Julie Conason, et al., Respondents,v.Megan Holding, LLC, et al., Appellants.

Brief

N.Y.January 13, 2015

To be Argued by: UMAR A. SHEIKH (Time Requested: 30 Minutes) APL 2013-00352 New York County Clerk’s Index No. 106560/11 Court of Appeals of the State of New York JULIE CONASON and GEOFFREY BRYANT, Plaintiffs-Respondents, – against – MEGAN HOLDING, LLC and EMMANUEL KU, Defendants-Appellants. BRIEF FOR DEFENDANTS-APPELLANTS MARINO PARTNERS LLP Attorneys for Defendants-Appellants 15 Fisher Lane, Suite 200 White Plains, New York 10603 Tel.: (914) 368-4525 Fax: (914) 368-4527 Dated: March 11, 2014 i TABLE OF CONTENTS Page TABLE OF AUTHORITIES ..................................................................................... v QUESTIONS PRESENTED ...................................................................................... 1 PRELIMINARY STATEMENT ............................................................................... 6 FACTS AND PROCEDURAL HISTORY ............................................................. 14 A. The Non-Payment Proceeding and the Respondents’ First Rent Overcharge Counterclaim in Civil/Housing Court ..................... 17 B. The Civil Court Trial on Respondents’ Counterclaims and the Decision/Order Dismissing Respondents’ Rent Overcharge Counterclaim ....................................................................................... 17 C. The Summary Judgment Motions on the Rent Overcharge and Piercing the Corporate Veil Claims in the Supreme Court Action .................................................................................................. 21 D. The Appellate Division’s Order Unanimously Affirming the Motion Court’s Grant of Summary Judgment Awarding Plaintiffs Affirmative Relief on a Stale Rent Overcharge and Piercing the Corporate Veil Claims and Denial of Defendants’ Motion for Summary Judgment ...................................... 26 STANDARD OF REVIEW ..................................................................................... 29 ARGUMENT ........................................................................................................... 31 I. NEW YORK C.P.L.R. § 213-a’s CLEAR AND UNAMBIGUOUS FOUR (4) YEAR STATUTE OF LIMITATIONS PRECLUDES RESPONDENTS’ ACTION FOR RESIDENTIAL RENT OVERCHARGE BECAUSE IT IS TIME-BARRED ............................................................................. 32 A. Principles of Statutory Construction Guide this Court’s Analysis of the Relevant Statute that is a Complete Bar to the Respondents’ Claims for Rent Overcharge .................... 33 ii B. The Express Language and Public Policy of C.P.L.R. § 213-a Statute Is Unambiguously Clear on Its Face: Residential Rent Overcharge Actions Must be Brought Within Four Years of the First Overcharge Alleged ................ 35 C. The Express Language and Public Policy of N.Y. Code § 26-516(a)(2) Precludes a Tenant from Recovering Treble Damages on a Willful Rent Overcharge Complaint Based On an Overcharge More than Two (2) Years from When the Complaint is Interposed ................... 38 D. Neither Grimm, Cintron, Nor Thornton create an Exception to the Four Year Statute of Limitations Period ........................................................................................ 40 i. There is No Fraud-Exception to the Four-Year Statute of Limitations in Grimm ..................................... 41 ii. There is No Fraud-Exception to the Four-Year Statute of Limitations in Cintron .................................... 43 iii. Finding of Fraud Does Not Toll or Except the Mandatory Limitations Period in Thornton .................... 45 E. The Legislative History Of The RRRA’s Amendments to the C.P.L.R. and New York City Administrative Code Amplifies the Unambiguous, Plain Language of C.P.L.R. § 213-a, Precluding Stale Rent Overcharge Claims Brought More Than Four Years From the First Overcharge ................................................................................ 53 i. The Highly Charged Political Climate Leading Up to the RRRA’s Enactment on June 19, 1997, Demonstrates that Reforms to Rent Laws Was a Compromise that All New Yorkers Settled Upon .......... 54 ii. The Legislature Intended to Codify a Four Year Statute of Limitations for Rent Overcharge Actions Not Susceptible to Judicial or Administrative Override ................................................. 56 F. A Void Rent Stabilization Lease for Unlawful Rent Does Not An Exception to the Four Year Statute of Limitations, Make ..................................................................... 61 iii G. Settled Canons of Judicial Interpretation, Stare Decisis and Continuity of Law Invariably Point to the Conclusion that this Rent Overcharge Claim is Barred by the Four-Year Statute of Limitations ................................... 62 H. The Underlying Policy Behind All Statutes Of Limitations Forecloses The Appellate Division’s Exhumation By Judge Made Law Of Respondents’ Expired Rent Overcharge Complaint ........................................ 65 II. THE APPELLATE DIVISION’S JUDGE MADE LAW RETROACTIVELY APPLIED TO APPELLANTS MEGAN HOLDING LLC AND EMMANUEL KU EXACTS AN EX POST FACTO LAW PROSCRIBED BY ARTICLE I, §10 OF THE U.S. CONSTITUTION......................................................... 68 A. The Appellate Division’s Judge Made Law Grafted onto the C.P.L.R. § 213-a Statute Effect an Ex Post Facto Law Because It alters the Rules of Evidence ................. 70 B. The Appellate Division’s New Rule of Law Is An Ex Post Facto Law Because it is Retroactive With Due Process Implications, and Allows for the Retroactive Imposition of Treble Damages and Attorneys’ Fees on an Expired Rent Overcharge Claim .......................................... 72 III. THE APPELLATE DIVISION ERRED IN AFFIRMING THAT STATUTES OF LIMITATIONS ARE CALCULATED BACKWARDS ........................................................ 74 IV. THE APPELLATE DIVISION ERRED IN AFFIRMING THE MOTION COURT MISAPPLIED COLLATERAL ESTOPPEL TO THE CIVIL COURT’S UNDERLYING FINDINGS OF FRAUD ON THE DISMISSED RENT OVERCHARGE COUNTERCLAIM ................................................. 76 A. Not Only Was The Rent Overcharge Issue Never Fully Litigated or Decided, It Was Dismissed By the Civil Court .......................................................................................... 77 B. The Civil Court’s Findings of Fraudulently Based Rent Were Not Necessary to Support the Final Judgment on Breach of the Warranty of Habitability and Rent Abatement ................................................................................. 78 iv C. The Entirety of the Civil Court’s Factual Findings and Conclusions of Law on The Rent Overcharge Was Dicta, Not Entitled to Preclusive Effect in the Supreme Court Action .............................................................................. 79 V. THE APPELLATE DIVISION ERRED IN AFFIRMING RESPONDENTS’ FAILURE TO CARRY THEIR HEAVY BURDEN OF A PARTICULARIZED SHOWING THAT, (1) EMMANUEL KU IS MEGAN’S ALTER EGO, WHO, (2) USED THE LLC TO COMMIT A WRONG AGAINST RESPONDENTS, WARRANTING THE MOTION COURT’S PIERCING THE CORPORATE VEIL ............................ 80 A. Proof that Emmanuel Ku is a 99% of Megan Is Insufficient By Itself to Pierce the Corporate Veil ................... 81 i. Emmanuel Ku’s Majority Stake in Megan Does Not By Itself Constitute Dominion Over the Entity ............................................................................... 82 B. Respondents’ Proof Does Not Show Emmanuel Ku Dominated Megan During the Period of Claimed Rent Overcharges, the Transactions Attacked .................................. 84 C. Respondents’ Stale Rent Overcharge Claim Cannot Buttress A Meritless Piercing the Corporate Veil Claim .......... 85 VI. THE APPELLATE DIVISION ERRED IN AFFIRMING AND FINDING THAT ANY OF EMMANUEL KU’S RELATED CORPORATIONS HAVE ANY CONNECTION TO RESPONDENTS OR THE ALLEGED TRANSACTIONS FOR RENT OVERCHARGE, SUFFICIENT TO PIERCE MEGAN’S CORPORATE VEIL ........... 86 CONCLUSION ........................................................................................................ 90 v TABLE OF AUTHORITIES Page(s) Cases: Alamo v. McDaniel, 841 N.Y.S.2d 477, 44 A.D.3d 149 (1st Dep’t 2007) ..................................... 77 Alvarez v. Prospect Hospital, 68 N.Y.2d 320 (1986) ................................................................................... 29 Am. Bank-Note Co. v. New York El. R. Co., 129 N.Y. 252 (1891) ...................................................................................... 66 Anderson Street Realty Corp. v. RHMB New Rochelle Leasing Corp., 663 N.Y.S.2d 279, 243 A.D.2d 595 (2d Dep’t 1997) ................................... 85 Assn. of Contr. Plumbers of City of New York v. Contr. Plumbers Ass'n of Brooklyn & Queens, 302 N.Y. 495, 99 N.E.2d 542 (1951) ............................................................ 34 Baker v. Oakwood, 123 N.Y. 16 (1890) .................................................................................. 65-66 Belotti v. Bickhardt, 228 N.Y. 296 (1920) ...................................................................................... 66 Blanco v. Am. Tel. & Tel. Co., 90 N.Y.2d 757 (1997) .................................................................................... 65 Brinckerhoff v. New York State Div. of Housing and Community Renewal, 713 N.Y.S.2d 56, 275 A.D.2d 622 (1st Dep’t 2000) ..................................... 64 Calder v. Bull, 3 U.S. 386, 1 L. Ed. 648 (1798)..................................................................... 70 Capital Newspapers, Div. of Hearst Corp. v. Whalen, 69 N.Y.2d 246, 505 N.E.2d 932 (1987) ........................................................ 34 Church of St. Paul and St. Andrew v. Barwick, 67 N.Y.2d 510, 505 N.Y.S.2d (1986) ............................................................ 51 Ciafone v. Kenyatta, 27 A.D.3d 143 (2d Dep’t 2005) ............................................................... 69-70 vi Cohen v. Lord, Day & Lord, 75 N.Y.2d 95 (1989) ...................................................................................... 33 Comi v. Breslin & Breslin, 683 N.Y.S.2d 345, 257 A.D.2d 754 (3d Dep’t 1999) ............................. 77-78 Commonwealth of N. Mariana Is. v. Can. Imperial Bank of Commerce, 21 N.Y.3d 55, 990 N.E.2d 114 (2013) .......................................................... 34 Di Leo v. Pecksto Holding Corp., 304 N.Y. 505 (1952) ...................................................................................... 66 Di Sabato v. Soffes, 193 N.Y.S.2d 184, 9 A.D.2d 297 (1st Dep’t 1959) ...................................... 29 Direnna v. Christensen, 57 A.D.3d 408 (1st Dep’t 2008) ........................................................ 17, 63, 64 Drucker v. Mauro, 30 A.D.3d 37 (2006), lv. Dismissed, 7 N.Y.3d 844 (2006) .......................... 61 Enrico & Sons Contracting, Inc. v. Bridgemarket Assoc., 675 N.Y.S.2d 351, 252 A.D.2d 429 (1st Dep’t 1998) ................................... 75 Etex Apparel, Inc. v. Tractor Intern. Corp., 922 N.Y.S.2d 315, 83 A.D.3d 587 (1st Dep’t 2011) ............................... 87-88 F. A. Straus & Co. v. Can. Pac. R. Co., 254 N.Y. 407, 173 N.E. 564 (1930) .............................................................. 37 First Bank of America v. Motor Car Funding, Inc., 690 N.Y.S.2d 17, 257 A.D.2d 287 (1st Dep’t 1999) ..................................... 80 First Hudson Capital, LLC v. Seaborn, 54 A.D.3d 251 (1st Dep’t 2008) .................................................................... 52 Fumarelli v. Marsam Dev., Inc., 92 N.Y.2d 298 (1998) .................................................................................... 11 Gager v. White, 53 N.Y.2d 475 (1981) .................................................................................... 63 Gelston v. New York State Div. of Housing and Community…, 177 Misc. 2d 431 (Sup. Ct., Queens County 1998) ....................................... 58 Gramatan Home Investors Corp. v. Lopez, 46 N.Y.2d 481, 414 N.Y.S.2d 308 (1979) ............................................... 76, 77 vii Grammas v. Lockwood Associates, LLC, 944 N.Y.S.2d 623, 944 N.Y.S.2d 1073 (2d Dep’t 2012) .............................. 83 Grimm v. State Div. of Hous. and Community Renewal Off. of Rent Admin., 15 N.Y.3d 358, 938 N.E.2d 924 (2010) .................................................passim Hilton v. S. Carolina Pub. Railways Comm'n, 502 U.S. 197, 112 S. Ct. 560, 116 L. Ed. 2d 560 (1991) .............................. 62 In re Willard Parker Hosp., 217 N.Y. 1 (1916) .......................................................................................... 66 Insurance Company of Evanston v. Mid-Hudson Co-Operative Insurance Co., 706 N.Y.S.2d 457, 271 A.D.2d 651 (2d Dep’t 2000) .................................. 29 Island Seafood Co., Inc. v. Golub Corp., 759 N.Y.S.2d 768, 303 A.D.2d 892 (3d Dep’t 2003) ................. 82, 86, 87, 88 Jackson v. Board of Educ. of City of New York, 812 N.Y.S.2d 91, 30 A.D.3d 57 (1st Dep’t 2006) ......................................... 80 John John, LLC v. Exit 63 Development, LLC, 826 N.Y.S.2d 657, 35 A.D.3d 540 (2d Dep’t 2006) ..................................... 88 Kaufman v. Eli Lilly and Co., 65 N.Y.2d 449, 492 N.Y.S.2d 584 (1985) ..................................................... 76 Kim v. City of New York, 90 N.Y.2d 1 (1997) ........................................................................................ 13 La Guardia v. Cavanaugh, 53 N.Y.2d 67 (1981) ...................................................................................... 34 Landgraf v. USI Film Products, 511 U.S. 244, 114 S. Ct. 1483, 128 L. Ed. 2d 229 (1994) ...................... 70, 73 Majewski v. Broadalbin-Perth Cent. School Dist., 91 N.Y.2d 577 (1998) .................................................................................... 33 Matter of Cintron v. Calogero, 15 N.Y.3d 347, 912 N.Y.S.2d 498 (2010) ..............................................passim Matter of Glenn (Redford), 650 N.Y.S.2d 128, 233 A.D.2d 248 (1st Dep’t 1996) ....................... 82, 84, 89 viii Megan Holding LLC v. Conason, et al., 2012 N.Y. Slip Op. 52117(U) (Sup. Ct., App. Term, Nov. 15, 2012) .......... 25 Morris v. New York State Dept. of Taxation and Finance, 82 N.Y.2d 135, 603 N.Y.S.2d 807 (1993) ............................................... 82, 85 Mozes v. Shanaman, 804 N.Y.S.2d 3 (1st Dep’t 2005) ................................................................... 63 Myers v. Frankel, 740 N.Y.S.2d 366, 292 A.D.2d 575 (2d Dep’t 2002) ....................... 48, 62, 64 Petersen v. Lysaght, Lysaght & Kramer, P.C., 672 N.Y.S.2d 398, 250 A.D.2d 581 (2d Dep’t 1998) ................................... 76 Pollicino v. Roemer and Featherstonhaugh P.C., 716 N.Y.S.2d 416, 277 A.D.2d 666 (3d Dep’t 2000) ............................. 78-79 Rennie v. Barbarosa Transport, Ltd., 543 N.Y.S.2d 429, 151 A.D.2d 379 (1st Dep’t 1989) .................................. 29 Retropolis, Inc. v. 14th Street Development LLC, 797 N.Y.S.2d 1, 17 A.D.3d 209 (1st Dep’t 2005) ........................................ 83 Rogers v. Tennessee, 532 U.S. 451, 121 S. Ct. 1693, 149 L. Ed. 2d 697 (2001) ............................ 69 Ross v. Louise Wise Services, Inc., 8 N.Y.3d 478, 836 N.Y.S. 509 (2007) ..................................................... 10, 73 Ryan v. New York Tel. Co., 62 N.Y.2d 494 ................................................................................................ 77 Sahn v. AFCO Industries, 597 N.Y.S.2d 294, 192 A.D.2d 480 (1st Dep’t 1993) ................................... 79 Sheridan Broadcasting Corp. v. Small, 798 N.Y.S.2d 45, 19 A.D.3d 331 (1st Dep’t 2005) ....................................... 81 Stogner v. California, 539 U.S. 607, 123 S. Ct. 2446, 156 L. Ed. 2d 544 (2003) ............................ 72 Thornton v. Baron, 5 N.Y.2d 175, 800 N.Y.S.2d 118 (2005) ................................................passim TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335 (1998) .................................................................................... 84 ix United States v. Farris, 448 F.3d 965 (7th Cir. 2006) ......................................................................... 69 Weaver v. Graham, 450 U.S. 24, 101 S. Ct. 960, 67 L. Ed. 2d 17 (1981) .................................... 69 Zafra v. Pilkes, 245 A.D.2d 218 (1st Dep’t 1997) .................................................................. 59 Zafra v. Pilkes, 661 N.Y.S.2d 515 (App. Term 1st Dep’t 1996) decided April 10, 1996 ............................................................................................................... 59 Zumpano v. Quinn, 6 N.Y.3d 666, 816 N.Y.S.2d 703 (2006) ....................................................... 67 Zumpano v. Quinn, 6 N.Y.3d 666, 849 N.E.2d 926 (2006) .......................................................... 11 Statutes & Other Authorities: U.S. Constitution, Article I, § 10 ............................................................................. 68 N.Y. Const. art III, § 1 ............................................................................................. 52 C.P.L.R. § 213-a ................................................................................................passim C.P.L.R. § 203 .......................................................................................................... 13 C.P.L.R. § 203(a) ..................................................................................................... 74 C.P.L.R. § 203(d) ............................................................................................... 19, 75 C.P.L.R. § 3212(b) ................................................................................................... 29 C.P.L.R. § 5713 ........................................................................................................ 28 9 NYCRR § 2526(d) ................................................................................................ 30 9 NYCRR § 2526.1 ...................................................................................... 21, 30, 32 9 NYCRR § 2526.1(a)(1) ......................................................................................... 30 Real Property Law § 234 ................................................................................... 21, 30 Rent Stabilization Law § 26-516 ......................................................................passim Rent Stabilization Law § 26-516(a) ..................................................................passim x Rent Stabilization Law § 26-516(a)(i) .............................................................. 38, 60 Rent Stabilization Law § 26-516(a)(2) ................................................. 36, 41, 44, 49 Rent Stabilization Law § 26-516(a)(2)(i) ............................................................... 73 Rent Stabilization Law § 26-516(a)(4) ....................................................... 21, 29, 30 N.Y. Code § 26-516(a)(2)(i) .................................................................. 39, 40, 70, 73 Rent Stabilization Law § 26-514 ............................................................................. 45 Cardozo, Nature of the Judicial Process, 110 (Hall eds.) ....................................... 11 Elizabeth Kolbert, Studies Suggest Tenants In Upscale Neighborhoods Would Be Hit the Hardest, N.Y. Times, Metro, April 6, 1997 .................... 54 George F. Will, Big Scare In the Big Apple, Newsweek, May 26, 2997 ................. 54 John Caner, Thousands rally at state Capitol for rent control, Times Union, May 21, 1997 ................................................................................................. 55 Raymond Hernandez, Entering Debate, Governor Offers Rent Compromise: A Shift to Center, N.Y. Times Metro, May 12, 1997 ............. 55 Sheldon Silver, Stop rent war on middle class, N.Y. Daily News, June 04, 1997 ................................................................................................. 54 Warren Estis and Jeffrey Turkel, The Impenetrable Thicket: Unauthorized History of New York State and City Rent Laws, New York Law Journal, June 18, 1997 ................................................................................... 54 Rent Regulation Reform Act of 1997 .................................................................. 8, 35 N.Y. C.P.L.R. § 213-a ........................................................................................ 12, 27 1 QUESTIONS PRESENTED Question 1 Was the order of the Appellate Division, First Department, dated September 24, 2012, which unanimously affirmed the order of the Supreme Court, properly made? It is respectfully submitted that this question must be answered in the negative. The Appellate Division, First Department erred: (i) in creating a judicial exception to the rent overcharge statute of limitations that bars all of the Respondents’ claims; (ii) in creating an ex post facto law; (iii) affirming the motion court’s holdings with respect to the preclusive effect of findings of the Civil Court that were not necessary to the final judgment; (iv) affirming the motion court’s calculation of the statute of limitations backwards from the date the claim is interposed; and (v) affirming the motion court’s piercing the corporate veil on summary judgment in the face of disputed facts and no evidence of any domination of the entity with respect to the transactions attacked. Question 2 Whether the four year statute of limitations for residential rent overcharge claims is a bar to such claim where there is significant evidence of fraud on the 2 record that allegedly occurred prior to the four year period preceding the filing of the claim on the record? It is respectfully submitted that this question must be answered in the affirmative. The statutory language is plain and clear. Claims that are not interposed within four (4) years of the first overcharge alleged are barred as a matter of law. Question 3 Whether a party is barred from an award of treble damages on a claim for willful residential rent overcharge, when that claim is filed more than two (2) years after the alleged overcharge? It is respectfully submitted that this question must be answered in the affirmative. The statutory language is plain and clear. Treble damages cannot be recovered on overcharge claims that are not interposed within two (2) years of the first overcharge alleged. Question 4 Whether the order of the Appellate Division, First Department, dated September 24, 2012, which held that the statute of limitations is not a bar to a 3 residential rent overcharge claim when there is significant evidence of fraud on the record, creates an ex post facto law? It is respectfully submitted that this question must be answered in the affirmative. The statutory language is plain and clear and precludes the examination of the rental history of a housing accommodation prior to the four- year period immediately preceding the commencement of the action. By permitting allegations and stale evidence of fraud prohibited by statute for a period that is prior to the four (4) year period immediately preceding the commencement of the action to serve as the basis for the imposition of penalties, the court has created an ex post facto law. Question 5 Whether the Appellate Division, First Department erred in affirming the motion court’s order that held that statutes of limitation are calculated backwards? It is respectfully submitted that this question must be answered in the affirmative. The New York CPLR clearly states that statutes of limitation are calculated from the date the claim accrues going forward. 4 Question 6 Whether a party can be collaterally estopped from litigating factual disputes where a prior court made findings concerning those disputes, but such findings were not necessary to the final judgment? It is respectfully submitted that this question must be answered in the negative. The law of preclusion is clear and requires that the finding be necessary to the final judgment, otherwise it is dicta and without preclusive effect. Question 7 Whether the corporate veil can be pierced on a motion for summary judgment where there are disputed issues of fact concerning the intermingling of funds? It is respectfully submitted that this question must be answered in the negative. The intermingling of funds is a material issue on a claim for summary judgment and summary judgment cannot be granted where there is a material issue of fact in dispute. 5 Question 8 Whether the corporate veil can be pierced through a claim that is time-barred as evidence of the alleged fraud committed? It is respectfully submitted that this question must be answered in the negative. Where the underlying claim is time-barred, there can be no claim for piercing the corporate veil. Question 9 Whether the corporate veil can be pierced without a particularized showing that there is domination of the subject entity with respect to the transactions attacked? It is respectfully submitted that this question must be answered in the negative. A piercing claim is a fact intensive claim that cannot be determined on a motion for summary judgment and without a particularized showing of the domination of the subject entity with respect to the transactions attacked causing harm. 6 PRELIMINARY STATEMENT The Respondents’ claims are nothing more than a compilation of time- barred claims all of which must be dismissed with prejudice pursuant to the plain language of the controlling statutes. Despite the clear statutory language precluding all of these claims, both the motion court and the First Department have gone to great lengths to create exceptions to the statutorily prescribed limitations period that ignores: (i) the plain language of the statute; (ii) the legislative history that bolsters a plain language reading of the statute; (iii) long-standing policy concerning the application of statutes of limitations irrespective of the factual circumstances; and (iv) the principles of statutory construction and stare decisis. The Respondents’ rent overcharge claim is nothing more than a “garden variety” rent overcharge claim that was not interposed within the statutorily required four (4) year period from when it first accrued. It is time-barred. The Respondents’ claim for treble damages for a willful overcharge is not only barred because the underlying claim for rent overcharge is barred, but it is further barred because it was not interposed within the statutorily required two (2) year period from when it first accrued. It is time-barred. Respondents’ claim for attorneys’ fees as the prevailing party in this action is similarly barred because their underlying claim for rent overcharge is barred, and they cannot be the prevailing party when their claims are time-barred. 7 Similarly, the Respondents’ claim for piercing the corporate veil is not only barred because it relates to damages on the time-barred overcharge claim, but it is also replete with factual issues that prevented determination of the same by summary judgment. For the sake of clarity, the Respondents, who have not paid any rent since May 2009, have not interposed any claim to determine the monthly rent for their unit on a going-forward basis and any such claim is not before this Court. Notwithstanding, that claim, even if it was before this Court, was and continues to be, time-barred. Despite all the noise created by the Respondents concerning allegations of fraud and misconduct by the Appellants, the Respondents failed to file their claims on time. There is no explanation by the Respondents for this failure. They point to no conduct on the part of the Appellants or any other person that prevented them from timely filing their claims. This appeal concerns the application of the statutes of limitations to the Respondents’ affirmative claims for relief on their time-barred causes of action, and to the extent the application of the statute of limitations to those claims is not sufficient to deal with the Respondents’ claim for piercing the corporate veil, the misapplication of the standard on summary judgment that precludes a finding of liability when there are clear issues of fact. 8 The Hon. Judge Robert S. Smith of this Court foretold of the instant appeal concerning the First Department’s recent judicial repeal of C.P.L.R. § 213-a’s four (4) year statute of limitations for residential rent overcharge claims. In Grimm v. State Div. of Hous. and Community Renewal Off. of Rent Admin., 15 N.Y.3d 358, 938 N.E.2d 924 (2010), Judge Smith, in a dissenting opinion in which Honorable Judges Graffeo and Read concurred, remarked on the then majority’s decision to carve out a fraud exception to the Rent Regulation Reform Act of 1997 (“RRRA”)’s prohibition against examining the rental history of the housing accommodation prior to the four-year period from when a (timely-filed) overcharge complaint was brought, to determine if the current rent assessed to tenants of a rent stabilized unit was lawful. In what Judge Smith aptly described as a “garden variety overcharge case,” id. at 368, 930,1 where the majority went beyond the RRRA’s command, Judge Smith said: The majority, has in substance, largely repealed the statute [and the unequivocal enabling regulations implementing it]—or, perhaps, has turned it into a source of endlessly complex litigation. I am not sure which it has done, and I am not sure which is worse. The statute and the regulations implementing it are unequivocal. Id. at 367. 1 While this case is factually distinguishable from Grimm, 15 N.Y.3d at 358 (2010), for a variety of reasons explained herein, the underlying claim for rent overcharge does not implicate any reason to believe that this case involves a fact pattern that the Legislature did not contemplate in the enactment of the RRRA. For that reason, it is, like Grimm, 15 N.Y.3d at 358, a garden variety rent overcharge claim. 9 The RRRA was the creation of a legislative body that working in a manner that was the essence of how the legislature should work – a compromise product of fierce debate between landlords and tenants. Despite the exceptions to C.P.L.R. § 213-a that have been created by Grimm, 15 N.Y.3d at 358, Thornton v. Baron, 5 N.Y.2d 175, 800 N.Y.S.2d 118 (2005) and Matter of Cintron v. Calogero, 15 N.Y.3d 347, 912 N.Y.S.2d 498 (2010) (against all of which, members of this Court objected to), 2 the RRRA has not been amended or repealed by the legislative body that created it and it has not been stricken as unconstitutional. It remains in full force and effect. At last, this case, Conason, et al. v. Megan Holding, et al. represents the Grimm conundrum in its fullest manifestation – not only is this case endlessly complex litigation concerning a statute that no party disputes is plain on its’ face – but it is also an outright judicial repeal by the Appellate Division of a duly enacted and then strengthened by amendment, four-year statute of limitations applicable to both judicial and administrative rent overcharge proceedings. If the Thornton, Cintron and Grimm Courts arguably gutted the building that is C.P.L.R. § 213-a by creating exceptions to the clear statutory language, the First Department took the final liberty of leveling the building flat with its’ creation of a fraud on the record 2 As explained in detail, none of these cases are factually similar to the instant action and none of the previous judicial-created exceptions to the RRRA apply. 