assertion that the subject premises were exempt from rent stabilization due to luxury deregulation, while concealing from everyone the fact that the subject building was receiving J-51 tax benefits, more than two months after this Court’s binding and highly publicized determination Roberts v. Tishman Speyer Properties, L.P., 62 A.D.3d 71, 874 N.Y.S.2d 97 (1st Dept. March 5, 2009). Here, the Landlord also claims some $39,014 in approvable IAI increases to the legal rent on a 2004 rent stabilization rider, without a shred of proof to justify the massive increase and in the face of undisputed 17 evidence that belied the claim. Clearly, this case is analogous to Lucas and this Court should not hesitate to reverse and remand this case with directions for DHCR to investigate, inter alia, proof of the alleged IAI increases. It bears emphasis that Landlords, and DHCR, argue that because the Thornton case involved an illusory prime tenancy and a fraudulent agreement not to use the apartment as a primary residence, the formula should only be applied in such limited circumstances. That argument, however, has been squarely rejected by the relevant case law, binding and otherwise, that has been handed down since the Thornton decision, and expressly by Court of Appeals itself in Grimm. The illusory prime tenancy and non-primary residence agreements that existed in the Thornton case were, quite simply, completely incidental and irrelevant to the Court of Appeals’ holding that the DHCR default formula is the proper method to set the base date rent in cases with no reliable base date rent history due to, inter alia, fraudulent conduct by the landlord. In such a case, “the rent registration statement in effect on the base date ‘listing this illegal rent was also a nullity’”. Grimm, supra, at 366. The Court of Appeals recognized: Rather than using the registration statement to ascertain the rent on the base date, we instructed DHCR to use the so-called default formula to calculate the rent on the base date, as it does when no reliable records are available (see, id., see also Levinson v. 390 W. End Assoc., L.L.C., 22 18 A.D.3d 397, 400-401, 802 N.Y.S.2d 659 (1st Dept. 2005)) [emphasis added]. Id. The use of DHCR’s default formula was noted by the Court in Ruradan Corp. v. Natiello, 21 Misc.3d 1129A, fn 1, 2008 NY Slip Op 52279U (Civ.Ct. N.Y. Co. 2008). There, the Court recognized: Petitioner argues that Thornton is only applicable to situations where the landlord admits to wrongdoing. Not only is this argument completely in contradiction of existing and prevailing case law, but it would create a perverse rule that allows for proper application of rent regulations only when a landlord chooses to recant. Natiello provided perfect clarification of the fundamental holding of Thornton and the line of cases that have followed: Thornton simply dictates how to set the rent when it is found that the wrongful deregulation occurred over four years prior to commencement of the proceeding. [emphasis added]. This Court’s determinations in Grimm and Lucas put to rest any attempt by landlords to insulate fraudulent rent increases with the four year statute of limitations for overcharge, particularly where the Landlord claims deregulation of the subject premises. See also, Bogatin v. Windermere Owners LLC, 98 A.D.3d 896, 950 N.Y.S.2d 707 (1st Dept. 2012)(finding that court properly looked beyond four years where landlord falsely claimed to have undertaken substantial improvements – tenant’s allegations supported by affidavit and contractor’s estimate); Dignam v. 305 Riverside 19 Corp., 2012 WL 1410085 (Sup.Ct. NY Co. 2012)(Ling-Cohan, J.S.C.)(documents evidencing significant unexplained rent increases sufficient to warrant a further inquiry as to whether landlord was engaged in a fraudulent deregulation scheme to remove an apartment from the protections of rent stabilization.) Here, the Landlord had set up an attempted deregulation by fraudulently raising the rent with false claims of IAI increases, so it could, and did, claim deregulation of the subject premises at will. In Pehrson v. DHCR, 34 Misc.3d 1220(A), 2011 WL 7163038, 2011 N.Y. Slip Op. 52487(U) (Sup.Ct. NY Co. Billings, J.),the Court recognized: Here the lease provides that the rent upon vacancy, as of the commencement of petitioners' tenancy, is $1,947.47 per month. While this rent is below