10 exception to the clear statutory requirement to bring an overcharge claim within four (4) years of the first overcharge alleged. The “fraud on the record exception” to the four (4) year time bar that was already forcefully rejected by the RRRA’s amendments to C.P.L.R. § 213-a’s plain language – “An action on a residential rent overcharge shall be commenced within four years of the first overcharge alleged...” – the New York State Legislature, which had clearly spoken, has been rendered mute. Even in cases of reprehensible conduct – that is, conduct evincing a morally depraved indifference to one’s civil obligations3 – we do not use the conduct of a party as the bar by which we measure whether the claim was timely interposed.4 If it were, then surely an exception would have been created for those adults who were molested as children by priests and tried to bring their tort claims decades after the abuse had ceased and the statute of limitations period had expired. But, that is not the law in the State of 3 See Ross v Louise Wise Services, Inc., 8 N.Y.3d 478, 836 N.Y.S. 509 (2007), discussing when punitive or exemplary damages are permitted, requires more than just intentional wrongdoing. “Punitive damages are permitted when the defendant's wrongdoing is not simply intentional but 'evince[s] a high degree of moral turpitude and demonstrates such wanton dishonesty as to imply a criminal indifference to civil obligations’” Id. at 489. 516. 4 There are no facts alleged in this case that would support any type of equitable tolling of the statute of limitations. Further, there has been no claim for an equitable tolling of statute of limitations. The Respondents’ claim has been that the rent on the “base date”, i.e., four years prior to when their claim was first interposed, was tainted by fraud such that the default formula should apply as of the base date, giving them damages for overcharge for that four-year period. There is no statute or case on record that provides support for the Respondents’ claim. 11 New York, nor should it be.5 This case illustrates at once a perfect irony of how the Legislature’s intent becomes stunningly and needlessly subordinate to the law of unintended consequences – e.g., the majority’s decision in Grimm taken to the extreme, and yet presents a perfect opportunity to rectify the statute’s sorry state – a condition surprisingly not of the Legislature’s making.6 To do so requires returning to the “vital guidance” of this Court’s unique, but awesome mission expounded by Justice Cardozo: [T]he role of the Court, as an institution charged with the awesome responsibility of helping lawyers serve clients by providing firmly and clearly settled, adjudicated principles for the good of all society. . . [bedrock principle of law on how judges and courts are to decide cases, which recognize that] ‘judge-made law is secondary and subordinate to the law that is made by legislators’. Fumarelli v. Marsam Dev., Inc., 92 N.Y.2d 298, 302-03 (1998) (Emphasis Added) (citing Cardozo, Nature of the Judicial Process, at 110 (Hall eds.). If judge-made law, (in the rare instances where it can be said to ever be proper under our constitutional separation of powers framework), is subordinate to the laws enacted by the Legislature, then the Appellate Division’s Order -- 5 See Zumpano v. Quinn, 6 N.Y.3d 666, 849 N.E.2d 926 (2006). 6 This Court does not need to look any further than the various interpretations given to the statute by the three courts that this overcharge claim has been before. See Judge Schneider’s decision, Judge Kenney’s decision and the First Department’s decision. (R. 57-64). The range of interpretations is caused by permitting the thought that an exception can be or should be permitted where a statute is clear is its’ face. 12 allowing Plaintiffs to maintain an expired cause of action for rent overcharge must be subsumed by the legislative directive. And the Respondents’ claim is time- barred. No exceptions. Judicial principles of continuity of law, stare decisis, and even this Court’s rulings in Thornton, Cintron and Grimm, each of which emphasized that C.P.L.R. § 213-a requires that claims for rent overcharge be interposed within four (4) years, jointly compel this result. In addition to the fact that the clear and plain language of C.P.L.R. § 213-a requires reversal of the First Department’s Order, the same must further also be reversed because it assumes the unconstitutional complexion of an ex post facto law, by retroactively altering the laws of evidence proscribed by C.P.L.R. § 213-a to exact a retroactive penalty of treble damages and attorneys’ fees for violations of the rent overcharge statute. The statute clearly prohibits the determination of an overcharge based upon an overcharge occurring more than four years before the action is commenced. See N.Y. C.P.L.R. § 213-a (West 2014). Here, the First Department’s Order created an exception in 2013 for conduct that allegedly occurred in 2003 and imposes penalties upon such alleged conduct. This judge- made rule needlessly runs afoul of the public policy underlying all statutes of limitations, universally understood by this Court and all courts throughout the State of New York as prohibiting stale claims. 13 Further, the First Department’s Order must be reversed because it affirms the lower court’s erroneous constructions of law on such basic legal principles as accrual of statutes of limitations, collateral estoppel and equitable principles of piercing the corporate veil. By way of example, the First Department affirmed the motion court’s calculation of the statute of limitations backwards from the time the claim was interposed, in direct contravention to C.P.L.R. § 203. In sum, C.P.L.R. § 213-a is clear. The Respondents claims were not timely filed and neither common-law fraud nor a judge-made fraud exception to the statute can change that fact. There is no allegation or proof that the Appellants prevented the Respondents from timely filing their claim and there is no other justification given for the failure to timely file. Based on long-standing rules of statutory interpretation and the public policy underlying statutes of limitations, the First Department’s Order, and the motion court’s order that it affirms, must all be reversed on the law and the Respondents’ claims dismissed as untimely.7 7 See Kim v. City of New York, 90 N.Y.2d 1, 7 (1997), declining to extend principles of common law rules of title to property over the statutory rules in effect when title to property was assumed. “To accept this proposition would elevate common law over statutory law, and would represent a departure from the established understanding that statutory law may trump an inconsistent principle of the common law.” 14 FACTS AND PROCEDURAL HISTORY Defendant-Appellant Megan Holding LLC (“Megan”) is a limited liability company that was organized under the laws of the State of New York in May 2003. (R. 266). Megan is the owner and landlord of a certain multi-family apartment building located at 159 East 106 Street in the County, City and State of New York (the “Building”). (R. 74, 83, 85, 172). Defendant-Appellant Emmanuel Ku (“Ku”, and together with Megan, the “Appellants”) holds a ninety-nine (99%) percent ownership interest in Megan. (R. 266). Ku is also the principal owner of various other corporate entities, which like Megan, are single asset real estate holding entities that own and operate a single parcel of real property.8 Over the years Megan and these other entities principally owned by Ku have shared common management agencies and offices. (R. 550-555; R. 369). None of these other entities are parties to this action. (R. 13). On or about November 1, 2003, Plaintiffs-Respondents Julie Conason and Geoffrey Bryant (the “Respondents”), first became tenants of one of the apartments located within the Building. (R. 74-80). By lease dated October 10, 2003, Respondents entered into a twenty-four month lease with Megan as their landlord and agreed that the initial legally stabilized rent for their apartment was 8 The single asset limited liability company structure is a common and preferred method of real estate ownership in New York State for a variety of reasons attractive to both owners of real property and lenders. 15 $2,000 per month. (R. 81). At the same time, the Respondents and Megan executed a certain “Temporary Rent Concession Rider” through which the parties agreed to a reduced stabilized rent of $1,800 per month, “subject to any lawful adjustments.” (R. 81-82). The Respondents first entered into possession of their apartment and paid rent in November 2003. (R. 74, 81). The rental history for the Respondents’ apartment – a rent stabilized apartment – covering the years 1987 through 2003 was a matter of public record with New York State Division of Housing and Community Renewal (“DHCR”), when Respondents signed the lease and rider. (R. 139-143). At the time Respondents signed their Lease and Lease Rider on October 10, 2003, (R. 74 - 80) the rent registration statement on file with DHCR for their unit listed a prior tenant as Jacob Rivera, paying a rent of $475.25 in 2002. (R. 141). The statement had been on file for little more than a year giving Respondents ample opportunity to consult the rental history for their unit before ever entering into a lease agreement with Megan. (R. 141). DHCR’s rental history (the “Registration Information”) listed Jacob Rivera as the last long-term tenant living in Respondents’ unit before the Respondents moved in, around or about November 2003. (R. 141). The Registration Information shows Jacob Rivera’s last registered monthly rent was $475.24, and that Mr. Rivera moved out around or about March 2003. (R. 141). The Registration Information reflects that after Mr. Rivera’s occupancy, Megan 16 reported that Suzuki Oki took occupancy of the subject apartment in April 2003 with a monthly rent of $1,000. (R. 141). Again, the Respondents took occupancy in November 2003. In or about October 2005, Respondents renewed their lease agreement for an additional two years for a monthly rent of $1,899. In October 2007, Respondents again renewed their lease, but this time for one year at a monthly rent of $1,955.97. (R. 83-84; R. 85-86). All of Respondents’ rent payments were tendered to and negotiated by their landlord, Megan. (R. 87-138). On or about October 9, 2008, just as their third renewal lease was set to expire, Respondents requested the DHCR Registration Information for their apartment. (R. 139). In April 2009, Megan commenced summary nonpayment proceedings in Civil Court, New York County against Plaintiff-Respondent Conason,9 alleging that Megan was owed rent in the amount of $4,174.16 (the “Non-Payment Proceeding”).10 9 Plaintiff-Respondent Geoffrey Bryant was later added as a party to this action. For purposes of this Appeal, the Appellants are treating all filings by Plaintiff-Respondent Conason prior to Bryant’s addition as a party as if both Respondents made the filing. 10 The Non-Payment Proceeding bears Index Number 64737/2009 of the Civil Court of the City of New York, County of New York and continues to this day. 17 A. The Non-Payment Proceeding and the Respondents’ First Rent Overcharge Counterclaim in Civil/Housing Court Respondents answered the allegations in the Non-Payment Proceeding by an “Answer In Person and Verification” dated April 24, 2009. (R. 144). For the first time, and five and ½ years after taking occupancy and their claim for rent overcharge accrued,11 Respondents interposed a counterclaim for rent overcharge in their Answer. (R. 144). By Decision and Order dated June 24, 2009, the Civil Court dismissed Megan’s Petition and action for rent nonpayment without prejudice for lack of proof. (R. 154-155). A separate trial was ordered for Respondents’ counterclaims. (R. 154-155, 156-157). B. The Civil Court Trial on Respondents’ Counterclaims and the Decision/Order Dismissing Respondents Rent Overcharge Counterclaim Respondents’ remaining counterclaims for breach of the warranty of habitability/rent abatement, rent overcharge and harassment, were severed and tried before the Hon. Judge Jean Schneider, J.H.C., beginning on December 9, 2009. (R. 57-62). Testimony was taken on seven days over the course of several months in 2009 – 2010. (R. 57). 11 See Direnna v. Christensen, 57 A.D.3d 408 (1st Dep’t 2008) (dismissing a rent overcharge complaint because “Plaintiff subtenant’s action is time-barred since the first overcharge alleged by him occurred in April 2003 and this action was not commenced until September 2007.” Id. 18 In the midst of trial, Megan’s counsel made a motion to be relieved as counsel and for a continuance of the trial. By Order dated July 26, 2010, the motion was granted in part and denied in part by Judge Schneider. (R. 300-301). Judge Schneider granted counsel’s motion to withdraw but denied Megan a continuance to obtain new counsel and ordered the trial to continue the next day. The next day, the Civil Court issued another order giving Megan approximately seven weeks during the summer to secure an attorney representative who could step in as trial counsel in the midst of trial. (R. 300-303, fn. 21-23). Megan was unsuccessful in finding new trial counsel to step in and continue a trial that had already progressed over several months, to defend against Respondents’ various claims for warranty of habitability, harassment and rent overcharge. (R. 300-301, fn. 21-23; R. 346). Megan’s principal, Ku, appeared before the Civil Court on September 15, 2010, but declined to sit for further examination by Respondents’ counsel in the absence of counsel for the limited liability company or for himself since Respondents were also prosecuting a contempt violation against him. (R. 350). As a consequence, Judge Schneider sua sponte closed the record, and determined that negative inferences would be drawn against Megan and in favor of Respondents on their counterclaims. (R. 351). Megan did not have counsel when 19 the Civil Court cut short the proceeding and closed the record on September 15, 2010. (R. 57; R. 272-273; R. 345-364, 350-351). By Decision/Order dated April 8, 2011 (the “Civil Court Order”), the Civil Court: (i) awarded the Respondents a judgment on their claim for breach of the warranty of habitability; and (ii) dismissed the remaining claims for harassment and rent overcharge for failure of proof. (R. 58). The Civil Court stated that “Respondents have not … proven the amount of the legal regulated rent.” (R. 60). The Civil Court Order came in spite of the several negative inferences and findings against Megan it articulated in the Civil Court Order. (R. 57-62). Mainly, the court found that, (1) “Petitioner [Megan] created an entirely fictitious tenant [Suzuki Oki] and at least one fictitious apartment renovation in 2003 in order to boost the regulated rent from $475.24 per month (the registered rent for Jacob Rivera in 2003) to $1800.00” (R. 59-60); (2) Respondents’ rent overcharge claim was “actionable” (R. 58); (3) CPLR §§ 213-a and 203(d)12 established April 9, 2005 as the correct “base date” for the rent overcharge (R. 59); and (4) “the base 12 C.P.L.R. § 203(d) states: “A defense or counterclaim is interposed when a pleading containing it is served. A defense or counterclaim is not barred if it was not barred at the time the claims asserted in the complaint were interposed, except that if the defense or counterclaim arose from the transactions, occurrences, or series of transactions or occurrences, upon which a claim asserted in the complaint depends, it is not barred to the extent of the demand of the complaint notwithstanding that it was barred at the time the claims asserted in the complaint were interposed.” N.Y. C.P.L.R. § 203(d). While the Civil Court Order dismissed the rent overcharge claim for failure to prove the legal regulated rent and therefore leaving the Civil Court without the ability to calculate damages, the Civil Court Order’s reference to § 203(d) clearly indicates that the Civil Court knew the Respondents’ claim to be time-barred, except to the extent of the demand in the complaint, i.e., the petition for non-payment. 20 date was obviously affected by petitioner’s fraud” (R. 60) allowing for the court to peer back even earlier into the apartment’s rental history.13 None of these findings were necessary to support the judgment based on the breach of the warranty of habitability. The Court did not address the statute of limitations issue on the rent overcharge claim. The Civil Court made separate findings for Respondents’ breach of the warranty of habitability, (R. 60-62), and awarded Respondents a judgment based only on their counterclaim for breach of the warranty of habitability. (R. 62). The Civil Court Order awarded the Respondents: (i) a ten (10%) abatement of rent from the period May 2004 through November 2008; and (ii) a thirty (30%) percent abatement from December 2008 through September 2010. (R. 57-64). The Civil Court Order calculated the amount of the abatement as $23,249.76, based on the following findings that were necessary to support the final judgment of $23,249.76: (i) Respondent’s14 tenancy began on November 1, 2003; (ii) Respondent signed a two-year lease beginning on November 1, 2003 at a monthly rental rate of $1,800.00; (iii) Respondent renewed the lease for two years beginning on November 1, 2005 at a rental rate of $1,899.00 per month; (iii) 13 The Civil Court cited to Grimm v. DHCR, 15 N.Y.3d 358 (2010) for the proposition that the trial court could look beyond four years of rental history when the “base date” is affected by fraud. 14 The Civil Court Order only refers to Respondent Conason with respect to these findings despite the fact that Respondent Bryant was added as a party. 21 Respondent renewed the lease for an additional one year term beginning on November 1, 2007 at a rental rate of $1,955.97 per month; and (iv) rent was paid through May 31, 2009. (R. 58, 73). Respondents obtained a further judgment for attorneys’ fees based on being the prevailing party on their claim for breach of the warranty of habitability, but received no other relief from the Civil Court on their claim for rent overcharge. (R. 57-58; R. 62). C. The Summary Judgment Motions on the Rent Overcharge and Piercing the Corporate Veil Claims in the Supreme Court Action Plaintiffs-Respondents commenced the instant action on the dismissed rent overcharge counterclaim by Summons and Verified Complaint in Supreme Court dated June 6, 2011, within six (6) months of the Civil Court’s dismissal of the claim. (R. 158-165). The Verified Complaint was amended to add factual allegations after the Appellants’ moved to dismiss for failure to state a claim. The Amended Complaint contains the following claims: (i) rent overcharge, together with a claim for piercing the corporate veil to against Ku; and (ii) treble damages and attorneys’ fees pursuant to Real Property Law § 234, Rent Stabilization Law § 26-516(a)(4) and 9 NYCRR § 2526.1. (R. 171– 180). In response to the Amended Complaint, Appellants raised several affirmative defenses in their Verified Answer, (R. 187- 195), including the statute 22 of limitations and Megan’s then-pending appeal of the Civil Court Order. (R. 194 -195). In June 2012, after discovery confirmed that the Respondents’ claim for rent overcharge accrued in November 2003 and was time-barred, the parties separately moved for summary judgment. The Respondents moved for summary judgment on their Verified Amended Complaint, in an attempt to recover $172,743.21 in rent overcharges for the period of May 2005 through May 2009, with interest, treble damages and attorney fees. (R. 26-51). Respondents argued that collateral estoppel applied to the Civil Court’s findings contained in the Civil Court Order on their rent overcharge counterclaim, even though it was ultimately dismissed without prejudice and the findings related to the rent overcharge were not necessary to the final judgment on the breach of the warranty of habitability. (R. 42-44). Respondents also sought to pierce Megan’s corporate veil without a scintilla of proof that Megan was Emmanuel Ku’s alter ego at the time of the alleged rent overcharge. (R. 240-266). A July 2003 check from Megan Holding to City Waste Services of NY with “Dakko property” scrawled on top (R. 240), Ku’s personal bank statements from 2011 – evincing not a single transaction between Megan and Ku (R. 241-265), Ku’s testimony from the trial on Respondents’ counterclaims in Civil Court that he paid for improvements to the building with personal loans to 23 Megan as alleged proof that he “intermingled his personal finances with Megan” (R. 37; R. 238-239), and a loan application with the Building listed among Ku’s personal assets (R.241-245, 242), were the gravamen of Respondents’ proof on its veil-piercing claim. None of Respondents’ rent checks/payments tendered to their landlord, Megan, appear among any credits or debits in Ku’s personal banking accounts. (R. 241-265). In addition, Respondents did not submit evidentiary proof that their rent payments were deposited into any other account owned by a related corporation in which Ku owns a principal interest (R. 38-40; R. 52-56) to support their theory that Megan was just one of many “strawman” corporations (R. 36) who were all alter egos for Ku. (R. 39). As stated, Megan and Ku also moved for summary judgment dismissing the Complaint based on the four-year statute of limitations, CPLR R. 213-a, applicable to the rent overcharge and ancillary claims. (R. 388- 401). In its Decision and Order of October 10, 2012, the Supreme Court, J. Kenney, dismissed Megan and Ku’s statute of limitations defense based on a distorted reading of Matter of Cintron v. Calogero, 15 NY3d 347, 353-354 (2010), and awarded Respondents summary judgment on the issue of liability only. (R. 19). Sidestepping the clear statutory language of CPLR § 213-a, and as further 24 interpreted in Cintron, the motion court contrived its own novel method of calculating the statutory period for a rent overcharge claim. It stated: Therefore, rather than calculating the statutory period from the commencement of the overcharge, such claims are determined backwards, from the date of the first claim of an overcharge. (R. 19). The motion court concluded with a comment that Plaintiffs-Respondents’ overcharge claim was not time-barred, by incorrectly relying upon this Court’s decisions in Grimm v. State of New York Division of Housing and Community Renewal Office of Rent Administration and Thorton v. Baron, (permitting fraud exceptions to the four-year look back rule and default formula used to calculate rent overcharge claims), in reaching its decision. (R. 19-21). None of these cases however, creates an exception to the four-year statute of limitations for rent overcharge claims, even in instances of fraud. Continuing with its flawed construction and application of the law, the motion court invoked the collateral estoppel doctrine, which it held estopped Megan “from challenging the Civil Court’s determination that the base date for determining the rent overcharge is April 9, 2005 and that the rent charged to plaintiffs was fraudulently established.” (R. 22-23). The motion court was persuaded that Megan had “a full and fair opportunity to be heard in the prior 25 proceeding” because Megan had counsel for most of the trial,15 “declined to put on a defense,”16 “submitted a post-trial brief,” and contrary to Megan’s fifth affirmative defense in its Verified Answer reiterated by counsel in opposition, “failed to appeal the determination.” (R. 22; R. 270-271). Megan did appeal the Civil Court Order on the judgment for rent abatement (and subsequent judgment on attorneys’ fees) (R. 270-271), but the same was dismissed as non-appealable.17 Nevertheless, the motion court based Respondents’ award of treble damages and attorney fees on the rent overcharge claim upon the wholesale adoption of the Civil Court’s findings of an April 9, 2005 rent base date, effected by fraud. (R. 23). Finally, based on a determination that “it has been established that Ku is the owner of 99% of Megan,” its imported finding “that Megan fraudulently set a rent for plaintiffs’ apartment, and that plaintiffs were financially injured thereby” the motion court held that Respondents were permitted to pierce Megan’s corporate 15 Megan retained counsel (the within counsel through a predecessor firm) in time to submit a post-trial brief. Megan appealed the Civil Court Order primarily because Judge Schneider had closed the record when Megan appeared without counsel and specifically stated that the Court was not holding Megan in default. By its’ decision on Megan’s appeal of the Civil Court Order, the Appellate Term, First Department confirmed that a limited liability company cannot appear without counsel, but also dismissed the appeal as non-appealable, because contrary to the Civil Court explicit holding that Megan was not in default, Megan was in default and no appeal lies from an order entered on default. See Megan Holding LLC v. Conason, et al., 2012 NY Slip Op. 52117(U) (Sup. Ct., App. Term, Nov. 15, 2012). 16 In its’ appeal of the Civil Court Order, Megan argued that the Civil Court closed the proceedings without affording Megan an opportunity to present a defense. Id. 17 See supra, fn. 15. 26 veil holding “Ku individually liable.” (R. 23-24). The decision omits factual findings or cites to the record showing how Ku so dominated and controlled Megan besides Ku’s majority stake in the business. (R. 13- 25). Furthermore, the motion court’s decision ignored the lack of evidence showing Ku’s purported domination of Megan was contemporaneous with any of the alleged fraud or rent overcharges. (R. 13-25). The Supreme Court denied Appellants’ motion for summary judgment. (R. 24). Megan and Ku filed Notices of Appeal of the motion court’s decision on November 15, 2012. (R. 4-5, R. 9-10). D. The Appellate Division’s Order Unanimously Affirming the Motion Court’s Grant of Summary Judgment Awarding Plaintiffs Affirmative Relief on a Stale Rent Overcharge and Piercing the Corporate Veil Claims and Denial of Defendants’ Motion for Summary Judgment The Appellate Division by its Decision and Order dated September 24, 2013 unanimously affirmed the lower court’s grant of summary judgment of liability on the rent overcharge claim (interposed one year and six months after the statute of limitations expired), treble damages and attorneys fees (R. 635-641). As with the lower court’s decision, the language of the CPLR § 213-a statute, is nowhere to be found in the Order. However, the basis for the First Department’s exception to the four-year statute of limitations is an entirely new holding “that the four year statute 27 of limitations is not a bar in a rent overcharge claim where there is significant evidence of fraud on the record.” (R. 639). The First Department did not attempt to reconcile its’ holding with the language of C.P.L.R. §213-a, the plain language of which, bars an award or calculation of an award of any overcharge based upon an overcharge having occurred more than four years before the action is commenced.18 In affirming the motion court, the First Department also affirmed the motion court’s holding that the statute of limitations for overcharge claims is calculated backwards and that collateral estoppel can be used to give preclusive effect to factual findings that were not necessary to the final judgment. The First Department also affirmed the motion court’s piercing Megan Holding LLC’s corporate veil on summary judgment upon a loan application from August 2009 that lists properties held by entities of which Emmanuel Ku is a majority owner “as his own property” (R. 640), and vague references to “habitual transfer of funds to and from Ku’s individual account, which indicates the intermingling of funds… Ku also used personal funds for Megan expenditures and used Megan funds for expenditures by other LLCs.” (R. 640). No evidence in admissible form from the record below supports the Appellate Division’s finding of any habitual transfer of funds from Megan’s account to Ku, or for that matter 18 See N.Y. C.P.L.R. § 213-a (West 2014). 28 from Megan’s account to any of Emmanuel Ku’s other majority owned entities. The Respondents submitted a table summarizing various transfers between Ku and entities that are not parties to this action. (R. 56). There was no expert retained by the Respondents to explain how these transfers constituted any commingling of Megan’s assets or how the Respondents were damaged thereby. None of the Respondents’ evidence of “intermingling of funds” corresponds to the period from which Plaintiffs assert financial injury, November 2003 through May 2009. Appellants Megan and Emmanuel Ku immediately moved to reargue the Appellate Division’s Order and also sought leave for permission to appeal to this Court. By Order dated December 12, 2013, the First Department denied Appellants’ motion to reargue but granted leave for permission to appeal to the Court of Appeals pursuant to C.P.L.R. § 5713 posing the following question: Was the order of this Court, which unanimously affirmed the order of Supreme Court, properly made? (R. 633). The Court of Appeals accepted Megan Holding LLC and Emmanuel Ku’s appeal of the Appellate Division’s Order on December 26, 2013. Jurisdiction of the Court of Appeals to hear this appeal is proper. 29 STANDARD OF REVIEW On a review of the denial of a motion for summary judgment, an appellate court is “empowered to search the record and may, if warranted, grant summary judgment.” Insurance Company of Evanston v. Mid-Hudson Co-Operative Insurance Co., 706 N.Y.S.2d 457, 459, 271 A.D.2d 651, 652 (2d Dep’t 2000). Summary judgment will be granted only upon a prima facie showing of entitlement to judgment as a matter of law, by “tendering sufficient evidence to demonstrate the absence of any material issues of fact.” Alvarez v. Prospect Hospital, 68 N.Y.2d 320, 324 (1986); CPLR R. 3212(b). “It is hornbook law that the function of summary judgment is issue finding, not issue determination.” Rennie v. Barbarosa Transport, Ltd., 543 N.Y.S.2d 429, 151 A.D.2d 379 (1st Dep’t 1989) (internal quotations omitted). On a motion for summary judgment, “[i]t is incumbent on the Court, therefore, to search the proof, if any … to ascertain whether it discloses a real issue, rather than a formal, perfunctory, or shadowy one.” Di Sabato v. Soffes, 193 N.Y.S.2d 184, 189, 9 A.D.2d 297, 300 (1st Dep’t 1959). “The motion shall be granted if, upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party.” C.P.L.R. § 3212(b). Upon a review of the Record on Appeal and the relevant law presented herein, it is respectfully submitted that the Appellants are entitled to summary 30 judgment in their favor dismissing the Respondents’ claims as a matter of law based on the statute of limitations. The Respondents’ Amended Verified Complaint, (R. 171-183), sets forth the following causes of action against the Defendants:19 (i) rent overcharge, including an award of treble damages pursuant to Rent Stabilization Code, 9 NYCRR § 2526.1(a)(1);20 and (ii) attorneys’ fees and costs pursuant to Real Property Law § 234 and the lease agreement between the parties, Rent Stabilization Law (New York City Administrative Code) § 26- 516(a)(4) and Rent Stabilization Code, 9 NYCRR § 2526.1(d). New York C.P.L.R. § 213-a and all of the relevant codes and statutes provide a four (4) year statute of limitations for claims of residential rent overcharge. The Respondents failed to timely interpose their claims and the same must now be dismissed as a matter of law. 19 The Respondents did not interpose a separately denominated claim against Appellant Ku for piercing the corporate veil, but their Amended Complaint sets forth sufficient factual allegations to state the claim. 20 As set forth herein, not only is the Respondents’ claim for rent overcharge time-barred because it was not filed within four (4) years of the first overcharge alleged, but Respondents’ claim for treble damages is further time-barred because it requires the claim be filed within two (2) years of the overcharge. Here, the Respondents’ first filed their claim for overcharge approximately five and one-half years after the first overcharge alleged. 31 ARGUMENT There is no issue of fact with respect to the Appellants’ affirmative defense that Respondents’ claim for rent overcharge (and accompanying claims for attorneys’ fees, treble damages and piercing the corporate veil), are barred by the statute of limitations. While such defense was ripe for determination by the motion court as a matter of law, it is respectfully submitted that the motion court erred on its’ application of the law, and the Appellate Division erred in affirming the same. The statute clearly provides the Respondents with four (4) years from the first overcharge alleged to interpose their claim. The Respondents did not interpose their claim within such four (4) year period and have offered no justification for such failure. Their claims must be dismissed as a matter of law. Further, while Plaintiffs-Respondents’ claim seeking to pierce the corporate veil must be dismissed based upon the statute of limitations (since it is anchored on the time-barred rent overcharge claim), the motion court’s summary determination of the same was improper because there were issues of fact that precluded such summary determination. Not only did the Appellants raise issues of fact precluding summary judgment that were ignored by the motion court, but the motion court improperly gave preclusive effect to findings from the Civil Court Order that were not necessary to the Civil Court’s judgment for breach of the warranty of habitability. These findings were then used to improperly establish 32 fraud on the part of Megan, which fraud was used as a basis to disregard the statute of limitations and also grant the extraordinary, equitable relief of piercing the corporate veil to hold Emmanuel Ku individually liable for such time-barred rent overcharge claim. The Appellate Division erred in affirming the motion court’s determination of liability on the Respondents’ claims, but further erred by creating a judicial exception to the statute of limitations and in affirming the motion court’s misapplication of the law. For all of the reasons set forth herein, it is respectfully submitted that this Court must subject these claims to the plain language of the statute of limitations, and in doing so, dismiss the Respondents’ claims in their entirety. I. NEW YORK C.P.L.R. § 213-a’s CLEAR AND UNAMBIGUOUS FOUR (4) YEAR STATUTE OF LIMITATIONS PRECLUDES RESPONDENTS’ ACTION FOR RESIDENTIAL RENT OVERCHARGE BECAUSE IT IS TIME-BARRED. The plain and unambiguous language of the statute of limitations for residential rent overcharge embodied within New York C.P.L.R. § 213-a, Rent Stabilization Code, 9 NYCRR § 2526.1, and New York City Administrative Code § 26-516, mandate a dismissal of the Respondents’ claims to recover damages for residential rent overcharge, treble damages and attorneys’ fees, as a matter of law. The statute goes to great lengths to make crystal clear that claims for residential 33 rent overcharge must be brought within four (4) years of the first overcharge alleged. The legislative history demonstrates that there are no and should be no exceptions to the rule. In the face of a clear statutory bar to their claim that is supported by the legislative history, the Respondents offer no justification for their failure to timely file their claim. The public policy surrounding all statutes of limitation mandates that the Respondents’ claims must be dismissed as a matter of law. For all the reasons set forth herein, the Respondents’ claims must be dismissed as a matter of law. A. Principles of Statutory Construction Guide this Court’s Analysis of the Relevant Statute that is a Complete Bar to the Respondents’ Claims for Rent Overcharge. Courts are obligated to “the general principle that legislation is to be interpreted so as to give effect to every provision. A construction that would render a provision superfluous is to be avoided.” Majewski v. Broadalbin-Perth Cent. School Dist., 91 N.Y.2d 577, 587 (1998). See also Cohen v. Lord, Day & Lord, 75 N.Y.2d 95, 100 (1989). [T]he general principle of statutory construction that meaning and effect should be given to all language of a statute or rule is apt here… The tool we take to this task is the legal diplomacy of the common-sensible statutory construction principle that, ‘when it is practicable to give to each a distinct and separate meaning’, effect shall be 34 given to every part of an enactment (McKinney's Cons. Laws of N.Y., Book 1, Statutes, § 231). La Guardia v. Cavanaugh, 53 N.Y.2d 67, 79 (1981) (internal citations omitted). In keeping with fundamental rules of statutory interpretation this Court has repeatedly held, “that where the statutory language is clear and unambiguous, the court should construe it so as to give effect to the plain meaning of the words used … to effectuate the intent of the Legislature.” Commonwealth of N. Mariana Is. v. Can. Imperial Bank of Commerce, 21 N.Y.3d 55, 60, 990 N.E.2d 114 (2013) (internal citations, quotations omitted); See also Assn. of Contr. Plumbers of City of New York v. Contr. Plumbers Ass'n of Brooklyn & Queens, 302 N.Y. 495, 500, 99 N.E.2d 542 (1951) (“Legislative intent is best gathered by according the language employed its usual and ordinary meaning”), Capital Newspapers, Div. of Hearst Corp. v. Whalen, 69 N.Y.2d 246, 251, 505 N.E.2d 932 (1987) (“It is fundamental that in interpreting a statute, a court should look first to the particular words in question, being guided by the accepted rule that statutory language is generally given its natural and most obvious meaning”). Using fundamental rules of statutory construction that give effect to all parts of C.P.L.R. § 213-a and the plain, unambiguous language contained therein mandates dismissal of the instant rent overcharge action, because it is time barred. 35 B. The Express Language and Public Policy of C.P.L.R. § 213-a Statute Is Unambiguously Clear on Its Face: Residential Rent Overcharge Actions Must be Brought Within Four Years of the First Overcharge Alleged New York C.P.L.R.§ 213-a – Actions to be Commenced Within Four Years; Residential Rent Overcharge, as amended by the Rent Regulation and Reform Act of 1997 (hereinafter, “RRRA”) reads as follows: An action on a residential rent overcharge shall be commenced within four years of the first overcharge alleged and no determination of an overcharge and no award or calculation of an award of the amount of any overcharge may be based upon an overcharge having occurred more than four years before the action is commenced. This section shall preclude examination of the rental history of the housing accommodation prior to the four-year period immediately preceding the commencement of the action. C.P.L.R. § 213-a (Emphasis Added). Prior to the amendment of the statute by the RRRA, the statute of limitations relevant to overcharge claims read “An action on a residential rent overcharge shall be commenced within for years of such overcharge.” (Add. 37). It was always a four-year rule, and the RRRA’s amendments dispelled a lot of ambiguity in the case law by making it clear that: (i) the overcharge claim accrued and the claim had to be brought within four years of the first overcharge alleged; (ii) no determination of an overcharge and no award or calculation of an award may be based on an overcharge having occurred more than four years before the action is commenced; and (iii) precluding examination of 36 rental history of a housing accommodation prior to the four-year period preceding the commencement of the action. In addition, the corresponding New York City Administrative Code (the “RSL”) § 26-516 employs the same reinforcement language to be found in the C.P.L.R. § 213-a statute. [A] complaint under this subdivision shall be filed with the state division of housing and community renewal within four years of the first overcharge alleged and no determination of an overcharge and no award or calculation of an award of the amount of an overcharge may be based upon an overcharge having occurred more than four years before the complaint is filed. N.Y., Code § 26-516 (a)(2). On the obvious and natural meaning of C.P.L.R. § 213-a, there can be no doubt. Whereas, the statutory predecessor left room for interpretation, the RRRA version created a three-fold path, with all three trails leading to the same dead-end the Legislature intended: after four years of having first paid an allegedly unlawful rent, recovery for rent overcharge is time barred. First, the Legislature commanded that there be a four year time period in which a tenant must bring a residential rent overcharge claim which accrual begins upon the first overcharge (the “Mandatory Limitations Section”). Second, the statute limits how far back the records, the evidence, upon which an administrative or judicial body sitting in review of the overcharge claim may rely in determining whether there was ever an unlawful 37 overcharge in the first place (the “Reinforcement Section”). And finally, the statute imposes limits on the amount of any award for an overcharge (the “Recovery Section”). The Appellate Division’s common law fraud exception grounded in the public policy of the statute’s purpose being the alleviation of the record keeping burden of honest landlords, echoed in Thornton and Grimm, is misplaced. (R. 638). In the absence of any ambiguity, the public policy of a statute is the express language used in its enactment. “Public policy is … evidenced by the expression of the will of the Legislature contained in statutory enactments.” F. A. Straus & Co. v. Can. Pac. R. Co., 254 N.Y. 407, 413, 173 N.E. 564, 567 (1930). Thus, it becomes a stretch to suggest that the honesty or dishonesty of landlords is the public policy well from which C.P.L.R. § 213-a springs, given the language in the enactment makes no mention of the moral penchant of property owners; but only concerns itself with tenants bringing their claims on time. The statute applies to all landlords. To wit, the logical implications of an “honest landlord” record-keeping presumption means that if a landlord does not maintain records indefinitely, upon the colorable application of a tenant for either a lawful rent determination and or rent overcharge, a landlord will be presumed to be dishonest. Moreover, said landlord will be deprived of the necessary proof to rebut this new adverse 38 presumption because he or she would have dispensed with old rent records going back more than four years, as the Legislature expressly permits a Landlord to do. See New York City Administrative Code (also “RSL”) § 26-516(a)(i) (for the purpose of determining the legal regulated rent, “Where the amount of rent set forth in the annual rent registration statement filed four years prior to the most recent registration statement is not challenged within four years of its filing, neither such rent nor service of any registration shall be subject to challenge at any time thereafter.” (emphasis)). Therefore, even honesty affords no protections from stale claims under this reading of the statute. The Appellate Division’s reading presents a judicial fiction and is subjective. Plainly put, the public policy of C.P.L.R. § 213-a bare on its face is simply this: Tenants must bring their rent overcharge claims within four years of the first overcharge, or else their claim is time barred. C. The Express Language and Public Policy of N.Y. Code § 26- 516(a)(2) Precludes a Tenant from Recovering Treble Damages on a Willful Rent Overcharge Complaint Based On an Overcharge More than Two (2) Years from When the Complaint is Interposed Respondents may not recover treble damages on a willful overcharge having occurred more than two (2) years from when they commenced this action. New York City Administrative Code § 26-516(a) permits the recovery of treble damages only for the “willful” collection of rent above the legally authorized rent. 39 However, even the treble damages penalty has a statute of limitations, shorter than the four year codified period, which both the Appellate Division and the motion court failed to address. No penalty of three times the overcharge may be based upon an overcharge having occurred more than two years before the complaint is filed or upon an overcharge which occurred prior to April first, nineteen hundred eighty-four. . . . This paragraph shall preclude examination of the rental history of the housing accommodation prior to the four-year period preceding the filing of a complaint pursuant to this subdivision. N.Y. Code § 26-516(a)(2)(i) (West 2014) (Emphasis Added). What this means is that not only are Respondents barred from recovering treble damages for an overcharge that first occurred in April 2003 - more than two (2) years from when they interposed a counterclaim in April 2009, but Respondents were required to bring their overcharge complaint by November 2005 to recover treble damages at all. The Legislative purpose of this shorter limitations period on treble damages recovery is implicit. First , it rewards tenants who regularly inspect the rent history for their rent stabilized unit on an annual basis, to see if they are being charged a rent above the regulated threshold and then encourages them to timely commence an overcharge proceeding; preferably two years from when they assumed the leasehold and paid an unlawful rent. Second, and more importantly it discourages tenants who wait until the latter half of the four year limitations period to expire, 40 from getting a windfall of treble damages based on an overcharge that occurred once they took possession. Otherwise, tenants who sign two-year leases and learn or suspect that they are being charged more than the regulated rent need only wait until the end of the four year period to assert a rent overcharge claim and collect the maximum treble damages award possible. Landlords too are protected by the statute, from unscrupulous tenants seeking exorbitant recoveries for an unlawful rent, even where the landlord’s overcharge is deemed willful. Accordingly, under the N.Y. Code § 26-516(a)(2)(i), Respondents are not entitled to maintain a claim for treble damages on a willful overcharge, and their claim must be denied. D. Neither Grimm, Cintron, Nor Thornton create an Exception to the Four Year Statute of Limitations Period The authorities upon which Respondents are expected to rely in asserting that there is a fraud exception to the four-year statute of limitations to the rent regulation laws do not support this fiction. Grimm, companion case Cintron and Thornton all affirm the four-year statute of limitations period before carving out exceptions to the interstices of the New York City Administrative Code. 41 i. There is No Fraud-Exception to the Four-Year Statute of Limitations in Grimm The issue of whether DHCR properly calculated petitioner-tenant’s overcharge claim on the “base date” was decided in Grimm v. State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin., 15 N.Y.3d 358, 938 N.E.2d 924 (2010). And again, the Court of Appeals reiterated, “[a]s we have previously explained, rent overcharge claims are generally subject to a four-year statute of limitations,” id. at 364, citing to Rent Stabilization Law § 26-516(a)(2) and CPLR R. 213-a. In Grimm, tenant-petitioner moved into a rent stabilized apartment in 2004 at a rental rate of $1,450 per month, and subsequently filed a rent overcharge complaint with DHCR in July 2005. The tenant plaintiff in Grimm, unlike the Respondents herein, timely commenced her rent overcharge claim, well within the four year limitations period. DHCR denied tenant’s overcharge claim “on the ground that the rent on the ‘base date’– i.e., the date four years prior to the filing of the complaint – was $1,450, and the rent adjustments subsequent to the base date had been lawful.” Id. at 363. The Court of Appeals held that DHCR, “at a minimum [should have] examined its own records to ascertain the reliability and the legality of the rent charged on that date,” id. at 367, and that, the rental history [beyond the four-year look back period proscribed by statute and the C.P.L.R.] may be examined for the limited purpose of determining whether a fraudulent scheme to destabilize the 42 apartment tainted the reliability of the rent on the base date. . . . warrant[ing] the use of the default formula when calculating any rent overcharge that may have occurred. Id. (emphasis). The Appellate Division’s new “significant fraud on the record” exception to C.P.L.R. § 213-a’s decisive command, exceeds the limited purpose for which this Court granted a look back period in Grimm. In essence, the Appellate Division took the Grimm Court’s limited purpose for indicia of fraud on the base date to reason that if significant fraud effects the base date rent- i.e., the rent amount listed in the annual rent registration statement filed four years prior to the most recent annual registration statement – in this case, the most recent registration statement on file for Plaintiff’s unit was 11/10/08 (R. 71) - $180021, then the statute of limitations does not apply at all. But as already explained, that rent cannot be challenged at any time after 11/10/08 under N.Y. Code § 26-516(a) because the registration statement from 11/08/04 was not challenged while Respondents lived in the unit for four consecutive years. 22 The Appellate Division’s reasoning is flawed because it begins with a faulty premise that the base date rent of $1800 was subject to challenge at any time after 21 This was the rent filed in the DHCR annual rent registration statement for Plaintiffs’ unit on 11/01/04 (R. 141) 22 See Section I.B. supra for a discussion of rent registration statements and the prohibition on challenging rents in recent statements when the statements from four years earlier have gone unchallenged. 43 November 2008, due to fraud or otherwise, and that upon such challenge was unlawful. It was not. The Legislature unequivocally protected property owners’ rights to collect registered rents after four years of a tenant not challenging the rent registered with DHCR. Particularly, as here, where the fraud alleged pre-dates by more than a year the November 2004 rent registration statement, and pre-dates the filing of this action for rent overcharge by nearly six (6) years. And unlike the landlord in Grimm who filed a four-year backlog of annual rent registration statements all at once only after Sylvie Grimm commenced her rent overcharge lawsuit, Grimm at 363, Megan Holding LLC duly filed annual rent registration statements for Plaintiffs’ unit with DHCR; giving Respondents year, after year, after year, after year the opportunity to challenge their rent as unlawful. They forfeited that opportunity that other tenants like Grimm timely seized, and with it the ability to maintain this action for an unlawful rent. Grimm does not create a fraud exception to C.P.L.R. § 213-a’s Mandatory Limitations Section. The Appellate Division’s Order affirming the motion court’s grant of summary judgment on Respondents’ rent overcharge complaint was error. ii. There is No Fraud-Exception to the Four-Year Statute of Limitations in Cintron The Court of Appeals in Matter of Cintron v. Calogero, 15 N.Y.3d 347 (2010) discussed calculation of the base date for tenant’s rent overcharge claim 44 interposed more than two decades after tenant successfully petitioned the DHCR for rent reduction orders that remained in effect. Within one year of moving into the leasehold, the Cintron tenant-petitioner filed a complaint with DHCR in 1987 and then again in 1989. DHCR issued rent reduction orders in response to each complaint but the landlord and its successors failed to comply, instead charging tenant increasingly higher monthly rents. The DHCR rent reduction orders were to be calculated according to guidelines then in effect. When tenant brought his overcharge complaint in February 2003, DHCR refused to calculate tenant’s rent overcharge claim with a base date of December 1999 to include the 1987 and 1989 rent reduction orders still in effect at the time tenant brought his overcharge complaint, since the rent reduction orders were more than four (4) years beyond the complaint. Before The Court of Appeals decided whether DHCR properly calculated petitioner’s overcharge claim, it reiterated CPLR § 213-a and Rent Stabilization Law § 26-516(a)(2)’s clear statutory mandate. “Regardless of the forum in which it is commenced, a rent overcharge claim is subject to a four-year statute of limitations.” Id. at 353 (emphasis added). The Court then went on to reject DHCR’s reliance on the regulation, New York City Administrative Code § 26-516(a)(2)’s limitation of recovery to the four years preceding the filing of an overcharge complaint, because the interpretation 45 was inconsistent with Rent Stabilization Law § 26-514’s bar against a landlord recovering any rent increases while a rent reduction order is in effect. (Both the 1987 and 1989 rent reduction orders were still in effect during the four-year “look back period” prior to petitioner’s overcharge complaint). Thus, their inclusion into DHCR’s proper rent calculation was required. Id. at 356. It was the landlord’s failure to comply with a rent reduction order, in effect when the tenant commenced his rent overcharge suit in February 2003 more than a decade-and-a-half after moving in, and continuously paying rent which made the Cintron tenant’s complaint timely. Unlike the tenant in Cintron, Respondents Conason and Bryant have not shown that any rent reduction order was in effect during the four-year period: November 1, 2003 through October 31, 2007, within which they needed to prosecute their rent overcharge claim. Accordingly, their 2009 rent overcharge claim was time-barred then, just as it is time-barred now. iii. Finding of Fraud Does Not Toll or Except the Mandatory Limitations Period in Thornton The Court of Appeals decision in Thornton v. Baron, 5 N.Y.3d 175, 800 N.Y.S.2d 118 (2005) set the precedent for the narrow fraud-exception articulated in Grimm. As was the case in Grimm and Cintron, plaintiff-subtenant Thornton timely commenced his rent overcharge action against the tenant of the apartment, 46 within four years of taking possession, around or about December 1992. Id. at 178, 179. In Thornton, the tenant of the Apthorp building engineered a sophisticated scheme wherein the landlord/owner removed at least six apartments from rent stabilization protections by designating them as nonprimary residences, to garner rents in excess of the rent stabilized threshold.23 Subtenants like plaintiff Thornton participated in the scheme, paying significantly overpriced rent while falsely representing that the apartment was their nonprimary residence. The Thornton Court only decided one question in the case of such illusory tenancies: How is the legal regulated rent of the apartment to be established? Id. at 180. Before answering the question, the Court of Appeals endorsed the lower court’s correct interpretation of the Rent Regulation Reform Act of 1997 (“RRRA”). RRRA “clarified and reinforced the four-year statute of limitations applicable to rent overcharge claims by limiting examination of the rental history of housing accommodations prior to the four-year period preceding the filing of an overcharge complaint.” Id. Presaging the exact situation adjudicated five years later in Cintron, supra, the Court was careful to distinguish Thornton from a case, “where an order issued prior to the limitations period imposed a continuing obligation on a landlord to reduce rent, such that the statute of limitations would be 23 Nonprimary residences were exempted under New York’s Rent Stabilization Law. 47 no defense to an action based on a breach of that duty occurring within the limitations period.” Id. And because Plaintiff Thornton only joined the landlord/owner as a defendant in his amended complaint in 2000 -- four years after filing his rent overcharge claim against the Baron tenants in 1996, the Court disallowed review of “the apartment’s rental history before November 1996 … and the $507.85 rent in effect in 1992 is of no relevance.” Id. Yet, underlying fraud did prove relevant to the central question posed of how to establish the legal regulated rent. Rewarding neither plaintiff nor defendant for their collusive scheme –which involved obtaining fraudulent declaratory judgments using the courts, the Thornton Court ultimately affirmed the Appellate Division’s choice to use DHCR’s default formula, “when no reliable rent records are available,” id. at 181, to fix the base date for the rent overcharge. Thornton does not stand for the proposition that a fraudulently tainted rent base date, whether effected by a landlord’s creation of illusory tenancies or fabricated exemptions to the Rent Stabilization Law, revives an untimely brought rent overcharge claim. In fact, the Appellate Division, First Department’s decision in Thornton, later affirmed by the Court of Appeals Thornton v. Baron, supra, 5 N.Y.3d 175, explained that there is no tolling of the limitations period. Referring to the rent overcharge statute, C.P.L.R. § 213-a, the First Department held, “[t]he 48 statute of limitations contains no provision for a toll while a dwelling unit is not subject to rent stabilization, either because it is temporarily exempt or because an unlawful rent is being charged.” Thornton v. Baron, 4 A.D.3d 258, 259 (1st Dep’t 2004). The Civil Court’s findings of a fraudulently set rent, bootstrapped by the motion court and Appellate Division to hold Megan liable for rent overcharge, did not toll the four years Plaintiffs had to commence the instant action. In other words, even if as Respondents allege they were charged an unlawful rent, thereby removing the dwelling from the Rent Stabilization Law, they still had up through October 31, 2007, four-years from when their claim accrued November 1, 2003, to bring their claim. They even had up through November 2008 to challenge their current rent and bring an action to declare the legal regulated rent for their units. Respondents allowed both windows to close. See N.Y. Code § 26-516(a). Thus, the motion court’s application of the Thornton default rule to the stale Complaint was at best, academic, if not entirely superfluous. The line of authority from Thornton, Grimm and Cintron, are consistent and unwavering in placing the burden on tenants seeking to bring overcharge claims to do so within four years of the first alleged overcharge –i.e., when tenants first take possession and pay an unlawful rent. (See Myers v. Frankel, supra, 740 N.Y.S.2d at 367). Respondents’ rent overcharge claim is time-barred as a matter of law. Their summary judgment 49 motion should have been denied and Defendants-Appellants’ cross-motion for summary judgment dismissing the Complaint on C.P.L.R. § 213-a grounds, granted. While Grimm, 15 N.Y.3d 258, and Thornton, 800 N.Y.S.2d 118, undeniably created an exception to C.P.L.R. § 213-a’s Reinforcement Section - “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” id. at 366, it along with its companion and predecessor cases, Cintron v. Calogero, 15 N.Y.3d 347, 912 N.Y.S.2d 498 (2010), and Thornton v. Baron, 5 N.Y.2d 175, 800 N.Y.S.2d 118 (2005), respectively, never dispensed with the Mandatory Limitations Section, the threshold requirement necessary to even maintain a cause of action for residential rent overcharge. “Regardless of the forum in which it is commenced, a rent overcharge claim is subject to a four-year statute of limitations (see Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26–516 [a][2].” Cintron, 15 N.Y.3d 347, 353; (“As we have previously explained, rent overcharge claims are generally subject to a four-year statute of limitations…” Grimm 15 N.Y.3d at 364 (2010) citing to the RRRA’s clarification and reinforcement of the statute of limitations); Thornton v. Baron, 5 N.Y.3d 175, 180 (2005) (the RRRA “clarified and reinforced the four-year statute of limitations applicable to rent overcharge claims (see Rent 50 Stabilization Law of 1969 [Administrative Code of City of NY] § 26–516[a] ) by limiting examination of the rental history of housing accommodations prior to the four-year period preceding the filing of an overcharge complaint.” In all three cases, Cintron, Grimm and Thornton this Court’s understanding that the four year statute of limitations governs rent overcharge claims, is supported not just by looking to the plain statutory language, but using common sense and applying it to the facts of those cases. Basically, all of the tenants in each of the foregoing cases commenced their suit for a residential rent overcharge within four years of taking possession of their rent stabilized unit and paying an unlawful rent. Plaintiffs Conason and Bryant cannot count themselves among this group of tenants who timely prosecuted their rights to recover damages under the Rent Stabilization Laws. More importantly, they do not offer any justification or explanation, identifiable in the record below, for their delay in bringing this garden variety overcharge claim one year and six months after their claim expired under the statute. The Appellate Division’s rule pardons Plaintiffs’ inexcusable delay by refocusing on Defendants’ alleged misconduct. The Appellate Division used findings from Respondents’ dismissed overcharge claim in Civil Court – i.e., “bootstrapped findings of fraud” or dicta: a fictitious tenant, “nonexistent improvements”, as the basis for its wholly manufactured rule that “the four year 51 statute of limitations is not a bar in a rent overcharge claim where there is significant evidence of fraud on the record.” (R. 638). Aside from contradicting the Legislature’s four-year mandate: that no judge or DHCR may go back more than four years from when a complaint is filed to determine that there has been a rent overcharge, the rule both impermissibly allows entry into the record of fraud, which for reasons of time etc. may not be rebutted, and goes far beyond the controversy before it. It seemingly springs out of a misplaced concern for future tenants of Plaintiffs’ unit who may be stuck with paying an unlawful rent, all because these Plaintiffs sat on their rights and waited until their claim had long ago expired- i.e., tenants whose claims and rights are hypothetical and remote, neither ripe for adjudication nor properly before that court. (R 638-639). See Church of St. Paul and St. Andrew v. Barwick, 67 N.Y.2d 510, 518, 505 N.Y.S.2d (1986) (the Court will not squander judicial resources on controversies that are not ripe with actual, rather than hypothetical disputants on claims that are remote, or injuries that may never occur). Ironically the rule forgets the Appellate Division’s own admonition to itself “that, neither the Appellate Term nor this Court may develop its own ‘common- law jurisprudence’ in an area as thoroughly legislated and highly regulated as the rent stabilization laws in New York City by ignoring the plain language of a 52 statute, its clear legislative intent, and binding case law precedent of this Court apply the statute.” First Hudson Capital, LLC v. Seaborn, 54 A.D.3d 251, 253 (1st Dep’t 2008). Under the Appellate Division’s time-bending, “Back to the Future” rationale for invoking legislative powers24, it is the future tenants of Respondent-Plaintiffs’ rent stabilized unit, and not the actual Plaintiffs herein, who come back to the present to rescue their stale rent overcharge claim barred by the four year limitations period. The Appellate Division’s concern is as unfounded as it is unconvincing. Because if Sylvie Grimm could successfully challenge a fraudulently set rent base date set more than four years before she moved into her rent stabilized unit, in 2004, pay an inflated rent above the regulated threshold like the tenants immediately before her had done, and manage to prosecute her claim well within four years of the first overcharge, Grimm, 15 N.Y.3d at 362-363, these Respondent-Plaintiffs could have, and should have done the same. Their failure to follow a timely path modeled by Grimm consistent with the statute, effects a total bar to their rent overcharge complaint now. So says the Legislature. 24 See N.Y. Const. art III, § 1, “The legislative power of this state shall be vested in the senate and assembly.” 