the threshold for removing the apartment from rent regulation, it is so close to that level that the next vacancy inevitably will allow an increase triggering deregulation. N.Y.C. Admin. Code § 26-511(c)(5a). This inevitability suggests a scheme to achieve deregulation through the next unknowing tenant, by fixing the current rent artificially close to $2,000.00 per month, but just below that level so as to keep the current tenants content that their rent still is stabilized and not prompt them to file a complaint that might expose the scheme. Thornton v. Baron, 5 NY3d at 181. Id., at *3. In this case, the unexplained rent jump to $1,750.00 also ensures that the next vacancy increased the rent to the threshold. Moreover, here the Landlord misrepresented the April 1, 2004 rent on the Ramos/Teplitskiy rent stabilization rider in an apparent attempt to escape scrutiny and “keep the tenants content that their rent is 20 still stabilized and not prompt them to file a complaint that might expose the scheme. Pehrson, supra, at *3. Respondent DHCR’s attempt to either ignore or distinguish the indisputably fraudulent IAI rent increases in this case leaves one to wonder just how much fraud DHCR need to have staring it in the face before it investigates the validity of the base date rent. However, accessing the weight or degree of the Landlord’s fraud and choosing between those demonstrated frauds that DHCR will investigate versus those demonstrated frauds that the DHCR will not investigate places before DHCR and the Courts a false choice, because the law cannot reward or condone any landlord’s fraudulent attempts to evade compliance with the Rent Stabilization Law and Code. The Court of Appeals made clear in Thornton v. Baron, 5 N.Y.3d 175 (2005), that fraudulent conduct by landlord was not to be immunized by the four year statute of limitations for rent overcharge. In rejecting the dissent, the Court of Appeals reasoned: The dissent would ignore defendants' fraudulent conduct and fix the rent at an amount likely soon to result in the apartment's permanent removal from rent stabilization, thereby rewarding the owner's wrongdoing. Under the dissent's rule, a landlord whose fraud remains undetected for four years--however willful or egregious the violation--would, simply by virtue of having filed a registration statement, transform an illegal rent into a lawful assessment that would form the basis for all future rent increases. Indeed, an unscrupulous landlord in collusion with a tenant could register a wholly fictitious, exorbitant rent and, as long as the fraud is not discovered for four years, render that rent unchallengeable. That surely was not the intention of the Legislature when it enacted the RRRA. Its purpose was to alleviate the burden on honest landlords to retain rent 21 records indefinitely (see Gilman, 99 NY2d at 149), not to immunize dishonest ones from compliance with the law. Id., at 181. Thus, no law condones immunizing or rewarding fraudulent conduct by Landlord in setting illegal rents, particularly where, as here, the fraudulent rent increases place the apartment in range of deregulation. DHCR not only ignored the fraudulent IAI increases demonstrated by the instant Tenant, but DHCR actually made a contrary finding based upon its speculative belief that “it could have taken $39,000 in IAIs to update the appearance8and equipment in an apartment which had not changed hands for thirty-two years, [emphasis added]” in the absence of any evidence that such an expenditures were made and, much less, that such expenditures constituted approval IAI rent increases, and in the face of the only evidence in this case which belied the claim. Determinations made by DHCR are required to be supported by substantial evidence. In the absence of substantial evidence, and worse, in the face of demonstrated fraud, DHCR’s and Supreme Court’s determinations in this case are irrational, arbitrary and capricious and constitute reversible error. CONCLUSION For all of the foregoing reasons, Plaintiff respectfully request that this Court 8 The Deputy Commissioner’s reference to updated “appearance” of the apartment, of course, ignores the fact that cosmetic changes, repairs and maintenance, such as 22 reverse and/or vacate the Decision and Judgment of the Supreme Court of the State of New York, County of New York (Barbara Jaffe, J.) dated