53 E. The Legislative History Of The RRRA’s Amendments to the C.P.L.R. and New York City Administrative Code Amplifies the Unambiguous, Plain Language of C.P.L.R. § 213-a, Precluding Stale Rent Overcharge Claims Brought More Than Four Years From the First Overcharge The passage of the Rent Regulation Reform Act in 1997 with its corresponding amendments to the Rent Stabilization Law, Administrative Code of the City of New York § 26-516, and the C.P.L.R. represented perhaps the most contentious battle for rent regulation reform since rent regulated housing stock emerged as part of the New York City housing stock during WWII. But its origins impart a necessary context to this enacted law which still generates challenges to this mandate, even today as evidenced by the instant appeal. The Legislative History of the RRRA amplifies the Legislature’s intention that the plain and ordinary meaning of the C.P.L.R. § 213-a statute be loud and clear. And that such amplified intention for clarity in the rent overcharge statute was the product of legislative compromise - the time for which passing on, weighing in, and challenging the respective positions, closed long ago ceased once enacted. The Appellate Division’s Order attempts to revisit settled law. 54 i. The Highly Charged Political Climate Leading Up to the RRRA’s Enactment on June 19, 1997, Demonstrates that Reforms to Rent Laws Was a Compromise that All New Yorkers Settled Upon Reform to the Rent Stabilization Laws largely pitted tenants against landlords and vice-versa, in what was largely perceived as landlords’ efforts to ultimately phase out all rent regulations and bring the housing stock, estimated at over a million units by some measures25, to current market levels. (See Add. 7-17; 43- 48; 77, 82, 95-98; 111-114). The New York Legislature was “under the gun” to enact measures to bridge the gap of the then expiring schemata of New York’s rent regulation laws26 set for June 15, 1997, but the Senate and Assembly chambers were deadlocked on a version of the bill that could pass both houses. (Add. 120-121) With the Democratic-lead Assembly declaring reform as a “war on the middle class”27 and the New York Republican-lead Senate leading the charge to abandon all rent protections and government suppression of market forces that it believed were impairing the quality and quantity of housing stock. (Add. 95-99 ), then Governor 25 George F. Will, Big Scare In the Big Apple, Newsweek, May 26, 2997; see also Elizabeth Kolbert, Studies Suggest Tenants In Upscale Neighborhoods Would Be Hit the Hardest, N.Y. Times, Metro, April 06, 1997. 26 For a good summary of the evolution of the Rent Regulation and Reform see Warren Estis and Jeffrey Turkel, The Impenetrable Thicket: Unauthorized History of New York State and City Rent Laws, New York Law Journal, June 18, 1997. 27 See Sheldon Silver, Stop rent war on middle class, N.Y. Daily News, June 04, 1997. 55 George Pataki had to even issue an Executive Order to maintain tenant protections in the event the Rent Control and Rent Stabilizations Laws lapsed, as they eventually did for five (5) days. (Add. 28-30). In the end, it was the Governor who eventually brokered a deal28 (Add. 113, 01/16/14 Governor’s Press Release) that brought an end to the standoff between the Senate and the Assembly with the passage of the RRRA on June 19, 1977; passed in the Senate by a virtual unanimous 58 to 2 vote, but found a more vociferous challenge in the Assembly with a 93 to 53 vote. (Add. 3-6). The deal was widely regarded as a victory for tenants, particularly those in New York City, New York’s downstate region and a defeat for landlords seeking to end the protections returning the housing stock to the open market. Assembly Speaker and sponsor of the Assembly version of the RRRA declared in a press release: [W]e have fought back efforts to create a system that would have resulted in harassment of tenants and a rent market that would have seen a devastating rise in rents and the ruin of the downstate region. . . . This has been a long and difficult fight. But as I promised when the rent war was begun in December, my first priority would be to maintain middle-class families in New York. We have 28 See Raymond Hernandez, Entering Debate, Governor Offers Rent Compromise: A Shift to Center, N.Y. Times METRO, May 12, 1997 ( “In his first attempt to broker a compromise on rent regulations, Gov. George E. Pataki today proposed lifiting protections for a small number of wealthy tenants immediately and appeared to lay the groundwork for a broader plan to remove controls from apartments as they become vacant. The proposals set a middle ground between Republicans in the State Senate who want to abolish the current rent regulation and Democrats in the Assembly who want to preserve them.”); See also John Caner, Thousands rally at state Capitol for rent control, Times Union, May 21, 1997 at A-1. 56 succeeded in protecting you. I declare victory on your behalf. (Add. 121). The tenants were not the only victors in this protracted six month battle however, securing a number of victories for their constituency – e.g., new tenant protections making landlord harassment a crime with hefty fines and jail time, defeating landlord lobbyists’ efforts to remove units from rent regulation upon death or vacancy of a tenant, and so on. Landlords gained important concessions from this legislative compromise. Chief among this group’s extracted concessions was the strengthening of a four year statute of limitations for residential rent overcharge claims. ii. The Legislature Intended to Codify a Four Year Statute of Limitations for Rent Overcharge Actions Not Susceptible to Judicial or Administrative Override In the Assembly’s Memorandum summarizing what specific provision of the RRRA would do, in no uncertain terms the Assembly says it will “codify a four- year statute of limitations for contesting rent overcharges.” (Add. 22 ) The Senate echoes the identical intent in the accompanying memorandum that the RRRA is “[a]n Act to…[among other things] amend the civil practice law and rules, in relation to a four year statute of limitations for residential rent overcharges…” (Add. 2). The Governor’s Memorandum accompanying the Assembly Bill introduced it as part of his 1997 Legislative Program which “reforms rent 57 regulation in New York State…” One of those reforms targeted the statute of limitations for residential rent overcharges: A number of regulatory reforms are included in the legislation to simplify the administration of rent laws while protecting the rights of tenants and owners. First, the four-year statute of limitations for rent overcharge cases has been reinforced by prohibiting challenges to the rent or the service of any registration four years prior to the most recent registration statement. Examination of the rental history by the Division of Housing and Community Renewal (DHCR) or a court with concurrent jurisdiction is limited to the four-year period prior to the date of the complaint. (Add. 12) (Emphasis Added). The Assembly, the Senate and the Executive Branch-that brokered the RRRA’s passage, were all unified and clear that a four year statute of limitations was the line in the sand for rent overcharge claims seeking recovery for an unlawful rent, thus ensuring a more simplified administration of the rent regulation laws and the protection of property owner’s rights as well. Codification of their uniform intent can be found in the RRRA’s additions and changes to the C.P.L.R. and corresponding portions of the New York City Administrative Code. Of significance to this action, C.P.L.R. § 213-a were altered to read as follows: 58 (Add. 37). And in Section 33 of the RRRA, the Administrative Code of the City of NY § 26-516 was amended to reflect the following addition: Where the amount of rent set forth in the annual rent registration statement filed four years prior to the most recent registration statement is not challenged within four years of its filing, neither such rent nor service of any registration shall be subject to challenge at any time thereafter. (Add. ) (N.Y. Code § 26-516(a) (West 2014)29. The Supreme Court in Gelston v. New York State Div. of Housing and Community…, 177 Misc. 2d 431 (Sup. Ct., Queens County 1998) quoting from a Senate Memorandum perhaps best summarizes the intended design of the RRRA’s changes to C.P.L.R. § 213-a and § 26-516 of the City’s Administrative Code by quoting from a Senate Memorandum in the Governor’s Bill Jacket. The New York State Senator’s Memorandum in Support of the Amendment to the Administrative Code (Bill 29 This limitation to challenges of the regulated rent protects not only landlords but tenants. By encouraging the regular filing of annual rent registration statements, landlords who neglect to do this leave themselves exposed to application of DHCR’s default rule, because generally there are no recent registration statements available upon which a tenant could mount a rent challenge – e.g., Grimm. 59 Jacket, L.1997, ch. 116) stated that the courts in the First Department had ‘erroneously interpreted the language of the statute added in 1993 to the Rent Stabilization Law to permit examination of the rental history of an apartment prior to the four-year period authorized by law’ and that the Appellate Term, Second Department ‘correctly interpreted the Legislature’s intent when it held that the statutory scheme establishes a four-year limitation on the calculation of a rent overcharge and excluded proof of alleged overcharges accruing prior to the four-year period. * * * This legislation is intended to statutorily codify the Legislature’s intent and * * * effectively establish a Statute of Limitation on challenges to rents and rent increases in effect prior to the four-year period [preceding] the filing of an overcharge compliant by a tenant.’ Id. at 435-436. See Appellate Term decision in Zafra v. Pilkes, 661 N.Y.S.2d 515 (App. Term 1st Dep’t 1996) decided April 10, 1996 before RRRA’s enactment but later recalled and reversed by the Appellate Division in Zafra v. Pilkes, 245 A.D.2d 218 (1st Dep’t 1997) after RRRA’s passage, as a prime example of the courts, in the First Department, contrary to N.Y. Code § 26-516(a), errantly upholding expired rent overcharge determinations. “[T]he determination … that neither the four-year Statute of Limitations for rent overcharge complaints … nor the record- keeping provisions relieving a landlord from having to produce records dating back more than four years prior to the most recent registration date… prohibits inquiry into the legality of rent increases prior to the four-year period,” id. at 219 (citations omitted). 60 Both respective amendments bar the courts and DHCR from entertaining challenges to the rent if such challenges are based on a determination of an overcharge having occurred more than four years from the date an overcharge complaint is commenced, as is squarely the case here. Four years is the specific and designated time frame the Legislature intended for tenants to commence an overcharge action. Failure to bring that claim within four years from the first overcharge triggers an automatic double bar against the tenant in possession: Not only is their claim for money damages time barred, but any corresponding challenge to the rent they are paying is also barred. (See N.Y. Code § 26- 516(a)(1). The legislative intent apparent from C.P.L.R. § 213-a’s history profoundly underscores the plain language of the statute, that these tenant Plaintiffs herein triggered the double time bar when they waited more than four years after November 1, 2003 to bring their overcharge complaint. They may not recover on their residential rent overcharge claim for past overcharges or contest future rents as unlawful. The Appellate Division’s new rule openly flouts the statutory proscription and must be reversed as plain error of law. 61 F. A Void Rent Stabilization Lease for Unlawful Rent Does Not An Exception to the Four Year Statute of Limitations, Make Payment of an unlawful rent, not the promises and covenants contained in a rent stabilized lease is the essence of a claim for rent overcharge. In much the same way as the “base date”, while relevant to calculate damages, is irrelevant to the issue of whether a rent overcharge claim was timely interposed, so are the lease terms that may or may not be void on public policy grounds for their incongruity with public policy underlying the rent stabilization statute. In its’ decision affirming the motion court, the First Department stated: We went on to note that “sanctioning the owner’s behavior on a statute of limitations ground can result in a future tenant having to pay more than the legal stabilized rent for a unit, a prospect which militates in favor of voiding agreements such as this in order to prevent abuse and promote enforcement of lawful regulated rents. Matter of Grimm, 68 A.D.3d at 32 quoting Drucker v. Mauro, 30 A.D.3d 37, 40 (2006), lv dismissed 7 N.Y.3d 844 (2006). (R. 637-638). It is noted that in Drucker v. Mauro, 30 A.D.3d at 37, there were no allegations of fraud that led to the court voiding the lease agreement. It was void because it “subvert[ed] a protection afforded by the rent stabilization scheme…” Drucker, 30 A.D.3d at 45. It is respectfully submitted that the voiding of the agreement between Megan and the Respondents does not alter the nature of their claim for rent overcharge, which is still time-barred. A claim for rent overcharge is not dependant on a valid 62 lease agreement, but accrues upon possession and the payment of an allegedly unlawful rent. See Myers v. Frankel, supra, 740 N.Y.S.2d at 367. Further, the voiding of the lease does not operate to toll the statute of limitations. See Thornton v. Baron, 4 A.D.3d 258, 259 (1st Dep’t 2004) (“[t]he statute of limitations contains no provision for a toll while a dwelling unit is not subject to rent stabilization, either because it is temporarily exempt or because an unlawful rent is being charged.”) Finally, because the Respondents have not even interposed a claim for future rent determination, it should not be a consideration since that potential issue is not before the Court, and the statute is clear that if the rent is not challenged within four (4)years, it is not subject to challenge thereafter.30 The issue of future tenants is a non-issue because the Legislature has already addressed the question. G. Settled Canons of Judicial Interpretation, Stare Decisis and Continuity of Law Invariably Point to the Conclusion that this Rent Overcharge Claim is Barred by the Four-Year Statute of Limitations The doctrine of stare decisis, as the Supreme Court of the United States held, is a judicial canon of “special force in the area of statutory interpretation” which in promoting “stability, predictability and respect for judicial authority” is of “fundamental importance to the rule of law,” Hilton v. S. Carolina Pub. Railways Comm'n, 502 U.S. 197, 202, 112 S. Ct. 560, 563, 116 L. Ed. 2d 560 (1991). A 30 See supra. at § I.D.iii. 63 departure from this canon should not come without “compelling justification,” id., or where the sharp break in the continuity of law wreaks more havoc than society’s interest in stability of law will tolerate. Gager v. White, 53 N.Y.2d 475, 483 (1981). The Appellate Division’s Order needs to demonstrate that there is a compelling justification for its sharp break with judicial interpretation of C.P.L.R. §213-a’s express statutory language that shows fidelity to its plain and ordinary meaning. It does not. The weight of authority interpreting RRRA’s statutory reforms to C.P.L.R. § 213-a from not just this Court’s decisions in Grimm, Cintron and Thornton, but within the Appellate Division-First Department and Second Department all consistently hold that four years from the first overcharge is the statute of limitations for rent overcharge claims, without exception. Chief Judge Lippman and a unanimous panel of the First Department applied the straight forward statutory analysis dispositive of plaintiff’s overcharge claim in Direnna v. Christensen, 57 A.D.3d 408 (1st Dep’t 2008) which applies with equal force here. “Plaintiff’s subtenant’s action is time-barred since the first overcharge alleged by him occurred in April 2003 and this action was not commenced until September 2007.” Id. See also, Mozes v. Shanaman, 804 N.Y.S.2d 3, 4 (1st Dep’t 2005) (A claim for residential rent overcharge accrues when the tenants first entered into possession of the subject apartment and paid an 64 allegedly excessive rent); Myers v. Frankel, 740 N.Y.S.2d 366, 367, 292 A.D.2d 575, 576 (2d Dep’t 2002); Brinckerhoff v. New York State Div. of Housing and Community Renewal, 713 N.Y.S.2d 56, 56-57, 275 A.D.2d 622 (1st Dep’t 2000) (‘‘[t]he four-year Statute of Limitations applicable to both administrative and judicial rent overcharge claims, by its terms, commences to run with the ‘first overcharge alleged’”); Thornton v. Baron, 4 A.D.3d 258, 259 (1st Dep’t 2004) (“[t]he statute of limitations contains no provision for a toll while a dwelling unit is not subject to rent stabilization, either because it is temporarily exempt or because an unlawful rent is being charged.”) The Appellate Division gave no reason for its inexplicable departure from Direnna31or any of the foregoing authorities which make decisional law consonant with the Legislature’s statutory intent: Four years from the first overcharge is the maximum period allowed to recover for an unlawful rent. The new rule of law however, unleashes the chaos of Pandora’s box in not just the courts’ previous, consistent application of C.P.L.R. § 213-a, but into the real world obligations of property owners who under this new rule must preserve evidence of rent records 31 Other than a footnote stating that it was decided before this Court’s decision in Grimm (R.639), the Appellate Division attempts no reconciliation of its holding in Direnna with this Court’s holding in Grimm. They are not mutually exclusive of each other as suggested, but present harmonized readings of the different parts of the C.P.L.R. § 213-a statute. (Direnna addresses the Mandatory Limitations Section, the threshold part of the statute to even maintain a cause of action for rent overcharge, whereas Grimm concerns itself the Reinforcement Section, and further constrained by the narrow question of how to calculate the legal regulated rent.. There is no discord between these authorities and Direnna holds true today as it did when it was decided in 2008. 65 indefinitely – that is, if they wish to equally preserve any ability to defend against past, current, and future fraudulent rent overcharge claims; despite the Legislature plainly absolving them of this onerous obligation under the RRRA’s amendments to the rent regulation laws. The Appellate Division’s common law exception to the rule of law comes without any compelling justification, and at the expense of stability in the judicial application of New York’s rent regulation statute. On this basis the Appellate Division’s Order unanimously affirming the Motion Court should be reversed. H. The Underlying Policy Behind All Statutes Of Limitations Forecloses The Appellate Division’s Exhumation By Judge Made Law Of Respondents’ Expired Rent Overcharge Complaint As this Court held in Blanco v. Am. Tel. & Tel. Co., 90 N.Y.2d 757, 773 (1997), “[s]tatutes of limitation were designed to promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared.” Id. at 773 internal citations, quotations omitted). They further multiple objectives through the promotion of repose by which stability in human affairs can be maintained, judicial economy may be achieved, as well as give important consideration to “recognition of self-reformation by defendants, and the perceived unfairness to defendants of having to defend claims long past.” Id. See Baker v. 66 Oakwood, 123 N.Y. 16, 26 (1890), “[I]t is of the nature of the statute of limitations, when applied to civil actions, ‘to mature a wrong into a right by cutting off the remedy’”). Statutes of limitations effectively allow for wrongs to ripen into rights as in the case law dealing with adverse possession and easements by prescription. See Di Leo v. Pecksto Holding Corp., 304 N.Y. 505 (1952); Am. Bank-Note Co. v. New York El. R. Co., 129 N.Y. 252 (1891); Belotti v. Bickhardt, 228 N.Y. 296, 308 (1920) (recognizing adverse possession as an unfavorable but legally valid method of procuring title and settling disputes to title); In re Willard Parker Hosp., 217 N.Y. 1 (1916) (recognizing a trespasser’s building of a wharf or dock on a bulkhead line “may ripen into title by adverse possession”). A fortiori C.P.L.R. § 213-a and N.Y.C Administrative Code § 26-516 embody the quintessential functions of a statute of limitations: cutting off rent overcharge actions brought more than four years from the first overcharge and limiting challenges to the lawful rent to no more than four years from the most recent rent registration statement; both ripening any perceived past wrongs into a right to collect the registered rent without having to defend against stale claims. At the end of the day, statutes of limitations are legislative judgments that may not be dispensed with because a court disagrees with the ineluctable outcomes they rigidly demand. The Appellate Division’s exception to the double limitations 67 period codified in C.P.L.R. § 213-a and N.Y.C Administrative Code § 26-516 are judicial fictions created to redeem what the Legislature said may not be redeemed after a four year period. The “significant fraud on the record” rule of law which appears nowhere in the statutory language to justify the court’s abstention from applying the statute of limitations (Add. 37) defies the plain meaning and spirit of the statute, and is nothing more than the unauthorized exercise of legislative powers by the Appellate Division. “We conclude as we began: however reprehensible the conduct alleged, these actions are subject to the time limits created by the Legislature. Any exception to be made to allow these types of claims to proceed outside of the applicable statutes of limitations would be for the Legislature” to decide. Zumpano v. Quinn, 6 N.Y.3d 666, 677, 816 N.Y.S.2d 703, 708 (2006). Finally, unlike the Legislature’s clear statutory language, the Appellate Division’s Order creates chaos. The Order overrides prior law that a past wrong can be made into a right, permits claims based on memories and records suggestive but not dispositive of fraud, and makes it acceptable for Defendants such as Megan and Ku to have to answer for alleged wrongs in the past which have long been allowed to slumber for more than six years. The Appellate Division’s Order does not account for the instability to business affairs of landlords and lenders occasioned by its new judicial override of the Legislature’s command. Rent 68 records henceforward will always be subject to challenge upon any colorable claim of fraud that need only await the discovery process to be vindicated, regardless of the inherent imbalances in proof to one side or the other when expired claims are exhumed. Property owners, prospective buyers and lenders will never have certainty as to the value of the real property transferred as long as there are any fraud claims that may be brought waiting in the wings until the right time, or until a tenant or former tenant decides to wake up to its rights. II. THE APPELLATE DIVISION’S JUDGE MADE LAW RETROACTIVELY APPLIED TO APPELLANTS MEGAN HOLDING LLC AND EMMANUEL KU EXACTS AN EX POST FACTO LAW PROSCRIBED BY ARTICLE I, §10 OF THE U.S. CONSTITUTION Article I, §10 cl. 1 of the United States Constitution provides in relevant part: No State shall … pass any Bill of Attainder, ex post facto Law… U.S. Constitution, Article I, § 10 (West 2014). The Ex Post Facto Clause of the Constitution has traditionally been recognized to apply to state legislatures, as that is the body vested with law making authority. However, the U.S. Supreme Court has recognized the prohibition to apply to other branches of government, such as the highest courts of a state. “Most 69 prominent is our statement that “[i]f a state legislature is barred by the Ex Post Facto Clause from passing ... a law, it must follow that a State Supreme Court is barred by the Due Process Clause from achieving precisely the same result by judicial construction.” Rogers v. Tennessee, 532 US. 451, 458, 121 S. Ct. 1693, 1698, 149 L Ed 2d 697 (2001). See also United States v. Farris, 448 F.3d 965, 967 (7th Cir. 2006), citing Rogers v. Tennessee, “Although the Ex Post Facto Clause limits the legislature instead of the judiciary, “limitations on ex post facto judicial decisionmaking are inherent in the notion of due process.” The purpose behind the Ex Post Facto Clause’ prohibition was “to assure that legislative Acts give fair warning of their effect and permit individuals to rely on their meaning until explicitly changed… The ban also restricts governmental power by restraining arbitrary and potentially vindictive legislation.” Weaver v. Graham, 450 U.S. 24, 28-29, 101 S. Ct. 960, 964, 67 L Ed 2d 17 (1981) (citations omitted) (emphasis). Civil statutes are not exempt from the ex post facto prohibition by virtue of their designation. Citing to the Supreme Court’s decision in Smith v. Doe, 538 U.S. 84, “[i]n analyzing whether a civil statute constitutes an ex post facto law, the threshold issue is whether the law is penal in purpose or effect—that is, whether it was enacted with an intent to punish,” looking to whether the scheme of the statute is so punitive in effect as to negate any presumption that it is civil in nature. Ciafone v. Kenyatta, 27 A.D.3d 143, 146 (2d 70 Dep’t 2005). Indeed, the Supreme Court acknowledges that civil statutes calling for retroactive penalties like treble damages under trademark counterfeiting statute present ex post facto constitutional problems. Just as the retroactive application of “punitive damages presents serious constitutional question[s]. . .[R]etroactive application of punitive treble damages provisions of Trademark Counterfeiting Act of 1984 ‘would present a potential ex post facto problem’” Landgraf v. USI Film Products, 511 U.S. 244, 281, 114 S. Ct. 1483, 1505-06, 128 L. Ed. 2d 229 (1994). A. The Appellate Division’s Judge Made Law Grafted onto the C.P.L.R. § 213-a Statute Effect an Ex-Post Facto Law Because It alters the Rules of Evidence In the seminal articulation of the Ex Post Facto Clause, Supreme Court Justice Chase explained the various kinds of laws which constitute an Ex post facto law for the purposes of the Constitution’s proscription. I will state what laws I consider ex post facto laws, within the words and the intent of the prohibition. . . Every law that alters the legal rules of evidence, and receives less, or different, testimony, than the law required at the time of the commission of the offence, in order to convict the offender. All these, and similar laws, are manifestly unjust and oppressive. Calder v. Bull, 3 US 386, 390-91, 1 L Ed 648 (1798). The Appellate Division’s Order effectively altered the rules of evidence the Legislature set down in 1997 through the RRRA. Specifically, the Appellate Division rule retroactively applied, 71 allows for evidence of fraud in setting an unlawful rent under the rent stabilization laws to form the basis of a rent overcharge that first occurred in 2003. C.P.L.R. § 213-a as amended by the RRRA 1997, and in effect at the time Megan Holding LLC allegedly committed the fraud, plainly disallowed this kind of proof, “ …and no determination of an overcharge and no award or calculation of an award of the amount of any overcharge may be based upon an overcharge having occurred more than four years before the action is commenced.” In short, the Appellate Division retroactively allowed for the admission of evidence the Legislature prohibited – evidence from more than four years from when Plaintiffs’ brought this action, to summarily convict Megan Holding LLC and its majority owner Ku on a piercing the corporate veil claim, for statutory rent overcharge. Where the Legislature restricted proof of an overcharge more than four years from when the claim was brought, the Appellate Division subsequently altered those rules of evidence to allow for stale proof. Accordingly, the Appellate Division’s new rule of law falls under the strand of the Ex Post Facto Clause binding on state judiciaries, and must be rejected for its outright repugnance to the U.S. Constitution. 72 B. The Appellate Division’s New Rule of Law Is An Ex Post Facto Law Because it is Retroactive With Due Process Implications, and Allows for the Retroactive Imposition of Treble Damages and Attorneys Fees on an Expired Rent Overcharge Claim The troublesome nature of the form assumed by ex post facto laws was poignantly addressed in the Supreme Court’s decision in Stogner v. California, 539 U.S. 607, 123 S. Ct. 2446, 2449, 156 L. Ed. 2d 544 (2003). The Constitution's two Ex Post Facto Clauses prohibit the Federal Government and the States from enacting laws with certain retroactive effects. See Art. I, § 9, cl. 3 (Federal Government); Art. I, § 10, cl. 1 (States). The law at issue here created a new criminal limitations period that extends the time in which prosecution is allowed. It authorized criminal prosecutions that the passage of time had previously barred. Moreover, it was enacted after prior limitations periods for Stogner's alleged offenses had expired. Do these features of the law, taken together, produce the kind of retroactivity that the Constitution forbids? We conclude that they do. Id. at 539, 610. The kind of retroactivity imposed by the Appellate Division’s rule of law creating a judicial exception to, and in contravention of the Legislature’s duly enacted four-year statute of limitations compels the exact same conclusion as in Stogner. The Appellate Division’s “significant fraud on the record” rule of law suspends the effect of the four-year statute of limitations that would otherwise cut off Respondents’ claims in November 2007, by extending the limitations period to April 2009 when their rent overcharge claim was first interposed – six (6) years 73 from the alleged wrongdoing. Next, the rule extends the time in which to commence a rent overcharge proceeding seeking exemplary damages and attorneys fees beyond four years; and beyond two (2) years from when they first paid an unlawful rent if Respondents wanted treble damages. See N.Y. Code § 26- 516(a)(2)(i). Finally, this extension of the limitations period on a fraud basis comes well after - one year and six months - the enacted statutory period the Legislature designated for Respondents’ rent overcharge claim expired. “The very labels given “punitive” or “exemplary” damages, as well as the rationales that support them, demonstrate that they share key characteristics of criminal sanctions.” Landgraf v. USI Film Products, 511 U.S. 244, 281, 114 S. Ct. 1483, 1505, 128 L. Ed. 2d 229 (1994).32 And retroactive imposition of these types of damages presents ex post facto problems. Id. There are no two ways about the Appellate Division’s new rule of law: It is the epitome of an Ex Post Facto Law. With its retroactivity, compounded by its retroactive and unjust imposition of treble damages - damages signifying sanctions of a criminal nature, the Appellate Division’s oppressive rule simply cannot stand under the weight of the U.S. Constitution’s Ex Post Facto Clause. 32 See Ross v. Louise Wise Services, Inc., 8 N.Y.3d 478, 836 N.Y.S.509 (2007), explaining “Punitive damages are permitted when the defendant's wrongdoing is not simply intentional but 'evince[s] a high degree of moral turpitude and demonstrates such wanton dishonesty as to imply a criminal indifference to civil obligations’” Id. at 489. 516. 74 Therefore, the new rule of law must be struck down for its repugnance to the Constitution. And upon striking it from the jurisprudence of this State on the administration of our rent regulation laws, return to the pristine, crisp articulation of the statute of limitations that is C.P.L.R. § 213-a, and dismiss this rent overcharge action with ancillary claims, as time barred. III. THE APPELLATE DIVISION ERRED IN AFFIRMING THAT STATUTES OF LIMITATIONS ARE CALCULATED BACKWARDS The Appellate Division Order erred in affirming the lower court’s, finding that statutes of limitations are calculated backwards from the time a complaint is interposed, the lower court’s incomplete application of the collateral estoppels doctrine to dicta on a dismissed overcharge claim in Civil Court, the lower court’s improper piercing of Megan Holding LLC’s corporate veil on summary judgment to hold Emmanuel Ku personally liable for Plaintiffs’ damages, treble damages and attorneys fees. “The time within which an action must be commenced, except as otherwise expressly prescribed, shall be computed from the time the cause of action accrued to the time the claim is interposed.” C.P.L.R. § 203(a). A limited exception to this general rule is the doctrine of equitable recoupment. Under this doctrine stale counterclaims arising from the “transactions, occurrences, or series of transactions 75 or occurrences, upon which a claim asserted in the complaint depends […] [are not time] barred to the extent of the demand in the complaint…” C.P.L.R. § 203(d). However, the recoupment doctrine does not allow for an affirmative grant of relief or judgment on stale counterclaims. See Enrico & Sons Contracting, Inc. v. Bridgemarket Assoc., 675 N.Y.S.2d 351, 252 A.D.2d 429 (1st Dep’t 1998) (describing the doctrine as “really a defense, as it denies the validity of plaintiff’s claim in the amount claimed, and does not entitle defendants to any affirmative relief or any amounts in excess of the amount demanded by plaintiff” id. at 430). While Respondents’ counterclaim arises from the same transactions or occurrences as Megan’s petition for rent nonpayment filed in April 2009, under equitable recoupment, the counterclaim could only be a defense to the approximately three months of back rent allegedly owed, but nothing more. Thus at best, Respondents could have only offset their overcharge claim, now alleged to be at $172,743.21 with treble damages, against Megan’s petition for back rent, $4,174.16. The excess is not recoverable, and therefore cannot serve as the basis for the affirmative relief sought in the instant Supreme Court Complaint. In short, equitable recoupment is not a run-around back door though which Respondents may ram their expired rent overcharge claim. Finally, C.P.L.R. § 213-a actually tells how to calculate when a cause of action accrues, starting with the first overcharge. So the lower court’s misplaced 76 belief that one starts with the date a claim for rent overcharge is interposed to count four years backwards from there to make the claim timely flies in the face of the statutory language and the general guidance in the C.P.L.R. The Appellate Division should be reversed. IV. THE APPELLATE DIVISION ERRED IN AFFIRMING THE MOTION COURT MISAPPLIED COLLATERAL ESTOPPEL TO THE CIVIL COURT’S UNDERLYING FINDINGS OF FRAUD ON THE DISMISSED RENT OVERCHARGE COUNTERCLAIM The motion court, as with CPLR R. 213-a, misapprehended and incorrectly applied the collateral estoppel doctrine to the Civil Court’s fraud findings on Respondents’ claim for treble damages and attorney fees. Collateral estoppel, “permits in certain situations the determination of an issue of fact or law raised in a subsequent action by reference to a previous judgment on a different cause of action in which the same issue was necessarily raised and decided.” Gramatan Home Investors Corp. v. Lopez, 46 N.Y.2d 481, 485, 414 N.Y.S.2d 308, 311 (1979). “[C]ollateral estoppel effect will only be given to matters ‘actually litigated and determined’ in a prior action.” Kaufman v. Eli Lilly and Co., 65 N.Y.2d 449, 456, 492 N.Y.S.2d 584, 589 (1985) (internal citations omitted); see also Petersen v. Lysaght, Lysaght & Kramer, P.C., 672 N.Y.S.2d 398, 398-400, 250 A.D.2d 581, 582 (2d Dep’t 1998) (citing Kaufman v. Eli Lilly , on the requirements to satisfy 77 collateral estoppel). Because the issue of Respondents’ rent overcharge though raised, was not necessarily decided in the Civil Court action, but in fact dismissed, Defendants-Appellants Megan and Ku were not “estopped from challenging the Civil Court’s determination that the base date for determining the rent overcharge is April 9, 2005 and that the rent charged to Respondents was fraudulently established.” A. Not Only Was The Rent Overcharge Issue Never Fully Litigated or Decided, It Was Dismissed By the Civil Court Contrary to the motion court’s conclusion of law, collateral estoppel does not apply in the Supreme Court action against Megan or Ku.33 Collateral estoppel applies when (1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was actually litigated and decided, (3) there was a full and fair opportunity to litigate in the prior proceeding, and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits. Alamo v. McDaniel, 841 N.Y.S.2d 477, 481, 44 A.D.3d 149, 153 (1st Dep’t 2007) (citing to Ryan v. New York Tel. Co., 62 N.Y.2d 494; Gramatan Home Investors Corp. v. Lopez, 46 N.Y.2d 481); See also, Comi v. Breslin & Breslin, 683 33 In fact, collateral estoppel applies to the Respondents’ overcharge claim as the findings the Civil Court made with respect to the Respondents’ rent were necessary to the final judgment on a breach of the warranty of habitability. For that reason alone, the Respondents are not entitled to any relief on their overcharge claim. (R. 57-64). 78 N.Y.S.2d 345, 257 A.D.2d 754 (3d Dep’t 1999) (there must be an, “identity of issue which has necessarily been decided in the prior litigation” to invoke the collateral estoppel do ctrine). Id. at 349, 757. Setting aside the fact that Emmanuel Ku was not a named party in the Civil Court action who could be estopped from challenging that court’s findings, Megan was denied adequate time to retain trial counsel to rebut the charge of a fraudulent rent overcharge. Seven weeks at the end of summer to find trial counsel at the eleventh hour does not constitute a “full and fair opportunity to be heard.” Furthermore, there is no identity of the issues decided between the Supreme Court action and the Civil Court case. The Civil Court case only resolved and reduced to a valid, final judgment the issue of breach of the warranty of habitability and corresponding rent abatement for $23,249.76. No other valid and final judgment (except for attorneys’ fees on the warranty claim only) was rendered on the merits. B. The Civil Court’s Findings of Fraudulently Based Rent Were Not Necessary to Support the Final Judgment on Breach of the Warranty of Habitability and Rent Abatement “Language that is not necessary to resolve an issue, however, constitutes dicta and should not be accorded preclusive effect.” Pollicino v. Roemer and Featherstonhaugh P.C., 716 N.Y.S.2d 416, 417, 277 A.D.2d 666, 668 (3d Dep’t 79 2000). See Sahn v. AFCO Industries, 597 N.Y.S.2d 294, 295, 192 A.D.2d 480, 481 (1st Dep’t 1993) (where the prior federal court action did not decide the issue presented in the second state court action - that of Appellant-Defendant’s negligence or recklessness in advising plaintiff, the federal court’s finding of plaintiff’s failure to disclose relevant medical information to Appellant-Defendant, “was merely dictum wholly unnecessary to the Federal Court’s holding,” thus collateral estoppel would not apply). The Civil Court’s findings: that (1) the base date for the rent overcharge claim was April 5, 2005, (2) Megan “created an entirely fictitious tenant” with a fictitious renovation to “boost the regulated rent,” and that the rent on the base date was affected by Megan’s fraud, were not necessary to its final judgment that Megan “breached the warranty of habitability from January 2004 through the time of trial.” Therefore, these findings should not have been accorded preclusive effect in the 2011 Supreme Court action for any purpose, and certainly not to support an award of treble damages and attorney fees. C. The Entirety of the Civil Court’s Factual Findings and Conclusions of Law on The Rent Overcharge Was Dicta, Not Entitled to Preclusive Effect in the Supreme Court Action Preclusive effect will not be given to a court’s statements made in a previous action that were not essential to its disposition of the case, but are regarded as 80 “mere dicta, unrelated to the issue actually litigated on the merits.” Jackson v. Board of Educ. of City of New York, 812 N.Y.S.2d 91, 94, 30 A.D.3d 57, 59 (1st Dep’t 2006). Since the Civil Court’s findings of fraud were not essential to the ultimate disposition of the case, nearly half of the decision and order is dicta. The Supreme Court erred twice by first deciding the issue of Megan’s alleged fraud on Respondents’ motion for summary judgment, and yet again by according preclusive effect to the Civil Court’s dicta. Accordingly, the Appellate Division erred in affirming the motion court’s award of treble damages and attorney fees should be reversed, Respondents’ summary judgment denied, and the Complaint dismissed for failure to state a claim, as a matter of law. V. THE APPELLATE DIVISION ERRED IN AFFIRMING RESPONDENTS’ FAILURE TO CARRY THEIR HEAVY BURDEN OF A PARTICULARIZED SHOWING THAT, (1) EMMANUEL KU IS MEGAN’S ALTER EGO, WHO, (2) USED THE LLC TO COMMIT A WRONG AGAINST RESPONDENTS, WARRANTING THE MOTION COURT’S PIERCING THE CORPORATE VEIL “Veil-piercing is a fact-laden claim that is not well suited for summary judgment resolution.” First Bank of America v. Motor Car Funding, Inc., 690 N.Y.S.2d 17, 22, 257 A.D.2d 287, 294 (1st Dep’t 1999). A party seeking to pierce the corporate veil must allege “with the requisite ‘particularized statements detailing fraud or other corporate misconduct,’ facts that would warrant piercing the corporate veil […] especially since ‘an inference of abuse does not arise 81 …where a corporation was formed for legal purposes or is engaged in legitimate business.’” Sheridan Broadcasting Corp. v. Small, 798 N.Y.S.2d 45, 47,19 A.D.3d 331, 332 (1st Dep’t 2005) (internal citations omitted). Despite the absence of facts demonstrating that Megan Holding LLC was not formed for a legal purpose, that its ownership and its operation of the building was not a legitimate business, or any detailed, particularized statements of corporate misconduct, the motion court pierced Megan’s veil on summary judgment for rent overcharge. If anything, the pithy facts – littered with Respondents’ prejudicial, irrelevant submissions besmirching Emmanuel Ku’s reputation as a landlord (R. 215-236) -- upon which the motion court rendered judgment, favored dismissal of their extraordinary claim for relief. A. Proof that Emmanuel Ku is a 99% of Megan Is Insufficient By Itself to Pierce the Corporate Veil Emmanuel Ku’s majority stake in Megan cannot alone support a finding of dominion. Respondents’ proof failed to show Ku’s purported dominion of the limited liability company, while Respondents were allegedly charged an unlawful rent. Respondents’ stale rent overcharge claim is not a wrong or unjust act sufficient to pierce the corporate veil. Therefore, in all material respects, Respondents’ piercing the corporate veil claim fails as a matter of law. 82 i. Emmanuel Ku’s Majority Stake in Megan Does Not By Itself Constitute Dominion Over the Entity Standing alone, and contrary to the lower court’s determination, affirmed by the Appellate Division, Emmanuel Ku’s 99% (ninety-nine percent) stake in Megan does not meet the required showing of complete dominion on a piercing claim. “Piercing the corporate veil requires a showing that the controlling party exercised complete dominion over the corporation during the […] transactions at issue, and used that power to commit fraud or other dishonest acts which resulted in injury to the complainant.” Matter of Glenn (Redford), 650 N.Y.S.2d 128, 131, 233 A.D.2d 248, 251 (1st Dep’t 1996); See also Morris v. New York State Dept. of Taxation and Finance, 82 N.Y.2d 135, 141, 603 N.Y.S.2d 807, 811 (1993) (“such domination, standing alone, is not enough”). Complete dominion and abuse of the privilege of conducting business in the corporate or LLC form means that the subject corporation “‘…has been so dominated by an individual or another corporation and its separate entity so ignored that it primarily transacts the dominator’s business instead of its own and can be called the other’s alter ego.’” Island Seafood Co., Inc. v. Golub Corp., 759 N.Y.S.2d 768, 769, 303 A.D.2d 892, 893 (3d Dep’t 2003) (internal citations omitted). Indicia of transacting the dominator’s business and not the corporation’s business may “include the failure to adhere to LLC formalities, inadequate capitalization, commingling of assets, and the personal use of LLC funds.” 83 Grammas v. Lockwood Associates, LLC, 944 N.Y.S.2d 623, 626, 944 N.Y.S.2d 1073, 1075 (2d Dep’t 2012) (internal citations omitted). Respondents neither alleged nor presented documentary evidence showing Megan, through its principal Emmanuel Ku, failed to adhere to corporate formalities at any time. None. Respondents again failed to allege or show that Megan was inadequately capitalized at any point in time. And at best, Respondents’ reliance on selective parts of Ku’s Civil Court trial testimony that he sometimes paid for capital improvements to the building with cash, as evidence of “intermingl[ing] his personal finances with Megan’s finances,” unsupported by any other documentary proof-e.g., Megan’s bank statements, corporate accounting records, only raises rather than resolves more questions, making the issue inappropriate for summary judgment disposition. Finally, Respondents’ motion and the lower court’s decision were “devoid of any sufficiently particularized support” that Emmanuel Ku abused the corporate form by shuttling assets between his personal accounts and Megan Holding LLC, and certainly not for Emmanuel Ku’s immediate convenience. See Retropolis, Inc. v. 14th Street Development LLC, 797 N.Y.S.2d 1, 3, 17 A.D.3d 209, 211 (1st Dep’t 2005). Not a single transaction between Megan and Ku appears among the bank statements Respondents proffered in support of their piercing claim. Not 84 even a single rent check or payment to Megan from any tenant of the building, let alone the Respondents, appears among the deposits in Ku’s personal bank account. The record on summary judgment is essentially bankrupt of any support bolstering Respondents’ shadowy claim that Emmanuel Ku completely dominated Megan Holding LLC, to abuse the privilege of doing business in the LLC form. And none of Respondents’ vague allegations of Ku’s dominion of Megan are contemporaneous with their purported stale rent overcharge Complaint. B. Respondents’ Proof Does Not Show Emmanuel Ku Dominated Megan During the Period of Claimed Rent Overcharges, the Transactions Attacked Respondents’ proof equally founders on the second prong needed to prove complete dominion over Megan. “Those seeking to pierce a corporate veil of course bear a heavy burden of showing that the corporation was dominated as to the transaction attacked…” TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335, 339 (1998); see also Matter of Glenn (Redford), 650 N.Y.S.2d at 131. Notwithstanding the motion court’s approval of Respondents’ thin attempt to elide the four-year statute of limitations by seeking recovery of rent overcharges from May 2005 to May 2009, Respondents’ proof allegedly showing Emmanuel Ku dominated Megan, transpires after August 2009 through August 2011. No documentary proof in the record supports their charge of corporate domination 85 between May 2005 and May 2009. In other words, Respondents could muster no more than a reverse inference that the same purported domination of Megan that occurred during the two years after they paid rent, also occurred in the four-year period for which they now seek recovery of rent overcharges. Such a weak inference falters under the heavy burden requiring Respondents show Emmanuel Ku dominated Megan while he allegedly charged them rent above the legal stabilized amount, from May 2005 through May 2009, the subject transactions attacked. C. Respondents’ Stale Rent Overcharge Claim Cannot Buttress A Meritless Piercing the Corporate Veil Claim Respondents needed to submit evidentiary proof that Ku dominated Megan in committing a wrongful or unjust act towards them. An additional showing of “a wrongful or unjust act toward plaintiff is required.” Morris v. New York State Dept. of Taxation and Finance, 82 N.Y.2d at 142, before a court in equity will intervene and pierce the corporate veil. See Anderson Street Realty Corp. v. RHMB New Rochelle Leasing Corp., 663 N.Y.S.2d 279, 243 A.D.2d 595, 595-596 (2d Dep’t 1997). Here again, Respondents failed to carry their burden. A stale rent overcharge claim that accrued in 2003, well before the period of Ku’s alleged domination of Megan (from 2009 through 2011) barely hinted at in the record, does not show Megan committed a wrong against Respondents, 86 contrary to what the motion court indicated. More succinctly, Respondents have no evidentiary proof of a wrongful or unjust act committed against them by Megan or Ku while Ku allegedly abused the privilege of doing business in the LLC form. Thus, just as their predicate rent overcharge claim expired in November 2007, so did Respondents’ veil-piercing claim bite the dust along with it. VI. THE APPELLATE DIVISION ERRED IN AFFIRMING AND FINDING THAT ANY OF EMMANUEL KU’S RELATED CORPORATIONS HAVE ANY CONNECTION TO RESPONDENTS OR THE ALLEGED TRANSACTIONS FOR RENT OVERCHARGE, SUFFICIENT TO PIERCE MEGAN’S CORPORATE VEIL Deficiencies in Respondents’ veil-piercing claim are perhaps nowhere more pronounced than with their beleaguered attempt to hold Emmanuel Ku personally liable for rent overcharges, based on a nebulous implication of other corporate entities principally owned by Ku. A similar strategy was tried and rejected by the Appellate Division in Island Seafood Co., Inc. v. Golub Corp., 759 N.Y.S.2d 768, 303 A.D.2d 892. In Island Seafood petitioners tried to recover a $60,032.09 unsatisfied judgment against one corporation, “Anchor Distributors,” by levying against the assets owed to another related corporation, “Anchor Corporation.” Both Anchor Corporation and Anchor Distributors were New York corporations with the same sole owner, stockholder and director. Despite petitioner’s evidence that both 87 companies along with a “plethora of entities,” id. at 770, 894, conducted business at the same address, the owner’s testimony that the corporations used the same processing plant, trucks, even paid each other’s bills, the court held the showing was “[d]evoid…of the degree of intercorporate shuffling of assets and debts for the purpose of rendering uncollectable any money judgment against Anchor Distributors” id. at 771, 895 (internal citations, quotations omitted), and declined to pierce Anchor Corporation’s corporate veil. Nor did the successful veil-piercing claim in an unrelated federal action holding Anchor Distributor’s owner personally liable, persuade the court that petitioner’s met their “burden of demonstrating that Tuccillo [owner], through his domination, abused his power over both corporations to commit a wrong or injustice to the detriment of petitioner.” Id. The court declined to pierce Anchor Corporation’s corporate veil on this basis. Respondents, with even less evidence than the petitioner in Island Seafood, supra, have haphazardly established that Megan and various other LLCs are related because they (1) share a common majority stakeholder, Emmanuel Ku, (2) share an office, (3) are in the same line of business, and (4) share a common real estate management company. However, “[s]uch facts are not sufficient to satisfy the ‘heavy burden’ necessary to pierce the corporate veil or to establish an alter ego relationship,” Etex Apparel, Inc. v. Tractor Intern. Corp., 922 N.Y.S.2d 315, 316, 88 83 A.D.3d 587 (1st Dep’t 2011), between Emmanuel Ku and Megan Holding, LLC, Megan and any other corporate entity principally owned by Ku, or even between Emmanuel Ku and any one of his other entities. See John John, LLC v. Exit 63 Development, LLC, 826 N.Y.S.2d 657, 35 A.D.3d 540, 541 (2d Dep’t 2006) (citing to Island Seafood’s veil-piercing factors, “‘[g]enerally considered are such facts as whether there is an overlap in ownership, officers, directors and personnel, inadequate capitalization, a commingling of assets, or an absence of separate paraphernalia that are part of the corporate form’”). In Respondents’ turnover proceeding, the Civil Court, J. Margaret Chan, June 11, 2012 Decision and Order, rebuffed Respondents’ initial attempt to pierce Megan’s corporate veil on an intercorporate theory of liability based upon similar allegations made to the court below. (R. 368- 370). In the record there is no proof that any of Respondents’ rent payments were deposited into any of Ku’s principally owned, alleged “strawman” corporations. In the record there is no proof that there was an “intercorporate shuffling of assets and debts,” Island Seafood, supra, 759 N.Y.S.2d at 771, between Megan and Ku’s other related corporations. In the record there is no proof that Ku undercapitalized, comingled personal assets with, or ignored corporate formalities for any of his other corporations. Thus, Respondents’ proof on its piercing the corporate veil claim, hinges on little more than guilt-by-association-innuendo, and vague 89 allegations of corporate malfeasance that do not withstand their heavy burden warranting the lower court’s equitable intervention. To sum, and as the Appellate Division found in Matter of Glenn (Redford), , 650 N.Y.S.2d at 131, “the record in the instant matter, [is] bereft of necessary documentation and filled with innuendo and unanswered questions [… that] simply does not support the court’s finding of fraudulent conduct by petitioner warranting disregard of the corporate form.” The lower court erred in disregarding Megan’s form and piercing the corporate veil. Respondents’ summary judgment on its veil-piercing claim should have been denied, and Defendants-Appellants Megan Holding LLC and Emmanuel Ku’s motion for summary judgment granted. 90 CONCLUSION Because the rent overcharge Complaint is time-barred, the Appellate Division’s common law fraud exception to the four-year statute of limitations contradicts the statute and is an Ex Post Facto Law, and Respondents made an inadequate showing on their piercing the corporate veil claim, the motion court’s summary judgment award on Respondents’ rent overcharge, treble damages, attorney fees and piercing the corporate veil claims and the Appellate Division’s Order affirming same, should be reversed on the law, and Defendants-Appellants’ summary judgment motion dismissing the Complaint in its entirety, granted, and this Honorable Court award any other and further relief it deems just, proper and equitable. DATED: March 10, 2014 Respectfully submitted, MARINO PARTNERS LLP _______________________________ Umar A. Sheikh, Esq. Misha M. Wright, Esq. Of Counsel Attorneys for Defendants-Appellants Megan Holding LLC and Emmanuel Ku 15 Fisher Lane, Suite 200 White Plains, NY 10603 (914) 368-4525 ADDENDUM TABLE OF CONTENTS Page Governor’s Bill Jacket .............................................. Add.1 Relevant Excerpts from the Rent Regulation Form Act of 1997 ............................................................ Add.30 Senate Debate Transcripts .......................................... Add.37 Assembly Debate Transcripts .................................... Add.66 Select Press Releases from New York’s Executive and Legislative Branches ....................................... Add.111 LAWS OF 191.1 MIHlRANIXN m. ~---- SENATE BILL ------ ASSGmLY BILL _ _.,~.,.:=_%_._..._ s. 5553 A. 1346 1117-1111 Regular lessiaa- SENATE -~SSEMBLY , .. :-.;. . Jau 11, 1117 CHAPL/4 MWS OF 19.£:[ .. D IIDft - Iatroducftl bf CClleaftA ca nr.a- (at request of the Gonmor) - n .. twice ua ordered priJat .. , ... ..... printed to be ca.aitted to the Ca.alt:t:- CID aulea %B aa..Lt - IatrDctucel by CCIII!'J!DB a. am.at- cat requeat ~f 11. of A. 81lftr, LOpea, Purell, landers, Clark, l'beffer, .... ka, Wrigbt, bta, ArrC)70, Aubry, MylaDd, ar ..... , kodHJ', ColtOD, COok, Crowle)', Diu, PelcJMD, C:rHD, C:rHDe, ltaufMD, UelD, Llfa)'ette, Leatol, llc:Laueblla, 11111an, lloJ:MD, Ortiz, Pol.claet:n)', Pretlow, Rivera, !'awu, Vlta1luo, .. iutein, .. iHDIIertJ - (at r~q~~eat of the Coftr- DOrJ - r•d ODCe mad referred to tbe eo.lttH OD Bouaine All N:f to eaact tbt rat rqulatiOD refora act of 11171 to DUd cbapter 571 of tbe lan of 117•, ....au. tile -r~ boua1D9 re~at caatrol law relating to ~- CODtrol of ... aUbU.l .. tiOD of rat iD certaill e&HI, c:bapter 274 of tbe lan of lJtl, CCIIIItitlltlDg the -~ · hi ' = • 0 • ··- • ==s -· ....... -· -· --- local -r.-cl' boullll ze~at ca~~trol act, ln relatioa. to nccesalOD to. a rut replated -aaa.ing aac~•clatlozn to~ tbe penal law, iD relatloD to barua.Dt of rut regulated tezautsJ to DUd the ... r- VeDC7 teDallt protectlOD act of niut-n •-e~aty-four aDd tbe IU1ainia- trat1ft code of tbe cit)' of ..., tork, iD relatlOD to registration of reata ua cbu ... related thereto: to ... Dd the civil practice law and . rules, iD relatioa to a foar )'ear statute of 11a1tatlona for reaiden- tial r•nt overcba~ ... , to aaend tbe real propert~ actiaa. and p~oceediags law, iD relaUoa to proceec!lnga to recover poaaeadoaJ to a.ena tbe adaiDletrati .. caGe of tbe cit~ of ..., ~o~k, 1D relatian to deaoUtiOD of ~at retQlated boualng a~c=-acuJatiaa.s to aaend- the real p~opert)' law, ill ~elaUoa to warrant~ of babitabiHt~ ACT!~ MJSI' BE TAIR' S ACl'I~ T.AJCEN: 000001 Add.1 :/ MIMJIW«M Nl. -'-___ _ SENATE BILL ____ _ 8 . "7 '" .... l DS -; UDe " LL:Q:M b. fir MD l trocJucecl J OIIUHa '* .... - ,. u. btl " . lltltd ad wbD illt" ~tted t tbtl c-ttt __ 1lVl. •• II --., llltr_cd II Ha ~ - ( •• t ;' II •• 1.,." ~Ii, ar,.U a . . 1 b ~ r, . .rl,bt k li r~, lll» ,. • .a,.la1l11. r_, aro aky Clll t l.r hlc1 n Gr R G U 1ta1f.1Il n a afa,. . ut . Mc: uOhl.L I u...a. 1Io~, I: 18 CIaetlty retlov,a _ra. ~, itilig "Laat ll .... rl' , ..... l Md 0Il .a il c-i .. 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Enacts the rent regulation reform act of 1997 and provides for the effectiveness of provisions relating to housing rent control and stabilization · 06/19/97 referred to housing 06/19/97 reported referred to codes 06/19/97 reported referred to rules 06/19/97 rules report cal.481 06/19/97 ordered to third reading rules ca1.481 06/19/97 message of necessity - 3 day message 06/19/97 passed assembly 06119/97 delivered to senate 06/19/97 REFERRED TO RULES 06/19/97 SUBSTITUTED FOR S5553 06/19/97 3RD READING CAL.l318 06/19/97 MESSAGE OF NECESSITY- 3 DAY MESSAGE 06/19/97 PASSEDSENATE 06/19/97 RETURNED TO ASSEMBLY 06/19/97 delivered to governor 06/19/97 approval memo.ll 06/19/97 signed chap.116 SENATE V(Jl'E 5!l_y _j_N DATE '_,, ... f 7 A<;SOOLY VOTi 9J. Y £N DATE _ _.l,..__. .....;;;/....;f;._•...:.f~t~. C00002 IDtE RULE MESSAGE Bill. IS DISAPPROViD DATE CCIJNSEL. tO tHE WViilllf "i N - Add.2 rn . c S 1 .1 I 1 1 1 1 1 .l1 qr .!l Y -'- N ,,- " .... z 4 I L - 9J ~JN C BfB DATE ______ _ ..... 4ioC--....::/:.....f;...-....:f"-!il~ ZOOOO ~ REPRlNT DATE: 06/19/1997 SILL: A8346 y Abbate·PJ NAY A''umpura PL y A/fanoTW NAY Ander.!.·on RR y Arroyo CE y Aubr~JL NAY liacu l11s JG NAY Bulboni MA .NAY Barraga TF y Btta SD r BeckerGR NAY BonacicJJ y Boyland WF NAY Boyle PJ..,f y Bragmaa MJ y BrennanJF y Brodsky RL NAY BrowrJ HC y Butler :OJ NAY Butler :\!tW NAY Calhoun N y Canestrari RJ y Carrozza A.r\1 NAY Casale PM EOR Christen~en JK y Guk Bl\1 y CobnanS y Colton W y ConneUyEA NAY ConteJD y CookV~; NAY Crouch CW y Crowley J .lvAY D'Andrea !?A y Davis C y Derlis NA NAY Destito RM y DiaxR y DINapoli TP NAY DingaJJ y UinowttzJ NAY DoranCJ y Englebright S y EspaiUat A · y EveAO y Farrell HD NAY FasoJJ y Feldman D NAY FerraraD NAY Fessenden DJ CONTROL: 51906207 R.R. NO: 481 DA1E: 0611911997 TINIE: 09:53:41PM SPONSOR: RULES (SILVER) Enacts th~ rent reg11lation reform act of 1097 and provides for the effectiveness of provisions relating to housing rent control and stabilization ,...._ NAY y y y y y y y y y y NAY y y NAY EOR y y y y y NAY y y y NAY y NAY NAY y y NAY y y NAY NAY NAY y y NAY y NAY y EOR NAY y y NAY y y MESSAGE OF NECESSITY Flanagan JJ NAY Nun:: fiR GalefSR NAY OaksRC Gantt DF NAY (YNt:il CA Genovesi AJ y OrtizFW Glick DJ NAY Ortlc:ffC Gottfried RN }' O'SheaCJ GnJJmi$ A y P:umentWL G1·een l?.L y Perry NN Greene A y Pheffer AI Griffith E y Pillittere JT . Gromack A.J y Polonetsky J GuerinJJ NAY Prentiss RG CuntberJE y PretlowJG Harenberg PE y RamirezR fletbl·t lvf y Ravitz j Hikind D NAY Reynolds TM Hlll EH y Rivera PM HochbergAG NAY Robach JE HoytWB y Sanders S Jacobs RS y Scarborou~ W John SV y Schimminger RL Johnson J NAY Seaman DE KatzM y Semillerio AS Kaufman SB y Sidikman DS Keane RJ y . Smith RA Kirwan TJ y SpcmoMJ Klein J NAY Stephms WH KoonD N,tr Sn-aniere !J}, ers V rv J 1 l e je 8a ilLt iV lJ U .. Y &ck. I' }} M n ll /jo ' fie .l) l/I /,,( l lill rro=A,\-t . stt:n Chu M n' l! Y Vf; m ley :W R O is l C$tito x Y fl D l 2 Ol'a Y il ll ' 'i'f: V fi c l/ ll ; & T / 1 M hJ}, ers V rv J 1 l e je 8a ilLt iV lJ U .. Y &ck. I' }} M n ll /jo ' fie .l) l/I /,,( l lill rro=A,\-t . stt:n Chu M n' l! Y Vf; m ley :W R O is l C$tito x Y fl D l 2 Ol'a Y il ll ' 'i'f: V fi c l/ ll ; & T / 1 M h tll ' o , q q .' ' PROGRAM BW. f 7 c:L GOVERNOR'S PROGRAM BILL 1997 sss-3 1·1/ MEMORANDUM AN ACT to enact the rent regulation reform act of 1997; to amend chapter 576 of the laws of 1974, amending the emergency .hous~g rent control law relating to the control of and stabilization of rent in certain cases, cruipter 27 4 of the laws of 1946;conmtiltirig "the emergency housing rent control law, ch&pt~329'-hftbe·laW8 of •.; 1963, amending the emergency housing rent control law relating to the recontrol of rents in certain cases, the emergency housing rent control law, chapter 555 of the laws of 1982, amending the general business law and the administrative code of the city ofNew York relating to conversion of rental residential property to cooperative or condominium ownership in the city of New York and chapter 402 of the laws of 1983, amending the general business law relating to. . conversion of rental residential property to cooperative or condominium ownership in certain municipalities in the counties of Nassau, Westchester and Rockland, in relation to their periods of effectiveness; to amend the emergency housing rent control law, the emergency tenant protection act of nineteen seventy-four, the administrative code of the city of New York and the tax law, in relation to eliminating rent regulation for certain high income tenants; to amend the administrative code of the city. ofNew York and the emergency tenant protection act of nineteen seventy-four, in relation to limiting rent increase after vacancy of a housing accommodation; to amend the public housing law, the administrative code of the city of New York, the emergency tenant protection act of nineteen seventy-four, the emergency housing rent control law and the local emergency housing rent control act, in relation to succession to a rent regulated housing accommodation; to amend the penal law, in relation to harassment of rent regulated tenants; to amend the emergency tenant protection act of nineteen seventy-four and the administrative code of the city ofNew York, in relation to registration of rents and charges related thereto; to amend the civil practice law and rules, in relation to a four year statute of limitations for residential rent overcharges; to amend the real . property actions and proceedings law, in relation to proceedings to recover possession; to amend the administrative code of the city of Add.12 ILl SSS /- nn l l r l946;"con tiltin c ~ll a ef329"c. he"laWs " t' .. t J - -2- New York, in relation to demolition of rent regulated housing accommodations; to amend the real property law, in relation to warranty ofhabitability 5553 2·t.f Purpose: To reform rent regulation in New York State by creating competition in the housing market, protecting all but the wealthiest few tenants, establishing tough new penalties for owners who harass tenants and ensuring that housjng developed .in the future remains free of regulation. Summazy ofProvisions: This bill dramatically reforms New York State's system of rent regulation in many important respects. • • .. • • • Owners will be entitled to a vacancy bonus allowance after a tenant vacates. The formula includes a base 20 percent allowance and additional allowances for apartments renting below $500 and apartments occupied by for 8 years or more prior to the vacancy. The right of succession is narrowed by limiting succession to immediate family members. No more than one succession will occur without the owner receiving a vacancy allowance. Tough new criminal and civil penalties are established in law to punish owners who harass tenants for the Plli""Pose of causL'1g a vacancy. The income threshold for high-income decontrol has been reduced from $250,000 to $175,000. These sections were also amended to eliminate the limited time period in which the apartment's re~t level could be considered. Vacant apartments renting for $2,000 per month at any time are subject to deregulation. Restrictions in current law irilposing a limited time period in which an apartment's rent level could be considered have been repealed. Also repealed.from luxury decontrol is a requirement recently added. by the New York City Council prohibititig rent increases attributable to a vacancy allowance Add.13 ha it nn ; de \ r Pro i i nn nn . " • . p~"" o5 i.'l m · ed r -3- 5553 ~·'I or capital improvement to be considered in determining whether the $2,000 · threshold was exceeded. Neither these amendments nor those of the City Council have any retroactive effect. • The State is authorized to.enter into contracts guaranteeing that new housing construction will be exempt from regulation, now and in the future. _.