May 11, 2012 and entered May 18, 2012 (R. 5-12), and grant Petitioner’s Article 78 proceeding, reverse, vacate, revoke and/or annul DHCR’s July 19, 2011 Order and Opinion Denying Petition Administrative Review and DHCR’s October 4, 2010 Order Pursuant to Reconsideration and remand to, inter alia, ascertain the validity of the base date rent and any increases in legal rent for the subject premises in 2004, and award Petitioner such other and further relief that this Court deems just, equitable and proper. Dated: January 28, 2013 Respectfully submitted, New York, New York SOKOLSKI & ZEKARIA, P.C. Attorneys for Petitioner-Appellant ___________________________ BY: ROBERT E. SOKOLSKI , ESQ. 305 Broadway - Suite 1004 New York, New York 10007 (212) 571-4080 painting and refinishing floors, do not qualify for IAIs at all. 23 Printing Specifications Statement I, ROBERT E. SOKOLSKI, ESQ., member of the firm SOKOLSKI & ZEKARIA, P.C., attorneys for the Petitioner-Appellant do hereby certify, as follows: 1. the within brief was generated on a computer; 2. the margins are (1) inch on all sides; 3. the type face is Times New Roman, 14 point; 4. the line spacing is double space; 5. the word count (including cover, contents and authorities) is 5,342 words. Dated: January 28, 2013 _______________________ New York, New York ROBERT E. SOKOLSKI, ESQ. PRE-ARGUMENT STATEMENT DATED JUN 25, 2012 [1-2] 1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK --------------------------------------X In The Matter of the Application of Kelley S Boyd petitioner, -against- NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Counsels Office, Room 707, 25 Beaver Street, New York, New York, 10004 -and- INDEX NO. 11 110437 CIVIL APPEAL PREARGUMENT STATEMENT 232/242 Realty Co. LLC aka Uptown Realty, C-Uptown Realty Robert candee, owner Respondents --------------------------------------X APPEAL FROM: KELLEY BOYD COUNTY: NEW YORK JUDGE: HON. BARBARA JAFFEE INDEX NO. 11 110437 DATE NOTICE OF APPEAL FILED: June 25, 2012 DATE OF ORDER: May 5, 2012 DATE ORDER ENTERED: May 18, 2012 ProSe PETITIONER: Kelley S Boyd FOR RESPONDENTS: David Paul, Esg Rappaport, Hertz, Cherson & Rosenthal, P.C. 118-35 Queens Blvd, 9th Fl. Forest Hills, NY 11375 ph. 718-261-7700 X 108 THIS APPEAL is taken from Supreme Court, NY County. There is no related action or proceeding now pending in any court of this or any other jurisdiction except in Civil Housing Court of New York City - actions 61632/10 and 91958/10. The nature and object of the cause of the special proceeding was to overturn and vacate the DHCR ruling that denied my rent overcharge claim. Relief in the refund of illegally collected rent and the application of the default formula to correct 2 illegal use and occupancy rent, and such other relief, as the court deemed just and proper, was requested. In its denial of this motion the court was arbitrary and capricious in its reliance on evidence not of fact, and not in the record. Nowhere has the landlord, in the three + years of these proceedings, been required to present any proof of his assertion of any renovation. Further, the courts have relied on this information about an event that happened more than fours years go, to rule against me. It seems arbitrary and capricious that the landlord can submit a STATEMENT that something was done. more than fours years ago and that would be relied on to make rulings, yet, neither the OHCR nor I have been privy to any evidence in support of his claims to prove or disprove their voracity. Specifically, in I. Article 78, the first paragraph relies on case law that refers to "regard for the facts" and "supported by the record". Neither the OHCR nor this court has verified any facts or record. Further the third paragraph describes this court having relied on affirmations of OHCR counsel, Jack Kuttner, not in the record prior to the Art. 78 filing, therefore must be disregarded. Additionally, in paragraph four of I. Article 78, the court specifically describes that the "Commissioner evaluated the building owner's proof" and "made his decision on the basis of the record". Neither of these statements are valid, therefore cannot be reliable, nor can any conclusion based on them be valid or reliable, thus are simply and blatantly wrong. To my knowledge there is no additional appeal in this action pending. June 25, 2012 ~~~~ Kelley S Boyd