•,; :..:. -· - • Regulatory reforms are included to simplify the administration ofrent regulation while protecting the rights of tenants and oWners. · • During the pendency of landlord-tenant disputes that cannot be resolved within one month (or before two adjournments are requested), tenants will be required to deposit their rent payments in an escrow account. Certain exemptions are made for senior citizens and pers~ns of low-income. . ;-~ • In buildings occupied by three· or fewer tenants, owners can provide financial incentives for tenants to move so that dilapidated buildings can be demolished and new housing constructed. • The rent control, stabilization and cooperative and condominium laws have been extended through 2003. Existing Law: This legislation extensively amends each of the State's four systems of rent regulation: (1) Llie Emergency Housing Rent Control Law; (2) the Emergency Tenant Protection Act; (3) the Local Emergency Housing Rent Control Law; and ( 4) and the Rent Stabilization Law. Statement in Support: The Rent Regulatory Reform Act of 1997 is a comprehensive package of reforms that furthers competition in the housing market while still protecting the vast majority of rent regulated tenants in New York State. With the exception of the wealthiest one percent ofNew Yorkers- those earning more than $175,00 annually- the bill protects all current tenants and members of their immediate families from deregulation .. At the same time, the bill ensures that when a Add.14 3- 1 nn 'l w . + :.; ~ot _ .. h nn nn rkers - ually - -4- tenant vacates an apartment, the owner receives a substantial vacancy bonus in order to get the rent to market levels and keep it there. As a result,· 3 of every 4 apartments are· expected to reach market levels as a result of the far-reaching reforms included in the bill. In addition to providing a default vacancy bonus of 20 percent, the bill provides supplemental bonuses for owners who have not received a vacancy bonus in the last eight years and owners of units renting for less than $500. To ensure that unscrupulous owners do not take advantage of these new bonuses, tough new Penal Law sections are included in the bill to punish owners who unlawfully force a tenant to vacate his apartment. Property owners, particularly owners of small buildings, benefit from a provision requiring the mandatory deposit of Jent into an escrow account during landlord-tenant disputes. This prevents abuses of the Housing Court system and ensures that judgments will be collectible in the event the owner prevails on his claim. Vacancy decontrol for apartments renting for $2,000 or more is also included in the bill. Decontrol will be allowed at any time the vacant apartment has a maximum rent of $2,000 or more. The bill also eliminates restrictions imposed by New York City Council, which currently prevent vacancy bonuses ~d owner improvements from being considered in reaching the $2,000 threshold. Finally, cumbersome administrative/ reporting requirements are deleted from current law. The current high-income decontrol program is also strengthened by reducing the income threshold from $250~000 to $175,000. The wealthiest one percent nfNew Yorkers can and should pay market rents. The above-mentioned reforms relating to rent levels also are included here. · · The bill also ensures that newly developed housing will not be subject to regulation in the future. DHCR is authorized and directed to enter into binding . agreements with building owners to ensure that newly developed units are not regulated in the future. . In addition to encouraging new development, the existing housing stock is improved by provisions allowing an owner to relocate the last remaining tenants in a dilapidated building scheduled for demolition or substantial renovation. At the saD)e time, tenants are protected through comprehensive guidelines that require the tenant to be relocated to a comparable or better apartment and have' all reasonable expenses paid. Add.15 . nn i !lIld l , t nn ere.' . SaIl C Sponsors; Members of Assembly: Senate: Introduced at the request ot: TITLE OP BILLa AN ACT to amend the emergency tenant protection act of nineteen seventy- four~ the administrative code of the city of New York and the emergency hous1ng rent control law, in relation to conforming the method for setting rents for rent controlled apartments to the methodology used for rent stabilized apartltents providing for the establishment of rent guidelines and applicable adjustments and making transitional provisions for the implementation of such methodology, and creatinq statutory tenancies in rent stabilized apartments; to amend the general business law, in relation to conversion or residential property to cooperative or condominium ownership; raising percentage needed to declare non-eviction plans effective; providing for establishment of certain reserve funds; and changing the computation of excessive vacancies which prevents conversion and eliminating the filing of eviction plans with the attorney general in condominium and cooperative residential conversions and repealing paragraph (c) of subdivision 1, subparagraph {V) of paragraph (c) and paragraph (d) of subdivision 2 of section 352-eee and paragraph (c) of subdivision l, subparagraph (v) of paragraph (c) and paragraph {d) of subdivision 2 of section 352-eeee of the general business law relating thereto; and to amend the administrative code of the city of New York, the emergency tenant protection act ot nineteen seventy-four and the emergency rent control law, in relation to extending the length of time over which major capital improvement expenses may be recovered altering vacancy allowance provisions and providing for rent increases for certain housing acco~odations and to amend chapter 576 of the laws of 1974, amending the e~ergency housinq rant control law relating to the control of and stabilization of rent in certain cases, chapter 329 of the laws of 1963, amending the emergency housing rent control law relating to the recontrol of rents in certain cases, chapter 555 of the laws of 1982, amending the general business law and the adm.inistrative code of the city of New York relating to conversion of rental residential property to cooperative or condominium owT.ership in the city of New York and chapter 402 of the laws of 1983, amending the general business law relating to conversion of rental residential property to cooperative or condominium O'w'nership in certain municipalities in the counties of Nassau, ~estchester and Rockland, in relation to making such provisions ongoing and to repeal subdivision 2 of section l of chapter 274 of the laws of 1946, constituting the emergency housing rent control law, relating thereto. P~POSE OR GENERAL IDEA OP BILL: The purpose of this bill is to streamline and simplify the operation of New York State's rent regulation statutes and reform the State's cooperative and condominium conversion laws. SUMMARY OF SPECIFIC PROVISIONS: This bill would: • establish a January lst effective date for rent adjustments for housing accommodations subject to rent regulation in New York City and Nassau, Westchester and Rockland counties; • require rent guidelines boards in New York City and Nassau, westchester and Rockland counties to establish by October 1, 1997 guidelines for pro-rated transitional rent adjustments for leases expiring between January 1, 1998 and December 31, 1998 and to establish Add.16 s ~bly: t F , . l 1 "" t f ~nershl i Mi I ( 1, e ( . K f commodations a~ g cl 1a~ .. lll iniua ~ershi a~ a~ ow'ners Westchester ~aki 9 1 CRPOS oa F fol'1ll st ~s. CH 1s .., cit west ~ cit B by October 1, 1998 adjustments for leases 1999; SF J\11' TE 3q~, guidelines tor pro-rate'CI tranQonal · rent z-S expiring between January 1, 1999 and December 31, • require the Division of Housing and Community Renewal {DHCR) to order a rent reduction it it finds that an o...,ner has failed to maintain services in accommodations subject to rent regulation; • direct rent guidelines boards to require a sample of landlords subject to Rent Stabilization and the £mergency Tenant Protection Act {ETPA) to make records available regarding the income, expenditures, tax benefits and financing arrangements of their properties to aid in the determination of appropriate one and two year rent adjustments; • cap vacancy allo...,ances at five percent for units subject to rent regulation; • authorize rent guidelines boards to administer oaths, issue subpoenas, conduct investigations and make inspections; • eliminate the existing requirement that rene...,al leases be offered to tenants living in accoa~odations subject to the ETPA and Rent Stabilization; • establish that an o...,ner can not start a proceedinq to recover possession of a housing unit for personal use and occupancy, or for non- primary residency, unless proper notice to the tenant has occurred; • require owners of accommodations subject to the E'l'PA and Rent Stabilization to offer vacancy leases ...,hich expire on December 31st of the year in which they ...,ere commenced; • require owners of accollll!lodations subject to the ETPA and Rent Stabilization to serve new tena~ts ...,ith a Notice of Rights and Duties of Owners and Tenants promulgated by DHCR; • require tenants living in accommodations subject to the ETPA and Rent Stabilization to give at least JO days notice of an intent to vacate; • require legal regulated rents for housing accolDJDodations whose leases expire on December 31, 1997 to be adjusted on January 1, 1998 and each January lst thereafter, or every other year thereafter if a tenant selects a two year rent adjustment; • require legal regulated rents for housing accommodations whose leases expire between January 1, 1998 and Dec~mber 31, 1999 to be increased on t'he first day following the expiration of such leases pursuant to a pro- rated transitional rent adjustment established by the rent guidelines board and on each January lst thereafter, or every other year thereafter if a tenant selected a two year rent adjustment; • require that legal regulated rents !or vacancy leases entered on or after January 1, 1998 be increased on every January lst thereafter, or every other January lst thereafter if a tenant selects a two year rent adjustment; • allow tenants living in acco!Mlodation.s subject to the ETPA and Rent Stabilization Law to sublease or assign a lease even in the absence of a written lease; • establish that housing accommodations which became rent stabilized pursuant to Article 7-C of the Multiple D...,elling La..., ...,ould continue to be rent stabilized notwithstanding the expiration of Article 7-C of the Multiple Dwelling Law; • eliminate the requirement that a rent stabilized tenant have a two year renewal lease in order to qualify for Senior Citizen Rent Increase Exemption (SCRlE) program; • require the New York City Rent Guidelines Board to establish annual Add.17 . N8TE3Q?' t r , -rated sit ona . 1 j t t f r l ~ . . ~al ( R . ne Z E ( C ~ lo~ance SUbje SUbpoe ne~al rr~odat lo' g i lMl ~hi ~hi Io' , co=odatio lo' nt .. it \m rT 30 o=odati"o "' C 1s lo'O Io'hc lo' ece ber ( lo'i 1s lo'O f 1s : 1s yO lll mlll lt\lll Io'hi welli w ~oul ~i 0lo' 9 s I SE"JATE 3lfll rent adjustlllents for rent controlled unit~· in the City ol New York in J-5 the sa111e manner in which it establishes rent adjustments under the Rent Stabilization Law; • pr~serve a tenant's·right to a Fair Market Rent Appeal subject to the prov1sions of New York City Rent Stabilization; • require o~ers ot rent controlled apartments in the City of New York who did not apply or qualify for an increase in the maximum rent in 1995, 1996, 1997 or 1998 to clear all conditions which constitute a tire hazard or other serious threat to the life, health or safety of their occupants and to clear at least eighty percent of a building's non-rent impairing code violations prior to receiving any rent increases; • require all O'liners of rent controlled apartments to file registration statements annually with DHCR; • require the rent guidelines boards in Nassau, Westchester and Rockland counties to establish annual rent adjustments tor rent controlled units within their jurisdictions in the same manner in which rent adjustments are established under the ETPA; • prohibit cooperative or condominium conversion non-eviction plans in certain localities in Nassau, Westchester and Rockland counties and the City of New York from being declared effective until at least thirty- five percent of the bona-fide tenants in occupancy have agreed to purchase under the plan; • require the sponsor of a cooperative or condominium conversion plan in certain localities in Nassau, Westchester and Rockland counties to establish a reserve fund of at least three percent of the total price (as defined) to be used exclusively for making capital repairs, replacements or improvements; • make existing •warehousing• prohibitions !or cooperative or condominium conversions more restrictive by limiting the nwrtber of vacancies that may exist to no more than five percent of the total number of dwelling units in a building or develop~ent or to no more than one dwelling unit in the case of a building or development containing less than 25 units; • eliminate eviction plans for cooperative or condominium conversions; • require major capital improvement (MCI) rent increases in all rent regulated buildings to be treated as a tempor2ry surcharge; • limit MCI monthly surcharges in all rent regulated buildings to an amount equaling no more than 6' of the monthly rent; • require that MCI surcharges in all rent regulated buildings cease once the cost of the improvement has been recovered; • limit the permanent increase in rent for individual apartment improvements in all rent regulated units to an amount equal to one seventy-second of the total cost incurred by landlords in making such improve~ents; and • remove the sunset provisions contained in the ETPA, the New York City Rent control and Rent Stabilization Laws, the ~ergency Housing Rent control Law and those provisions of the General Business Law related to enhanced protection tor residents of buildings undergoing cooperative or condominium conversions. EFFECTS OF PRESENT LAW WliiCH THIS BILL WOULD ALTER: This bill would eliminate the current requirement that renewal leases be provided to tenants subject to the provisions of the Rent Stabilization Law and the ETPA. The bill would change the effective date ot rent guideline boards' rent adjustments from October 1st to January 1st and cap vacancy allowances at five percent. The bill would subject rent Add.18 I,. -_'"' ~ -<:; _ _ 3Cf 2.1 n ~-l t rlc I lli lII justJD lsi wners cit t t t ovner t t ~estchester t tiV V lD ace~ent ft~areh · fe ln um t lIl t ~el 9 t l :a l t H l t lll t zaki r ements; x ci ~s, Emergenc Co t t wal I . t SE~'·'ATE 3Cflt controlled units in the City of New York 'and 1tassau, flestcheste nd if ·S" Rockland counties to annual rent adjustments set by the local rent guidelines board, replacinq the maximum base rent proqra•. The bill would require owners o! rent controlled units to register those units annually with the Division ot Rousing and Community Renewal (DHCR) in order to receive rent adjustlllents. Currently, there are no registration requirements tor owners ot rent controlled units. The bill would prohibit cooperative and condominium conversion plans in New York City and in certain localities in Nassau, Westchester and Rockland counties from being declared effective until at least 35 percent of the bona-fide tenants in occupancy have acrreed to purchase. CUrrently, only 15 percent of bona-fide tenants must purchase before a conversion plan may be declared effective in certain localities in Nassau, Westchester and Rockland counties. In the City of New York, conversion plans may be declared effective after purchase agreements have been executed for 15 percent of the units in a buildin9. The bill would impose a new reserve fund requirement on the sponsors of cooperative and condominium conversions in certain localities in Nassau, Westchester and Rockland counties. CUrrently, only sponsors undertaking cooperative or condominium conversions in the City of New York must meet reserve fund requirements. The bill would make cooperative conversion •warehousing• prohibitions more restrictive and eliminate eviction plans in Nev York City and Nassau, Westchester and Rockland counties. In place of current provisions which allow the cost of a major capital improvement to be recovered through a permanent increase in the base rent, the bill would allow owners of rent regulated buildings to recover the cost of those improvements through a temporary surcharge. The bill would limit the permanent increase in rent !or individual apart~ent improvements in all rent regulated units to an a111ount equal to one seventy-second of the total cost incurred by landlords in making such improvements. Owners of rent regulated units are currently allowed to increase rents in an amount equal to one-fortieth of the cost of the -improvement. The bill would also repeal the sunset provisions contained in the ETPA, the New York City Rent Control and :Rent Stabilization Laws, the Emergency Housing Rent Control Law and those provisions of the General Busi~ess Lav related to enhanced protection !or residents of buildings undergoing cooperative or condominium conversions. JUSTIFICATION: New York State's four separate and distinct rent regulation laws provide a patchwork quilt of rent and eviction protections for tenants. As such, one of the primary purposes of this cmnibus bill is to streamline and simplify the administration of and compliance "With these laws. currently, rent adjusti:ients based on cl".anges in operating costs are allowed on an application casis for rent controlled apartments and on an automatic basis determined through annual rent guidelines board orders for units subject to the Emergency Tenant Protection Act and the New York City Rent Stabilization Law. The use of these systems results in inequities in rent adjustments between rent c~ntrolled and rent stabilized apartments in the same building and bet·.-een rent stabilized tenants. This legislation would simplify both the administration of and compliance with the various rent laws by providing for a uniform method of determining rent adjustments, as well as a unif'o~ effective date for those rent adjustments. Under the provisions of this bill, rent adjustments for rent controlled units in the City of New York and Nassau, Westchester and Rockland counties would be set by local rent guidelines boards. This bill "Would also significantly strengthen State laws regulating the conversion of residential rental property to cooperative or condominium ownership. First, the bill ...,ould limit the ability of sponsors to warehouse apartments, i.e., to hold off of the market habitable rental units in anticipation of conversion, by reducing the permissible vacancy rate to five percent from the current ten percent level. In addition, the length of time these units can remain vacant would be reduced from five months priot: to the date the plan is submitted for filing, as Add.19 N.AT 'l2.\ N ~est est r""f ~. ' q g . f ql f 9 ~unlt S I I rJ f f 'nl ai I I ~ S 1 gT g ~ ·varehousinqR w ci ~ockl ~hi ~oul o~ f art: t liou \l lo'1le l ... y l< " il f "lJSTI I y st .;nni . wit CU rentl m hang i £ i o .., rt;:JIent - ~oul ~in strat ~i a~ f t. cit q woul st iniUlll lo'1lershi w t V lll l;' SEI\JAT~ 3ttz' allowed by current law, to 110 days after the plan is submi ttel--ror S·S !ilin9. This chan9e in the law is critical because some sponsors have warehoused up to 25t ot their total units by the time their plan vas accepted !or filin9. Second, the bill would require that 35\ ot the tenants in occupancy on the date the plan is accepted tor tiling purchase their apartment• before a non-eviction plan could ba.declared effective. This chan9e would increase the participation and control owners actually living in the cooperatives and condominiwt.S have in the manage~nent ot their buildin9. The current 15\ purchase requirement, which in New York City need not include any existing residents of a building, results in con~ersions where a small number, and some cases no residents purchase thelr apartments. Third, the bill would extend to all municipalities covered by General Business Law S352(eee) a requirement that the sponsor of a conversion plan establish a th.ree percent reserve fund !or capital repairs, replacements and improvements. A reserve !und is now required by local law in New York City and in several other municipalities. This change in State law would provide the necessary resources to new cooperators and condominium owners to make essential capital repairs in their ·building, thereby preserving and i~proving the residential housing stock in New York State. The bill would also alter the manner in which owners of rent regulated buildings can recover the cost of ~ajor capital improvements (MCis). In 1989, the Court ot Appeals ruled unanimously that building owners may increase rent levels in perpetuity based on MCis to their buildings. However, since the actual cost of the improvement is recovered after seven years of increased rent collection, this ruling means that tenants are forced to continue to pay for improvements long after costs have been fully recovered, and even after they have outlived their useful life. This bill seeks to balance the conflicting concerns of maintaining affordable housing and ensuring adequate incentives for investment in MCis in order to preserve and improve our ho~sing stock. Current law allows owners of property subject to rent regulations to permanently increase the rent of an individual apartment in an amount equal to one-fortieth of the cost of improvements to such apartment. By increasing tt.e rent of an apart~ent in this manner, property owners are able to increase the base rent of a unit and continue to reap the benefits of that increase long after the cost of the improvement is recovered. Altering the method of calculating an individual apartment improvement increase to an amount equal to one seventy-second of the cost ot the improvement would provide a more modest increase in rent, while providing property owners with a reasonable rate of return on their investment. The bill would also repeal the sunset provisions contained in the ETPA, the New York City Rent Control and Rent Stabilization Laws, the Emergency Housing Rent Control Law and these provisions of the General Business Law related to enhanced protection for residents of buildings undergoing cooperative or condomini\llll conversions. By making these l~ws ongoing, this provision would prevent New York State from interfer1n9 with legitimate policy decisions made by local governments. PRIOR LEGISLATIVE HISTORY: New legislation. ~ISCAL IMPLICATIONS FOR STATZ AND LOCAL GOVE~~ENTSI staff savings should result from the elimination of Maximum Base Rent/Maximum Collectible Rent application processing and the elimination ot the need for lease renewal dispute resolution. E~FECTIVE DA'l'ZI I:mmediately. Add.20 NAT QZ.1 v t su i tel r; . t g g v I vare ' f t g ' f I f f q . e. g q ini t anagellle t f q versi i J r f f l&a s l Her t el fi Jll r ~lt vi r- cit i ium a st ri g ~i I B lat,i F SC r Rh~EN St lll f F l' r ln e i ·ntlW ~submitted _'\() - f- NEW YORK STATE ASSEMBLY MEMORANDUM IN St1PPOR'l' 01" LEGISLATI-oN-··-- - - · ·-···-· in accordance with Assembly Rule III, section l(f) 8346 ,,r:.•-::- Bill Number: '\)'0 -<0 Assembly: :" Memo on original Draft of Bill: senate: #OttS/Nq I Amended bill: Sponsors: Members of Assembly: Rules (Silver) Senate: Introduced at the request of: TITLE OF BILL: AN ACT to amend chapter 576 of the laws of 1974, amending the emergency housing rent control law relating to the control of and stabili.zation of rent in certain cases, chapter 274 of the laws of 1946, constituting tbe emergency housing rent control law, chapter 329 of the laws of 1963, amending the emergency ·housing rent control law relating to the recontrol of rents in certain cases, the emergency housing rent control law, chapter 555 of the laws of 1982, arnending.the general business law and the administrative code of the city of New York relating to conversion .of rental residential property to cooperative or condominium ownership in the city of New York and chapter 402 of the laws of 1983, amending the general business law relating to conversion of rental ;residential property to cooperative or condominium ownership in certain ,·municipalities in the counties of Nassau, Westchester and Rockland, in relation to their periods of effectiveness; to amend the emergency. housing rent control law, the emergency tenant protection act of nineteen seventy-four, the administrative code of the city of New York and the tax law, in relation to eliminating rent regulation for certain high income tenants; to amend the administrative code of the city of New York and the emergency tenant protection act of nineteen seventy-four, in relation to limiting rent increase after vaca11cy of a housing accommodation; to amend the public housing law, the administrative code of the city of New York, the emergency tenant protection act of nineteen seventy-four, the emergency housing rent control law and the local emergency rent control act, in relation to succession to a rent regulated housing accommodation; ::o amend the penal law, in relation to harassment of rent regulated tenants; to amend the emergency tenant protection act of nineteen seventy-four and the administrative code of the city of New York, in relation to registration of rents and charges related thereto; to amend the civil practice law and rules, in relation to a four year statute of limitations for residential rent overcharges; to amend the real property actions and proceedings law, in relation to proceedings to recover possession; to amend the administrative code of the city of, New York, in relation to demolition of rent regulated housing accommodations; to amend the real property law, in relation to warranty of habitability PURPOSE OR GENERAL IDEA OF BILL: The purpose of this legislation is to extend New York State's rent and eviction protection laws and make amendments thereto. SUMMARY OF SPECIFIC PROVISIONS: This legislation would: • extend the period of effectiveness of New York state's rent and eviction protection laws until June 15, 2003; • lower the income level for high-rent, high-income decontrol from $250,000 to $175,000 and maintain the existing $2,000 rent level; • provide occupants of units subject to luxury decontrol with a right of first refusal upon receipt of an order of decontrol; .. •- in .lieu of rent .guidelines boards' vacancy. allowances., establish a Add.21 · A 1~ submitted _"'c:. 1- /1. 83'-/fo H H OX strP T OF ISLATI-oN-· - oo C.~ il ,.:',,)~ ""V /! tl .. ' ~ / o ili.z; t " o o o mending t o i . o o , 'municipali westo Ul ali Itllnodation;t , j j ations. st - - .. ( -.t.- A.83'1ro statutory vacancy allowance for one and two -year -viica:ncy-lea:s-es· for· units covered by the New York City Rent Stabilization Law and the Emergency Tenant Protection Act of 1974 (ETPA); • in lieu of rent guidelines boards' vacancy allowances, establish enhanced vacancy allowa~ces for units subject to the New York City Rent stabilization Law and the ETPA which are vacated after 8 or more years of continuous occupancy; • in lieu of rent guidelines boards' vacancy allowances, establish enhanced vacancy allowances for units subject to the New York city Rent stabilization Law and the ETPA which are renting for less than $500 a ltlonth; • direct the State Division of Housing and Community Renewal (DHCR) to promulgate regulations providing for the rights of family members to succeed rent regulated tenants; • would limit rights of -succession by removing nieces, nephews, aunts, and uncles from those family members authorized to succeed the prior tenant; • subject 'the second generation of family members succeeding a tenant and each second subsequent succession to the statutory vacancy allowance and enhanced vacancy allowances established in the Act; • enact new criminal penalties and increase civil penalties for landlords who harass tenants; • change the method for enforcing the collection of rent registration assessments; • codify a four-year statute of limitations for contesting rent overcharges; • in summary proceedings to recover possession, require rent accruing from the date that the petition is served to be paid into. escrow after two tenant requests for an adjournment or 30 days, whichever occurs sooner; • in summary proceedings to recover possession, require any undisputed amount of rent to be paid by the tenant to the landlord if the building in which the tenant lives has 12 or fewer units, with the remaining undisputed amount to be paid into escrow; • in summary proceedings to recover possession, limit the amount of rent that public assistance recipients must deposit into escrow to no more than the amount of their shelter allowance payment from rent escrow requirements; · • in summary proceedings to recover possession, limit the amount of rent that SSI recipients must deposit into escrow to no more than one-third of their total monthly benefit; • guarantee that all new housing construction taking place after the effective date of the Act will not be subject to rent regulation, except where owners voluntarily accept government benefits in exchange for placing units under regulation; • provide that in certain rent controlled buildings in New York City which are set to be demolished, the owner may relocate the tenants to comparable apartments for the same or lower rent;· o' require the Division of Housing and Community Renewal to tal· NEW YORK:!T;ASSEHBLY 483tf{p MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, section l(f) Bill Number: Assembly: ~~~ ~ Senate: /-lovs //vG Memo on original Draft of Bill: I Amended bill: Sponsors: Members of Assembly: Rules Senate: Introduced at the request of: TITLE OF BILL: AN ACT to amend. chapter 576 of the laws of 1974, amending the emergency housing rent control law relating to the control of and stabilization of rent in certain cases, chapter 274 of the laws of 1946, constituting the emergency housing rent control law, chapter 329 of the laws of 1963, amending the emergency housing rent control. law relating to the recontrol of rents in certain cases, the emergency housing rent control law, chapter 55.5 of the laws of 1982, amending the general business law and the administrative code of the city of New York relating to conversion of rental residential property to cooperative or condominium ownership in the city of New York and chapter 402 of the laws of 1983, amendil)g the general business law relating to conversion of rental residential property to cooperative or condominium ownership in certain municipalities· in the counties of Nassau, Westchester and Rockland, in relation to their periods of effectiveness; to amend the emergency housing rent control law, the emergency tenant protection act of nineteen seventy-four, the administrative code of the city of New York and the tax law, in relation to eliminating rent regulation for certain high income tenants; to amend the administrative code of the city of New York and the emergency tenant protection act of nineteen seventy-four, in relation to limiting rent increase· after vacancy of a housing accommodation; to amend the public housing law, the administrative code of the city of New York, the emergency tenant protection act of nineteen seventy-four, the emergency housing rent control law and the local emergency rent control act, in relation to succession to a rent regulated housing accommodation; to amend the penal law, in relation to harassment of rent regulated tenants; to amend the emergency tenant protection act of nineteen seventy-four and the administrative code of the city of New York, in relation to registration of rents and charges related thereto; to amend the civil practice law and rules, in relation to a four year statute of limitations for residential rent overcharges; to amend the real property actions and proceedings law, in relation to proceedings to recover possession; to amend the administrative code of the city of New York, in relation to demolition of rent regulated housing accommodations; to amend the real property law, in relation to warranty of habitability PURPOSE OR GENERAL IDEA OF BILL: The purpose of this legislation is to extend New York State's rent and eviction protection laws and make amendments thereto. SUMMARY OF SPECIFIC PROVISIONS: This legislation would: • extend the period of effectiveness of New York state's rent and eYiction protection laws until June 15, 2003; • lower the income level for high-rent, high-income decontrol from $250,000 to $175,000 and maintain the existing $2,000 rent level; • provide occupants of units subject to luxury decontrol with a right of first refusal upon receipt of an order of decontrol; • establish a statutory vacancy allowance ·for one-and two.year vacancy Add.24 ·0 ~ ~ ~l{)uS . X:!T-: ASSEMBL ,4. 8.5 ¥( LJ ~ c ill r: l : C. t : #OVS /#C7 . f; f 6 s l .t B :mendin Ul y St l yi t , - . 1 V/an one-a v/a .. -~- lease for units covered by the New York City Rent Stabilization Law and the Emergency Tenant Protection Act of 1974 {ETPA); • establish enhanced vacancy allowances for units subject to the New York City Rent Stabilization Law and the ETPA which are vacated after 8 or more years of continuous occupancy; • establish enhanced vacancy allowances for units subject to the New York City Rent Stabilization Law and ·the ETPA which are renting for less than $500 a month; · • direct the State Division of Housing and Community Renewal {DHCR) to promulgate .regulations providing for the rights of family members to succeed rent regulated tenants; · • would limit rights of succession by removing nieces, nephews, aunts, and uncles from those family members authorized to succeed the prior tenant; • subject the second generation of family members succeedi~g a tenant and each second subsequent succession to the statutory vacancy allowance and enhanced vacancy allowances established in the Act; • enact .new criminal penalties and increase civil penalties for landlords who harass tenants; ., {change the .method for enforcing the collection of rent registration assessments; • codify a four-year statute of limitations for contesting rent overcharges; • in summary proceedings to recover possession, require rent accruing from the. date that the petition is served to be paid into escrow after two tenant requests for an adjournment or 3 o days, whichever occurs sooner; • in summary proceedings to recover possession, require any undisputed amount of rent to be paid by the tenant to the landlord if the building in which the tenant lives has 12 or fewer units, with the remaining undisputed amount to be paid into escrow; • in summary proceedings to recover possession, limit the amount of rent that public assistance recipients must deposit into escrow to no more than the amount of their shelter allowance payment from rent escrow requirements; • in summary proceedings to recover possession, limit the amount of rent that SSI recipients must deposit into escrow to no more than one-third of their total monthly benefit; • guarantee that all new housing construction taking place after the effective date of the Act will not be subject to rent regulation, except where owners voluntarily accept government benefits in exchange for placing units under regulation; • provide that in certain rent controlled buildings in New York City which are set to be demolished, the owner may relocate the tenants to comparable apartments for the same or lower rent; • require the Division of Housing and Community Renewal to take into account Court awarded damages for violations of the warranty of habitability or for failure to maintain services before imposing damages for ~hose same violations, and vice versa; and • clarify that owners of units subject to the New York City Rent Stabilization Law need not qualify for a hardship rent increase in order to collect rent increases for major capital improvements. EFFECTS OF PRESENT . LAW WHicH THIS BILL WOULD ALTE}t:. Add.25 -.z.- ci ( cit : l st co ( : n 'cha .enfor i e 0 ·t s : IC R A.8.3LifJ, New York State's rent and eviction laws expire on June 15·, 1997. Under existing law, local rent guidelines boards establish vacancy allowances for regulated units within their jurisdictions. Existing regulations provide aunts, uncles, nieces, nephews, and cousins with succession rights to regulated units. Existing law and regulations allow multiple generations of family members to succeed rent regulated tenants without imposing vacancy allowances. Existing case law is not definitive on whether tenants can bring rent overcharge complaints for overcharges that occurred four or more years ago. currently, owners of rent stabilized- units who fail to pay annual registration assessments are precluded from applying for or collecting any rent increases until such assessments are paid. Units renting for $2,000 or more a month and_ occupied by households earning more than $250,000 in two consecutive years are subject to 11 Luxury Decontrol 11 provisions under existing law. Tenants whose units are subject to luxury decontrol under existing law do not have a right of first refusal to those units. currently, tenants must place all future rent into escrow upon a second request for adjournment by the tenant, except for good cause shown. Currently, both the Division of.Housing and Community Renewal and the Courts can award damages for violations of the warranty of habitability and for failure to maintain required services without considering the actions of the other. Existing law provides·no guarantee that.new housing construction will not be subjected to rent regulation. Current law does not provide for criminal penalties for harassment of rent regulated tenants in the first, second and third degrees. Existing law does not establish minimum civil penalties for harassment of tenants. Current law makes no st:lecial provisions related to the dernoli tion of certain under-occupied rent controlled buildings in New York City. JUSTIFICATION: New York State's rent and eviction protection laws play a critical role in ensuring that millions of New Yorkers have access to decent, affordable housing. Since their enactment, these laws have promoted neighborhood stability and enabled generations of working families to make New York State their horne. Recognizing the vital contribution that these laws make to the quality of life in this State, this legislation, among other changes, would extend the effectiveness of the rent and eviction protection laws until June 15, 2003. PRIOR LEGISLATIVE HISTORY: New legislation. FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: None noted. EFFECTIVE DATE: Immediately and shall be deemed to have been in full force on and after June 15, 1997. June 19, 1997 Add.26 /I /(P st ' Curr · u " " , Housi " t ,ne Ul t 1 m liti st y st m st No. 53 ESTABLISHING A SPECIAL PROSECUTOR TO INQUIRE INTO CRIMINAL ACTS BY LANDLORDS AGAINST TENANTS IN THE EVENT OF A LAPSE OF THE RENT CONTROL AND STABILIZATION LAWS WHEREAS, the State's rent control and stabilization laws, which protect more than two million New Yorkers, will expire on June 16, 1997 unless renewed by che Stace Legislature; WHEREAS, chere is concern that if the rent laws expire, unscrupulous landlords may attempt to unlawfully force tenants from their apartments or engage in illegal rent gouging; WHEREAS, the right to live in peace in one's own home is fundamental to the American way of life, and no renters should suffer the indignity of being illegally forced from their.homes; WHEREAS, illegal acts by building owners that threaten the security of a person's home are reprehensible crimes and must be taken seriously by all public officials, particularly those charged with prosecuting the law; and WHEREAS, unscrupulous owners who attempt to illegally force tenants from their homes or engage in unlawful rent gouging must be prosecuted to the fullest extent allowed by law; NOW, THEREFORE, I, GEORGE E. PATAK!, Governor of the State of New York, by virtue of the authority vested in me by the Constitution and Laws of the State of New York, and particularly by subdivision eight of section sixty-three of the Executive Law, and in accordance with the statute and law in such case made and provided, find it to be in the public interest to reauire that the Attornev General inquire, in the circumstance and the manner hereafter provided, into matters concerning public peace, public safety and public justice with respect to criminal acts committed by building owners or their agents against tenants in New York State arising from a lapse of the State's rent control and stabilization laws. I hereby appoint the Attorney G.eneral as Spec·ial Prosecutor to lead the investigatory and prosecutorial efforts pursuant to this Order. The Attorney General and such deputies and assistants as he deems necessary shall have the powers and duties specified in subdivision eight of section sixty-three of the Executive Law for the purpose of this Order. Add.27 ~ : i~ ~ ~ egisl ~ r ; t ~ ~ a. ~ Lheir.hu",,, " I rt ~ crui ~ i ~ :ia:' ~ r. ecu~ ::'l Executive Order No. 53 -2- When making an inquiry pursuant to this Order, the Special Prosecutor shall investigate illegal conduct by building owners against tenants arising from a lapse of the State's rent control and stabilization laws, in cooperation with the district attorney of the county wherein the offense or portion thereof is alleged to have been committed. Upon a determination by the Special Prosecutor that there is probable cause to believe a building owner or his agent has engaged in such illegal conduct, the Special Prosecutor shall notify the Counsel to the Governor of the determination, the basis therefor, and the status of the criminal prosecution, if any, against the alleged wrongdoer. The Special Prosecutor, his deputies and as~istants, and any other personnel he deems necessary shall assist in the prosecution of such crimes·upon the request of the district attorney. Where such assistance is provided, the district attorney shall retain exclusive authority to direct ~he prosecution of the case, unless otherwise provided by law. Every department, division, board, bureau and agency of this State shall provide to the Special Prosecutor every assistance, facility and cooperation he deems proper or desirable for the accomplishment of the purposes of this Order. The Mayors or other chief executive officers of all cities, cowns and villages, the district attorneys of each of the counties in the State, the sheriffs of such counties, the commissioners of police or persons having comparable title or duties exercising supervision of police forces within the State are called upon to cooperace and make every reasonable facility and assistance to the Special Prosecutor in the performance of hie duties pursuant to this Order. The Special Prosecutor shall report weekly to the Counsel to the Governor regarding the implementation of this order, including information relating to ongoing investigations and criminal prosecutions and any recommendations for legislative changes necessary or desirable to effectuate the purposes of this Order. I hereby direcc che Division of Housing and Community Renewal (the Division) to establish a toll-free hotline by which tenant complaints of illegal conduct by building owners or their agents can be reported and transmitted forthwith to the Special Prosecutor. Such hotline shall be available 24 hours each day beginning on l2:0l a.m. on Monday, June 16, l997. The Division is further directed to make trained personnel available to respond to tenant inquiries on such hotline. The Chief Judge and Chief Administrative Judge of the New York State Unified Court System are hereby requested to temporarily assign such judges and justices of the Unified Court System and other personnel as they deem necessary to the Housing Part of the Civil Court of the City of New York and to other courts throughout the State, particularly in Westchester, Nassau, Rockland and Erie counties, to ensure that complaints by tenants against building owners arising from a lapse in the State's rent regulation laws are heard as expeditiously as possible. 'T"'ho noi ~·~-~~."":"!"'. "='f. 't-t"':"'.,.~;;_~-'J' ~-'!1.~. r:~>;";".':':".~J.!"' ... i.;,:,.,, ,,:,.·.' ,:,_it:.J" P.~~_~·:!'::'.1. s ·tV~~~'b .. / £ .. !.'::":.':-..~ . c · e Executive Order No. 53 -3- The Counsel to the Governor is hereby directed to prepare such legislation as he deems.necessary or desirable to effectuaee the purposes of this Order for introduction as a Governor's Program Bill. L. S. BY THE GOVERNOR /s/ Bradford J. Race, Jr. Secretary to the Governor G I V E N under my hand and the Privy Seal of the Staee in the City of Albany this fourteenth day of June in the year one thousand nine hundred ninety-seven. /sf George E. Pataki Add.29 u ~ l i ~ c ' l RELEVANT EXCERPTS FROM THE RENT REGULATION REFORM ACT OF 1997 1997 LAWS OF THE STATE OF NEW YORK CHAPTER 116 Add.30 Add.31 RETRIEVE http://public.leginfo.slaLe.ny.us/bsmmef,cgi BILL TEXT: 1 onl 8, 5553 1)1" SENP .. TE Governor) conunitted to STATE OF NEW YORK A. 834h 1997-1998 Regular Sessions SENATE ASSEMBLY June 19, 1997 Introduced by Cor"'r.1ITTEE ON RTJLES -- (at request of the read twice and orde~ed printcQ, and Hhen printed to be the Conmittee on Rules lK ASSSM3LY -- Introduced by COMMITTEE ON RU:'ES -- (at request of M. of A. Silver, LOP8Z, Farre:"l, Sanders, Clark, }r,effer, :'leeks, Wright, Katz, l\rroyo, Aubry, Boyland, Brennan, Brcdsky, Colton, Cook, :::::rowley, Diaz, ?eldman, Green, Greene, Kaufman, Klein, Lafayette, Lentol, l'1cLaughlin, Millman, Norman, Ortiz, Pclonetsky, Pretlolll, Rivera, Towns, '..iitaliano, vleinstein, Weisenberg) -- (at request of the Gover- nor) read once and referred to the Commit~ee on Housing AN l\CT to enact t~e rent regulation reform act of 1997; Lo a:nend chapter 576 of the lal'.'s of 1974, anending the emergency hO'J.sing rent c:::mtrol laH relating to the control of and stabiliza-::io::-. of rent in certain cases, chapter 274 of the laws of 1946, cons~ituting the e~ergency housing rent control law, chapter 329 0= the laws of 1963, amending the emergency hO"J.sing rent control law relating to the recontrol of rents in certai.:'l cases, the emergency housing :!::'er:t control 1 a·"" chap- ter 555 of the laHs :)f 1982, amending the gene:::al business la'I'I and the administrative code of the city of Nevi York rela:..:lng 1:.0 cUIiver:lior, of rental residential property to cooperative or condominium o'rlr.ers;,ip in the c~.ty of Ne .... York and chapter 402 of the la;..'s of 1983, arne::-.ding the genera: business law rC!lating to conversion of rental reside:,.tial property to cooperative or condDminium ownership in certain ffi"J.:'.ici- palities ~n the co~nties of Nassau, Westches~er a~d Rockland, i~ rp.lation to their periods of effectIveness; to amend the ernerq-e:1cy h:)using rent cont::::cl lav,t, t:j'~ emergency tenant prctec\:ion act of nine- teen seventy-fou:::, ~he adrnl:l1slrative code of the ci-:y of New York and the tax law, in relation ~o eli~inating rent regulatio~ for certai~ hi gh income tenants; to ame::-.d tie adYfLinlsLrative code of the city of NeH York and the err.erge:ccy tenant protection act of ninet.ee~ sever.ty- four, in relation to limiting rent increase after vacancy of a housing accommodation; to amend the public housing law, the administrative code of Lhe city of Neh' York, the emergency tenant protection act of EX?:']I.NATI001--jl.jatter in italics (u::-.derscored) is new; rr.a~ter in brackets [._.J is old law to be omitted. l,FlD1L-105-[]1-7 Add.32 RETRlEVE 20f31 http://public.lcginfo . .statc.ny.tl'i/bstfrmef.cgi s. 5553 2 A. 8346 nineteen sevGnty-=ou~f the emergency housing rent control law and the local emergency housing :cent cor.trol act, in relation to succession to a rent regulated housing accorrunodation; to amend the penal law, in relation to haL'assment cf rent regulated tenants; to amp,nri the emer- gency tenant protection ae: cf Line teen seventy-four and the adminis- trat'::'ve code 0:: the city of KeVI' York, in relation to registration of rents and charges related thereto; to amend the civil practice law and rules, in relation to a fou::: year statute of limitations for residen- tial rent overchargesi to amend the real property actions and proceedings :aw, in relation to proceedings to recover possession; to a:nend the adninistrative code of the city of New York, in relation to demolition of rent regulated housing acco:TL"'llndattons; to amend the real property lal-l, in relation to 'lJarranty of habitability The People of th~ State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Short title. This act shall know:) and ma.y be ci ted as the 2 ":::ent regulation reform act of :'997". 3 § 2. Section 17 of chapter 576 of the laws of 1974, constituting the 4 emergency tenant protection act of nine:een seventy-four, as amended by 5 chap-:er 253 of thf'. laws of 1993, is aIr.ended to rec.d as follows: 6 § 17. ~ffective date. This act shall take effect immediately and 7 shall remain in full force and effect unL:l1 and inch:.ding the fifteenth 8 day of June [1·-9-9·.:;.·] 2003; except that secticns h'o ar_c three s~"1e.ll take 9 effect ".;ith respe~to any city having a population of or_e million or :'0 more and section one shall take effect with respect to any ot~"1er city, 11 or any town or vIllage whenever the local legislative body of 2. :::ity, 12 town or village determines the existence of a public emerger_cy ?ursuant 13 to section ~hree of th8 emergency tenant p~ctecticn act of nineteen 11 seventy-fou~, as e::1.acted by section four of thi.s act, and provided that 15 the housing accornmodatio::-,_s subject on the effective date of ttis act to 16 stab':"lization pursuant to the New York ctty rent stabilization 1 a'"" of 17 nineteen hundLed sixty-nine shall rena in subject to such laH '..1.pon the 18 cxpirat':"on of this ac~_ 19 § 3. Subdlvislun 2 of section 1 of chapter 274 of the la\~'s of 1946, 20 constitut':"ng the emergency housing rent control latlJ, as amendeci by chap- 21 ter 253 of the lailJs of 1993, is amended to read as follOilJs: 22 2. l'he provisions of -:::his E',ct, and all regulations, orders and 23 requirements thereunder shall remain in fu~l force and ef=ect until and 24 incLlding June 15, [-±-9-9fJ 2003. 25 § 4. Sect':"on 2 of chapte~ 329 of the laws of 1963, amending ~he local 26 emergency houstng rent cont:::cl la"" relating to recontrol of :::::en-:s i::-,_ the 27 city of Albany, as amended by chapter 253 of the laws of 1993, is 28 am~nded to read as follows: 29 § 2. This act shall take effect immediately and the p~ovisio~s of 30 subriivi sL:m 6 of sect:"on 12 of Lhc: c:mergency housing rent con-:Lol 12w, 31 as added by this act, shall ~emain in full force and ef=ect until and 32 incl uciing June 1 S, [1-9-9;o"J 2003_ 33 § 5. Section 10 of chapter 555 of the 1al-l.'3 of 1982, amending the 34 gc:neral b-..lsiness lal-l and the administrative code of the c.:'.ty of Ne",' York 35 relating to conversion of re.<;icien-:ial property to cooperative or CO::1do- 36 m.:'.niurr. owr:ership in the city of New York, as amended by chapter 253 of 37 the lalvs of 1993, is amended to read as follows: Add.33 RETRIEVE 30f31 http://public.leginfo,state.ny.usibstfrmef.cgi s. 5553 3 J!... 8346 1 § 10. T:lis act shall take effect imrrectiately; provided, -:hat the 2 provisioDS of sectioLs one, t\-10 and nine 0:: this act shall ::cmain in 3 full force a:1d effect only unti=- and including June 15, [.,t~J 2003; 4 p:oT,.dded Iurtr.er that the Drovisions of section three 0:: this act shall 5 remain ir. f1l11 force and effect on:"y so long as the public err.ergency 6 :::equi.clng the regl;.lation and control of residential rents and evictions 7 continues as prov.ided i:1 subdivision 3 of section 1 of the local emer- 8 gency housing rent control act; provided further that the provisions of 9 secticns fou,:" five, six and seven of this act sha2.1 expire in acco:::d- 10 ance I'l"ith the p::::avisians of section 26~520 of the administrative code of :"1 the city of New York as sech section of the administrative code is, f::::om 12 l':"me to time, amendedi provided further that the provisions of sRetion 13 26-511 0:: the administra::ive code of the city of New !'"ork, as amended by 14 this act, which the New Ycr:{ City Department of Housing Preservation and 15 Development must find are conlained in the code of the real estate 16 industry stab':"lization associatio~ of such city in order to approve it, 17 shall be deened contained therei~ a~ of the effective date of this act; 18 and prov~ded further that any plan accepted for filing by the department 19 of la\ll on or before the effective date of this act shall continue to be 20 governed by the provisions cf section 352~eeee of the genera:" business 21 law as they had exisled immediately prior to the effective date of this 22 act. 23 § 6. Section 4 of chap leI' 402 of tr.e la'..,s of 1983, amending the gener- 24 al business layl relating to conversions of rental residential property 25 to cooperative or condomin.:'..um ownership i~ certain munL::ipalities in the 26 cOI..:'::'.ties of Nassau, vJestchester and Rock] and, as amended by chapter 253 27 cf t:1.e laws of 1993, 1s amended tc ::::eac as fa 11 o'..,s : 28 § 4. This act shall take effect immediately; provided, that the 7.9 p:::::ovisions of se-::Llons one and three of this act shall remain in fuL_ 30 force and effec:t only unti:'.. and inc1udL"lg J-.l:."le 15, [-144-1-] 2003i and 31 providec L:.rtr.er that any plan accepted for fi1i::,.g by LIe department of 32 law cn or before the effective date cf this act sha.ll continue to be 33 governed by the provisions of section 352~eee of the general business 34 laiv as they hac existed irrunediately p::::ior ':0 the effective date of this 35 act. 36 § 7. Paragraph (n) of sub::livisloIl 2 of section 2 of cha.pter 274 of 37 the laivs of 1916, constituting the emergency hcusing rent control law, 38 as added by chap-:er 253 of the laws of 1993, is amended to read as 39 fo:"lows: 48 (n) any housing accomrnodation with a maximum ren-: of t'..,o thousand 41 dollars or more per month at any time between the effec-:ive date of this 42 paragraph and October first, nineteen hundred ninety-three wtic:h is or 43 becomes vacant on 0:::: after the effect':"ve date of this pEiragraph, or any 44 housing accommodation with a maximum rent of two thousand dollars or 45 more per month at any time on or after the effective date of the rent 16 regulation reform act of 1997 which is or becom~-; vacant on or after the 47 effective date of the rent regulation reform act of 1997. This Gxclu- 48 ."l; on shall not apply, howeveI', to or become effecti 'Ie ~d -:h respect to 49 housing accommodations which -:he co:nmissioner determines or finds that 50 the landlord or any person acL1rq on his or her behal::, with intent to 51 ca~se the tenant to vacate, has engaged In any course of conduct 52 (i.ncl-.lding, but not lirn1l!=d to, interruption or discontir.uance of 53 required services) \llhich interfered with or disturbed or 'vas intended to 54 interfere with or disturb the comfort, repose, peace or quiet of the 55 tenant in his or her use or occl1pancy of the housing accommocations and Add.34 RETRIEVE 22 of31 http://public.leginfo.state.ny.us/bstfhmf.cgi S. 5553 22 A. 8346 1 the tenant for a penalty eq"J.al to three times the anount of such over- 2 charge. In no event shall suci treble damage penalty be assessed aga~nst 3 an owner based solely or, said O'.·mer' s failure to file a proper or time~y 4 initial or annual rent registralion statement. If the owner estab:ishes 5 by a preponderance of tr.e evide::lce that the overcharge was neither w-=-l~- 6 fu' nor attr'::"butable to his :legligence, the state division of housing 7 and cOr.1ITlunity rcne.-lal shall establish the penalty as the aMount of the 8 overcharge plus interest at the rate of interest payable on a judgment 9 pursuant to section five thousand four of the civil practice law and 10 rules. (i) Except as to campla.ints filed pursuant to clause ~i:') of th:'s 11 paragraph, the legal regulated rent for purposes of determincng an over- 12 charge, shall be deemed ~o be tte rent indicat8d in the annual rcg:'stra- 13 tion statement filed tour years prior to tie ~ost recent registration ] 4 statement, (or:, if more recen-:ly filed, t:1e initial registration state- 15 m::::nt) plus in each case any subsequent lawfu.l increases and adjustoents. 16 Where the amount of rent set forth in tho annual rent registration 17 statement filed four years p.,...ior to the most recent registra'bon state- 18 mont is not challenged within four years of its filing, neither such 19 rent nor service of any registration shall be subject to challenge at 20 any time thereafter, (ii) As to complaints filed 'Nithin ninety days of 21 the initial registration of a housing accommodation, th"" legal regulated 22 rent for F..-.rposes of determining an ove2:charge shall :Oe deemed to be the 23 rent charged on the date four years prier to ::he date of the i.nitial 24 registration of the housing accornrr.odation (or, if t:1e housing accommo- 25 dation Has subject to th':"s act for less than fonr ye"Lrs, the initial 26 legal regula Led :t'ent) plus in each case, any la'..,ful increases and 27 adjustmen-:s. \'{r.ere the rent charged on the date four years prior to the 28 date of the initial registrat:'on of the acccmmodation cannot be estab- 29 lished, such rent shall be estabL_shed by the division. vfuere the 30 amount of rent set forth in the annual rent registration statement filed 31 four years prior to the most recent registration statement is not cha~~ 32 lenqed within four years of its filing, neither such rent nor service of 33 any re9~stration shall be subject to challenge at any time thereafter, 34 § 32. Clause (i) of subparagraph ,:b) of paragraph 1 of sub:livision a 35 of section 12 of section "'1 of chapter !:d6 of the laws of 19"/4 constitut- 36 ing the emergency Lenant protect':"on act of nine':ee::-l seventy-four, as 37 amended by chapte::: 403 of the lallis of 1983, is ame:"'_ded to read as 38 follows: 39 I:i) l.:xcept as provid2d under clauses ~i-=-} and (iij) of this subpara- 40 graph, a cor:tp:'aint under this subdivision sha:"l be filed with the state 41 division of housing and cOTh"ltunity renewal within :::our years of the first 42 overcharge a:"leged and no determination of an overcharge and no award or 43 calculation of an award of the amount of an overcharge m~y ~e based upon 44 an overcharge having occc.rred :nore than four years before the Go:nplaint 45 is filed. This paragraph shall preclude examination of the rental 45 history of the hous1nq accommodation prior to the four year period 17 preceding the filing of a complaint pursuant to thi$ subdivision. 48 § 33_ Subdivision a of section 26-516 of the adrninis~rative code of 49 tr.e city of New York, a.'l ame:-:ded by charter 253 of the laws of 1993, is 50 ame:-,ued to read as follo;-,'s: 51 a. Su.oject to the condi~io:"'ls and limitations of this subdivision, any 52 Ql the anount of 2 such overcl-_arge. In no event shall such treble damage pena:..ty be 3 assessed against an owner based solely on said owner's fai:ure to file a 4 timely O~ proper i~itidl or annual rent registration statement. If the 5 owner establishes by a preponderance of the evidence that the overcharge 6 was not toJillful, :::he sta.te division of hous':"ng and community renewal 7 shall estaJ::::lish the penalty 2S the amount of the overcharge plus inter- 8 est. (l; Except as tc complaints filed pursuant to clause ,:-=-1) of this 9 paragraph, the legal regulated rent for purposes of determining an over- :'0 charge, shall be the ::::ent indicated in the annual registration stAtement 11 filed four years p::::io:c: to the most recent registration statement, (or, 12 tf more recently filed, ::he initial registration statement) ,plus in each 13 case any subsequent la .... ful increases a.::-.d adj ustments. Where the amount 14 of rent SQt forth in the annual rent registration statement filed four 15 years prior to the most recent registration statement is not challenged 16 within four years of its filing, neither such rent nor servioe of any 17 ~istration shall be subject to challenge at any time thereafter. (ii) 18 As to co~plaints filed with~n ninety days of the initial registration of 19 a housing accommodation, the legal regulated rent shall De deemed to be 2C the re:-:t charged on the date four years prior to the date of the initial 21 registration of the housing accomnodation (or, if the hOJ.siny ac:;orn::rru- 22 daticn was sUDject to this chapter for le88 ttan four years, the initial 23 legal reg:...::12ted rent) plus in each case, any lawL.ll inCr'i:l8SeS and 24 adjustments. Where Lha rent charged on the da-:e four years prior to the 25 date of the i~itial registration of the accommodation ca~not be estab- 26 L.shed, such rent s~'1all be established by the division. 27 Where the rent cjarged on the date four years prior: "':0 the date of 28 initial regis~ratio~ of the housing accommodation cannc~ be established, 29 such rent shall be p.stablished by the division provided tr.at I<.'r.ere a 30 rent is established based on rentals determined under -:he provisio::".s of 31 the local err,ergency hOl:sing rent control act such ::::en:: mus;: be acijusted 32 to account for nc less tjan tje minimum increases which would be permit- 33 ted if the housing accommodatior, were covered undeL the p::::ovisicns of 34 this chapter. ~~Gre the amount of rent set forth in the annual rent 35 registration statement filed four years prior to the most recent reqis- 36 tration statement is not challenged within four years of its filing, 37 neither such rent nor service of any registrat.J..on shall be subject to 38 challenge at any time thereafter. 39 (1) The order of the sta'tp. division of housing and community renewal 40 shall apportion the owner's liabili~y between or anong two or more 11 tenants found to have been overcharged by such owner during their 42 pa~~ic~lar tenancy of a unit. 43 (2) Except as provide:d under clauses (i) and (ii) of thls paragraph, a 44 complaint under this subdivision shall be filed I-lith the state divisicn 45 of housing and community re:neil,lal wi thi::-J. [our years of the first over'- 46 charge alleqed and no determination of an overcharge and no award £E 4'/ calculation of an award of the amount cf an overcharge may be based upon 48 an overcharge ~aving occurred morp. than foc.r years before lhe complaint 49 is filed. (1) No penalty of three times tte overcharge may be based 50 upon an cverctarge having occurred more than two years before the 5J complainl is filed or upon an overcharge ",;hieh oCGurred prior to April 52 first, nineteen hT1_rlred eighty-four. (ii) p ... ny complalnL bas8d upon 53 overcharges occurri;--,g prior to the date of filing of the initial rent 54 registrat~on as provided in section 26-517 of this chapter shall be S:; filed wi thin nine-:y days of the :nailing OZ no'Cice to the tenant of such 56 registration. This paragranh shall preclude examination of the rGntal Add.36 RETRIEVE 240f31 http://public.leginfo.state.ny.us/bstfrmef.cgi S. 5553 24 P •• 8346 1 h~story of the housing accommodation prior to the four-year period 2 preceding the filing of a complaint pursuant to this subdivision. 3 (3) Any affected tenant shall be nctifiea of and given a1: opporL.nity 4 to join in any c:o::nplaint filed by an cfficer or employee of tte state 5 division of housing and community renewal. 6 (4) An aI-mer found to have overcharged may be 2ssessed t~'le reasonable 7 costs and attorney's fees of the proceeding and i~terest fro~ the date 8 of the overcharqe at the rate 0:: in-:erest payable or_ a j·J.dgment pursuant 9 to section five thousand four 0:: the civil practice laH a:ld rules. 10 (5) The order of the state division of tot:sing and conuuunity renewal 11 a'rEirding penal ties may, upon the expi:::a-:ion of -:he period i:1. which the 12 owner may institute a proceeding pursuan'c -:0 article seventy-eight of 13 the civil practi:'e 1a".,;< and rules, be filed and enforced by a tenant in 14 the same mar.ner as Co judgment or not in excess of "ti'ien-:y percent thereof 15 per mo::-.t;-, may De offset against any rent thereafter due the ovmer. 16 § 34. Beetio:'. 213-a of the r."ivil practice laioJ and L'ules, as added by 17 chapter 403 of the la-I-\rs of 1983, is amended to read as follo",,,3: 18 § 213-a, 121.cticns to oe co::nmenced within four years; residential rent 19 ove:c:cha:c:ge. An actlon on a res':"dential rent overcharge shall be 20 corrmenced ~ithin four years of [~J the first overcharge alleged and 2~ no deteImination of an overoharge and no award or calculation of an 22 award of the amount of any overcharge mav be based upon an overCharge 23 having oocurred more than four years before thE! action is commenced. 24 This section shall preclude examination of the rental history of the 25 housing accommodation prior to ths four year period immediately preood- 26 ing the commencement of the action. 27 § 35. Section 731 of the r8z.1 property act-=-ons and proceedings la"" i.s 28 amended by adding a neN subcilvi:>ion 3 to read as foL.ows: 29 3. In the city of New York, when the petitioner seeks to make an 3D application pursuant to subdivision two of section seven hundred forty 31 five of this article, the notice of petition shall advise the respondent 32 of the reqUirements of subdivision two of section seven hundred forty- 33 five of th~_~ __ article. 34 ~ 36. Subdivifij_on 2 of sec-:ion 745 of the I'eal property ac-:ions ar.c 35 proceedings laVl, as added by chapter 403 of the lal-1S of 1983, is amendec. 36 ':0 read a~ fo llo\o'lS: 37 2. 1::1 the city of New York: 38 (a) In A su:nmary proceeding upon the sec::md [req:uest B3.T the ton~ 39 an adjour-n-lae-n-tJ of two adjournments at the reguest of the respondent, 40 or, upon the thirtieth day after the first appearance of the parties in 4: court less any days that the proceedincr has baen adjourned upon the 12 request of the petitioner, whichever occurs sooner, the COlE ~ sha 11 43 direc_ that tte {t:eflan-te---pos-t--alll respondent, upon an application by the 44 petitioner, deposit with the court within five days sums of rent or use 45 and occupancy accrued from the date the petition and notice of petit10n 46 are served upon the respondent, and all sums as they beCOIT.e due for 47 [:€u··"\;:;»Ee] :rent and use and occupancy, which may De established withou-: 48 the use of expert testimC"lnY, unless [wa-i~ .... :b'-y-".40h.e··-e0.l:H~?-t ...... f*"3-'l?-···goffi.--e.a-1:Joe", 49 ~J the respondent oan establish. at an immediate hearing. to the 50 satisfaction of the court that respondent has properly interposed one of 51 the following defenses or established the following grounds: 52 (i) the petitioner is not a proper party to the proceeding pursuant ~o 53 se(!tiou seven hundred twenty-one of this article; or 54 (ii) (A) actual eviction, or. (B) actual partial eviction, or (C) 55 oonstructive eviction; and respondent has quit the prem1sesi or SENATE DEBATE TRANSCRIPTS 1997 LAWS OF THE STATE OF NEW YORK CHAPTER 116 RENT REGULATION REFORM ACT OF 1997 Add.37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5645 (There was no response. The Rules report is accepted. Senator Bruno. SENATOR BRUNO: Mr. President, can we at this time take up Calendar Number 1318. ACTING PRESIDENT KUHL: Secretary will read the substitution which is at the desk. THE SECRETARY: Senator Bruno moves to discharge from the Committee on Rules Assembly Bill Number 8346 and substitute it for the identical Third Reading .Calendar 1318. ACTING PRESIDENT KUHL: Substitution is ordered. Secretary will read the title. THE SECRETARY: Calendar Number 1318, by the Assembly Committee on Rules, Assembly Print 8346, an act to enact the Rent Regulation Reform Act of 1997. ACTING PRESIDENT KUHL: Senator Bruno. SENATOR BRUNO: Is there a message of necessity at the desk, Mr. President? PAL'LIh'E .E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.38 a r nse. ul r ort i accepted. enat r runo. Mr. President, t t i t m ale dar Number 8. NG IDENT KUHL: ecret r il t bsti hic i at t e s . CRETARY: Senator r ove rom mi t ul s bl il u ber sti f r ti al Third Reading al ar 1318. N HL: bsti ion is ordered. Secretar ill r . ECRETARY: alendar u ber s bl o mi tee on ules, s bl r t ent egulat ef ct f 1997. NG PRESIDENT KUHL: at r . ENATOR BRUNO: I t es s i y h r r t ULIN I S 5646 1 is. 2 SENATOR BRUNO: Move we accept 3 the message. 4 ACTING PRESIDENT KUHL: Motion is 5 to accept the message of necessity on Calendar 6 Number 1318. All those in favor signify by 7 saying aye. 8 (Response of "Aye.") 9 Opposed nay. 10 The message is accepted. The 11 bill is, before the house. 12 Secretary will read the last 13 section. 14 SENATOR CONNOR: Explanation. ! 15 ACTING PRESIDENT KUHL: Senator 16 Bruno, an explanation of 1318 has been requested 17 by the Minority Leader, Senator Connor. To whom 18 would you like the explanation directed? 19 SENATOR BRUNO: Mr. President, I 20 believe the chair of the Housing Committee in 21 the Senate, Senator Leibell. 22 ACTING PRESIDENT KUHL: Chair 23 recognizes Senator Leibell for an explanation. 24 SENATOR BRUNO: Thank you for 25 PAULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.39 ENATOR RU : Move e a t h essage. NG IDENT KUHL: oti i o h es cessi al ar be 318. l i i b a e. f " ye.") ppos nay. e ge is accepted. The il i . before h use. r t il l st t . Explanation. N IDENT KU : Senator r l o 18 st h i ori y , S or C r. To h oul l at i Mr. President, I l e i ousi o mittee i enat , enator eibe l. N IDENT KUHL: hair i at ei ell f r a planati n. : ha f r (unintelliaible) -- E. WILLI MAN SHO REP 5647 1 SENATOR LEIBELL: Thank you very 2 much, Mr. President. 3 This session has been dominated 4 by only a couple of issues. We are here to- 5 night to conclude business on one of those 6 issues. 7 Some months ago, in the time 8 frame of last December and January, the Senate 9 Majority Leader, Senator Bruno, brought to the 10 floor an issue that has been before this body in 11 the past, and an issue that involved a great 12 deal of controversy. 13 I initially start by commending 14 our leader, Senator Bruno, for bringing this 15 issue to the attention not only of this 16 legislative body, but to all the people of the 17 state of New York. Of course, I'm talking about 18 rent regulations. 19 This is a critically important 20 issue because it affects the quality of life of 21 millions of New Yorkers. We have been plagued 22 in this state over many years now by a grossly 23 inadequate supply of housing. We have the 24 lowest percentage of home ownership in the 25 nation. We have a housin su 1 that is PAQLINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.40 N OR IBELL: Thank y er uc , r. resi ent. i o inat e issues. We ar her t - l si o e f t s s. ont t ram ec ber ar , t Senate ajori ea er at r , t t lo ssu i st r t f ntr ersy. l endin r enat r r no, f r ri i t is ssu t o t nl f t i iv t l l e w r Of course, I' t l i about t ulati s. i . ri i portant ssu ali f il ion w r . We have e l a r ssl n u y ng. We have t e o est f e nershi i t e ion. e ve a housin that i UU . WILLI I I SHORT 5648 1 rapidly deteriorating. 2 Many of us have searched for 3 reasons as to why this has occurred and 4 similarly sought solutions as to how we could 5 cure this great ill. There are many areas of 6 our cities, especially our largest city, where 7 you will find housing that is reminiscent in 8 squalor to what existed one hundred years ago. 9 We have been greatly concerned 10 with the impact of our regulatory system, our 11 laws and those regulations that control housing 12 throughout much of our urban areas, especially 13 New York City. 14 Tonight we are here for some ! 15 dramatic ,changes in the existing laws, changes 16 that probably satisfy almost no one, but changes 17 that are nonetheless dramatic and reflect an 18 opportunity for us and for our great state to 19 move ahead into a new future and create a new 20 and better housing supply for all of New 21 Yorkers. 22 The legislation we have before us 23 tonight has not been easily achieved. It is 24 only just now passed in the state Assembly. It 25 PAULINE E. WILLIMAN CERTIFIED SFIORTHAND REPORTER Add.41 et ri r t . a f r o r il t l o e c ul s l. There are many areas of eci l st i , here il si t i r iniscent i l hat i e r ear ago. r t cer i pact f r l t s st , our aw h l o ntr l housi rou t u r s, speciall or it . ni t f s e ati changes in the e ting a es t ost e, ut changes et el ati r fl t an ort i r r at st t t o t r at a ne t s l l f e orkers. i io e ef r us t i hiev~d. i now p ssed in the state Assem ly. It is leqislation which has been the result of many I E I A!'< I I SH E ORT 5649 1 hundreds of hours of work by our leadership, our 2 members, and our staff. There are numerous key 3 areas that have been changed. 4 Initially I should note that 5 there are a number of extenders and, in fact, 6 this legislation will extend, if enacted, for 7 six years. We have expanded luxury decontrol. We 8 have provided for rent adjustments, establishing 9 new and enhanced rent adjustments for owners 10 upon vacancy. 11 We have amended the rules of 12 succession. We have provided limits on 13 regulating new construction. Most significantly 14 and as proposed by our Governor, we have a new 15 section of the Penal Law providing for 16 harassment of a rent-regulated tenant. 17 We have also seen enacted here 18 and included in this legislation proposals 19 concerning a deposit of rent, which is an issue 20 we have debated in this chamber previously. We 21 also have a variety of regulatory reforms which 22 hopefully will make it easier not only for those 23 who own buildings to operate, but also will make 24 it easier for those who live within those 25 PAULIKE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.42 r or r l ers i , our e ber nd staff. There ar nu erous ke t ee changed. i ly t t t ber t r , i f ct, io il t , i act , f r r l r econtrol. e ded e ustm , tab ishing t j t f r o ners aca cy. en t r l f on. We have provi e li it on ing ew c ru tion. ost si nifi tl r overnor, e ha e a ne io l r i f r s t t l t t ant. t er u i o r posals osi t, hi i a i e ed in this cham r previously. e r l t r s hich ef l il l i n er t t ill ake it i t s units. LI~ . WILLI SHORT REPORTE 5650 1 ACTING PRESIDENT KUHL: Senator 2 Connor. 3 SENATOR CONNOR: .Thank you, Mr. 4 President. 5 We have - seen these past months in 6 this Capitol a struggle not about philosophy 7 because, as I made it plain here on April 7th, 8 when the Democrats in this house moved to extend 9 the rent law so we could study them further and 10 we could reject what was viewed by tenants as a 11 threat to back them up against the deadline, I 12 pointed out that I, too, and Democrats in^ 13 general believe that a true free market system 14 with protections for safety against harassment 15 would always be preferable to some sort of 16 system of regulation, but that there was really 17 no supply that would allow someone to wave a 18 magic wand and end rent regulation. 19 We now have before us a bill 20 that's a product of this struggle, and I-would 21 like to, first of all, Mr. President, thank all 22 of my colleagues on the Democratic side of the 23 aisle for holding fast, standing tall and 24 remaining committed to ensuring that the tenants 25 PAULINE E. WILLIMAN CERTIFIED SI-IO RTRAND REPORTER Add.43 '" NG IDENT KU : Senator onnor. R: ha you, Mr. r si ent. e ont i apit l u l t t i I ade it l i here on pril 7th, h emocrat i t i s ove t ext aw ~ t e r a l t hat as i t t as a he ai st adli , I i t t at I, t o, and Democrats in, r l t f arket s i r t t f f t ai st ar ent oul r f l t s e rt of tem l t t t as r all l t oul low e t ave a agi a e r t r gulati . ~ s a ill t' ct f l , I oul ik l r. r si t, t ll ea emocrati f t l t t l ai mi t s r t t t t ants in New York State continued to be protected and I E HORTHAND RE 5651 1 had our support against the threats laid down as 2 early as December to simply end all rent 3 regulation and let all laws expire. I s 4 ! appreciate that support. 5 I know in the other house, I'm 6 sure, the leadership there, the Speaker, 7 appreciates that unified effort. I'd like to 8 thank the tenant organizers who did such an 9 effective job not only in getting bodies and 10 picket lines and all that, but in making the 11 case on the merits, in pointing out the real 12. facts, because at some point, at some point, 13 ^ this struggle became a battle between extremist 14 ideology, the idea that ideology. .said do this, 15 so ignore the fact and do it, and the reality 16 and we owe those tenant leaders and the many 17 tenants we heard from, our thanks for bringing 18 to the .public fore, the realities of life in New 19 York City, Westchester, Nassau County and 20 elsewhere, the reality of life for tenants in a 21 scarce housing market. 22 I'd like to thank Mike McKee and 23 Billy Easton and Martin Brennan for their 24 efforts in participatory democracy in getting 25 the tenants involved. I'd certainly like to PACLINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.44 ort ai st t l i do n as ec ber l l r t ion nd let a l laws expire. I r ci t t t s pport. ow n he m peaker, r i es th fied effort. I' li t ha i Q iv t in i n l t aki t erit i n t l Oint, t e aint, ru am t t ist , t e idea that ideology sa d t is, h li an rom h r public fore, the rea ities of ife e or i estchest r as unt se r l f t i a usi arket. d ike o hank i c e il art r i rt p ocr ett h en s involved. I' cert i l t U I E I. I SHORTH REP '5652 1 congratulate Speaker Silver, my partner in 2 representing the Lower East Side, and our 3 leader, in standing fast against the threats to 4 eliminate all protections. 5 This bill that's before us, Mr. 6 President, is important, yes, for what it 7 contains, but it's more important for what it is 8 not. 9 It is not an end to protection 10 for our tenants. It is not an end to standing 11 against the greed that can sometimes -- 12 sometimes affect some people who find themselves 13 the owners of a scarce commodity, in this case 14 certainly one of the necessities of life, rental 15 housing, shelter in a large metropolitan area. 16 Mr. President, the public in this 17 state knows, the public in this state knows well 18 that those things in this bill that might 19 disadvantage tenants are there because of the 20 Governor and the Republican leadership in this 21 house, and the public in this state, Mr. 22 President, knows that the reason we have 23 protections at all, the reason there is a bill 24 is due to the Democratic leadership in the 25 PA[JLINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.45 1 7 5 5652 r t e i r e ing he i r lea , in tanding i im l r t t s. i i t' ef r us, r. t port t hat i t 's or port t f hat it i t. s r t t ten s. It is not an end t st i i et e - et m l h f t sel es ner modity, i t i case n y the i ies f life, re al si , elt i a l etropolitan area. r. r si nt, t publi i t is s, bli i t i st t kn s e l i ill t at ight i t r t r because of t e over r t epubli l ers i i t is us , t ubli i t is state, Mr. r si t, t t r e have r t t t ll t r t er is a bi l emocrati l er i i t e P U I E. WI LIMAN CERTIFIED SHORTHA REPORTER 5653 1 house, who stood unified. That's the reality of. 2 this struggle. 3 As our own Governor Pataki said 4 when finally seeing the light, this bill is a 5 victory over the extremists who would have ended 6 all rent protection and we know, Mr. President, 7 from what quarters those extreme threats have 8 emanated in these past months. 9 Yes, Mr. President, there are 10 winners and losers, but the biggest winners are 11 the tenants in New York State. They're winners 12 for what did not happen as well as for what did 13 happen with respect to this bill. 14 Mr. President, there are good 15 things in this bill. There are things that are 16 balanced, things that Democrats urged. We urged 17 early on, let's look at specific things to help 18 small, struggling landlords and there are things 19 in here. That's a good thing. 20 There are other things in here, 21 when I spoke to this issue in April I said 22 there's more wrong with the New York City 23 housing market than simply rent regulation. 24 Maybe -- maybe 50 years ago they went down the 25 wron road but the fact is the realit toda PACLINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.46 tood ied. That's t e realit of le. over r at i sai h t il i a t i t oul r t t e k , r. resident, rom at art t e t have anat i t past onths. es r. r si t ar i r r t i st i er r h en s n ew k state. hey'r inners at t ell f r hat di it ct t t i bi l. r r t ings n h s l. There ar t t t ar hings th t ocr s urged. e ur t ci n el all ru in That's a g od thing. r t i here, ssu n pri ' or r i ~ it ar et pl r t r ulati . ay a ent t r n r but the f t s t r li U E. WILLI SHORT REP 5654 1 is we need more housing units and indeed as we 2 all know, you could build new housing, you could 3 build new rental units and have it totally free 4 from rent regulation, but one of the things I 5 encountered in talking to developers around New 6 York City -- and indeed I did go, I talked to 7 them -- was that the problem with that is you 8 couldn't get financing. You couldn't get 9 financing, not because the building they wanted 10 to build would be subject to present rent laws 11 but the fear that somehow or other a later 12 edition of the rent laws would cover them and, 13 therefore, make their investment less secure for 14 the financers. 15 There's a provision in here, Mr. 16 President, that I think is good, permitting 17 developers to have a 50-year contractual 18 relationship guaranteeing that for that new 19 construction there won't be rent regulation for 20 50 years. That's good. Let them take that 21 contract. Let them borrow millions. Let them 22 build housing. Let us create enough units that 23 we don't have to worry about anything other than 24 good strong penal laws against harassment or 25 PAGLINE E. WILLIMAN 'CERTIFIED SHORTHAND REPORTER Add.47 s ng i e i si , coul i w i s rom l io I t e n alking o o r i nd k hem e it t t i you l ' financing. You couldn't get ina n i t anted o i oul j t t r s t r t l s t o t i io t l oul ver t and, a tm t r f r f cers. here' r i i here, Mr. r t n r itt el r t a 0-year contractual ion ar t t t n st t o on't t l t f r . That' . Let the take t at t . Let t r ow il ion . Let t i Let us create enough units that e on't t orr ut yt i ot er t an ro l l ai st ar ent or other laws in favor of fairness and a truly C E. WI LIMAN -CERTIFIED SHORTH REPORTER 5655 1 competitive market that's indeed a tenants' 2 market, not a landlords' market. 3 Mr. President, as we conclude now 4 with this bill, this struggle, it's clear who 5 the winners were. It's clear who the losers 6 were. I look at the roll call in the Assembly. 7 I see that most Republicans were against this 8 law. That assures me that voting in favor of 9 this is the right thing to do. 10 Thank you, Mr. President. 11 ACTING PRESIDENT KUHL: Senator 12 Waldon. 13 SENATOR WALDON: Mr. President, 14 my colleagues, this is a rare exception for me 15 when i can stand up and ask my Republican 16 colleagues to join with me and those in the 17 Democratic Conference in doing the right thing. 18 It is clearly evident that the tenants won. 19 They have been held in hostage for a long time, 20 but it appears that Speaker Silver, as did Moses 21 centuries ago, went down into the valley and 22 told Pharaoh to let his people go, and we have a 23 bill, a bill which reflects the needs and the 24 interests of the tenants of New York City and 25 its environs and in. fact the entire state of PAULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.48 1 5 petit v ar t t' i a t ants' ar et t l r s' arket. r t l i i ru l l r ho he i s e. It' clear who t e l sers er I look at the ro l ca l in t e A sembly. os e ubli er ai st t i aw That assures me t at voti i f r f t t i t do. r. resi ent. N IDENT KU : Senator aldon. Mr. President, CO l es, i a r excepti for me he I as y epublican l eag j it e a t s i t e e ocrati onfer i oi t ri t t i g. i t t at t e t ants won. el i ost f r a l g ti e, t ear t t peaker Sil er, as did Moses t ri , ent n i t t vall and har t l t i eopl go, and we have a ill il hi t t e a t f t t t of Ne ork City and i o in the entire state of P I E. WI LIMAN ERTIFIED SHORTHAND REPORTEI< 5656 1 New York. 2 I'm going to be brief, and I'm 3 going to be gone. We have a train acoming. The 4 number on that train is 1997. It is not the 5 Orient Express, which is for those who have 6 great wealth and luxuriate themselves. The name 7 of this train is the People's Express. Most of 8 the ridership are tenants. The supporters of 9 those tenants as conductors, the people who load 10 the baggage for the Democratic Senators in this 11 house, and I think this train is going to travel 12 the breadth of this state, and what it is saying 13 as it passes from town to town is, Do not forget 14 who held you hostage. Do not forget who caused 15 you to come to Albany., Do not forget who 16 threatened you in such a sense that people even 17 made death threats surrounding this issue. 18 My colleagues on the other side 19 of the aisle, I welcome you with open arms to 20 join me on this issue and vote as my conscience 21 will allow me to vote this time and vote for 22 this bill. 23 Thank you very much, Mr. 24 President. 25 ACTING PRESIDENT KUHL: An other PAULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.49 1 2 3 4 5 6 7 8 1 2 3 24 25 5 w or . I'm ng to m ng to be gone. e a train acoming. on that train is 1997. It i ot t ri r i h h and lux ate them lves. The na e h s rain s the l s E ss. ost of he idership re ten s. The supporters of h e uct r l h l h emocrati enat r i t i n i t t el hat i s i f om t t i ot f r et a . Do not for et ho caus l a . o ot f r t ho e i s a s t t eopl even ade eat t r ats surr ndi g this issue. y l t t er si i l , I el e it ope ar s t j e i i ot as y c nsci ce ill al o e t vote t i t e and vote for i bi l. resident. han you very much, Mr. CTI SIDENT KUHL: PAGLINE E. WI LIMAN CERTIFIED SHORTHAND REPORTER y other 5657 1 Senator wishing to speak on the bill? 2 Senator Markowitz. 3 SENATOR MARKOWITZ: Let me -- let 4 me just say that this experience has been like 5 -- an experience like when you need a root 6 canal. It's not something you ask for. You go 7 through a lot of pain. It could have been 8 worse, I guess. They could have pulled our 9 tooth, so the tooth was saved. 10 Let me just say that perhaps from 11 this evening on, the Republican Majority that 12 seems so overwhelmingly interested in the 13 problems of rental housing in New York City tha t 14 perhaps you might continue to show your interest 15 in some other concerns that face New York City 16 residents, the problems of homelessness and 17 poverty, the problems of race relations, the 18 problems of sexual biases, the problems of 19. medically underserved, of schools that are over- 20 crowded and bursting at their seams where too 21 many of our kids are left behind. Those are the' 22 kind of concerns that your biggest city in this 23 state needs. 24 Senator Kuhl, you've got a piece 25 0 PA(ULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.50 at i t s o t ill at arkowitz. N TOR I Z: et e -- l t j t t eri a bee li r e ik r t . It' not s et i k o . You go hrough o f p in. It coul ha e bee ors . They could have pull our t t t was saved. f o , epubli ajorit t at em hel i l i t em t si i e or it t at i t t n o how t st o e or it t e elessness and ert em io t em l i , t r l s of edical er l ver- o r n am her t a ds re left behind. Those are t e t r i est it i t is eeds. t uhl ' t i of leaislation that I never oaid attention to ULINE . IL I SHORT REP 5658 1 before this effort this year, but I think I'm 2 beginning to see more and more that that piece 3 of legislation that you offered has a tremendous 4 amount of wisdom, because I'm not convinced 5 that those from regions outside of the city and 6 their city really understand what our problems 7 ar.e, really understand the kind of life we lead 8 in a city where we live close to each other as 9 opposed to having the -- the ability, the luxury 10 whatever, of living in an area where you're not 11 up against each other but have some property 12 between each other. 13 I think there's a real difference 14 and it's hard for you to understand what we face 15 every day in our lives as for some of us it's 16 hard for us to understand what you face every 17 day of your lives, and so maybe there's a lot of 18 good in the legislation that you have proposed 19 to this state. 20 Insofar as campaign reform laws, 21 that movie where Mr. Cuba Gooding said, "Show me 22 the money." I'm concerned that we need real 23 campaign reform laws, and this is true on this 24 issue and who knows what future issues may come 25 before us. We need real cam ai n finance laws PAULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.51 1 r r t I I ng o ee e and e that that piece io f t e s o t i do m t i rom t f t i a er hat r r s e, real y understand the kind ife her l t eac other as ili t l r hat er v n her ou'r not i t t s r pert ot er. hink ' i e e s der hat e f v f s f it' er hat f er ayb t re' a l t of i io t r s i st t . pai r l s, ovi her r. oodi i , " me h one ." I' concerned that we need real pai form s i i t i ssu hat i ay c e We need real ca paig fi l s . WILLI SH REP 5659 1 so that when we vote on issues that affect 2 people across the state that we do so out of a 3 conviction of our faith, out of a conviction of 4 1 our beliefs and out of our consciousness at all 5 times when we vote on issues. 6 I'm going to follow my Senate 7 Minority Leader; I'm going to follow him and his 8 recommendations. I'm going to follow Vito Lopez 9 who worked very, very hard in .the New York State 10 Assembly and Sheldon Silver, let's face it, for 11 all the tenants in New York City, and I'm one of 12 them proudly. This is the best under the 13 conditions that we have in this government 14 today. This is the best they could do for us. 15 And so, Marty Connor, this is a victory, it is a 16 victory because it leads for the greatest 17 numbers of us that are tenants in New York City 18 that pay what I consider to be rents that are 19 almost affordable, this will allow us to 20 continue to at least have the assurance that 21 we'll continue to be able to live and be able to 22 pay the rent to the best way we can. 23 But I hope, Senator Connor, I 24 hope that tenants will not forget why we're here 25 and what-we're doin this evenin Never PAG'LINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.52 1 . 4 so th ssu t h t f a i ion h t vict f s t s i t ll im t o i es. 1'm n low y enat inori er m i lo i a his eco endati m i low it opez or er , very hard in he or st t s l i t e or it , a 1' one of hem y. This is t e best under t dit o t e i t i ver ent This is the best they could do for us. art onnor, i i a i 5~ i l f r t reatest ber t t or it hat I nsi er t be r t t at are ost l , t i ill al o us t t t l st ha t ass r ce t at e'll nt t l t l e abl t t r t t t e best way we can. ut I ope, enator o nor, I t t ill t f r t hy e'r here hat e' this evenin P U E. WILLIMAN ERTIFIED SHORTHAND REPORTER· ever 5660 1 forget, and perhaps we'll be able to say in the 2 future, never again. 3 ACTING PRESIDENT KUHL: Senator 4 Abate. 5 SENATOR ABATE: Because of the 6 lateness of the hour, I will explain my vote. 7 ACTING PRESIDENT KUHL: Is there 8 any other Senator on the Minority side wishing 9 to speak? 10 Senator Bruno to close for the 11 Majority. 12 SENATOR BRUNO: Thank you, Mr. 13 President. 14 Mr. President, we are about to ! 15 take a vote on something that will change the 16 complexion of the housing stock in New York 17 City. It will change it in a very positive 18 way. It's a fair and balanced approach. 19 I am sorry to hear my colleagues 20 talk about winners and losers, and I'm sorry to 21 hear about the politics of an issue as serious 22 as this one as far as the people of the city and' 23 the state. 24 This was not about politics. 25 PAULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.53 , e'l l i t er ai . NG PRESIDENT KUHL: enat r bate. ENATOR ABA E: ecaus f t aten r I ill pl i y vote. NG RESIDENT KUHL: I t r t at inorit is i t r o t ajorit . N OR : Thank you, Mr. r si ent. r. r si t ut t t et i ill t pl i s e or it It wi l change it i a ver osit a . It's a fair and balanced approach. l t i er l r , I sorr t t olit f i seri s pl f t cit and st t . hi as ot out olitics. This w_a_s not ~_anderina to any particular E. WILLIMAN J:;HTIYlED SHORTHA REPORTER 5661 i 1 constituency. This was about fixing something 2 that needs and needed to be fixed. I am proud 3 of my colleagues; I am proud of our Governor and i 4 4 I.am proud of what we are doing here because we 5 are creating balance. We are creating equity 6 and we have not politicized the process, and I, 7 think it's very unfortunate that my colleagues 8 here, Democrats on this side of the aisle, see 9 fit to use this issue in a political way, 10 panicking tenants, scaring tenants for months. 11 Mr. President, what we do here 12 tonight, we could have done months ago, and I 13 want to make that clear, months ago. We didn't' 14 have to wait until this law had been expired for 15 four days. We didn't have to do that. The 16 Governor suggested and recommended a program 17 that would protect every tenant in the City in 18 regulated housing except for about one percent 19 of the population who are the wealthy. 20 We adopted that stance and that 21 posture to protect all of the tenants in the 22 City. So let's not hear about scaring people 23 out of their homes, forcing people out of their 24 homes, politicizing an issue going forward, 25 because it is not a ro riate • it is not ro er PAULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.54 1 ituency. This as a out f et i h ds and needed to be fixed. r r eag r overnor a I m oud e e ing b lance. e ar cr t uit li c ze r cess, a I hink s f r t t y l s e ocrat q f t i l , see a oliti l way, i t t t f r onths. r r si t hat e d her t l ont , a d I a t h e , hs ago. We didn't ait ti l a e expir for ys. e i n' to do that. he over ecom e a t oul r t t r t t i t ity in l si t f r out one percent pulati ho ar t e wealthy. e t t t st and t at st r t t l t i t it So let's not hear about scari people t f i es, pl t f t eir es, olit n i goi for ard, s a E. WILLIMAN IFIED SHORTH REPORTER it i er i 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5662 and it is not true. And we for months have said that we wanted to pass legislation that would protect every tenant except for a few of the very wealthy that shouldn't be subsidized, don't need to be subsidized by other people in the City or in this state. So I make this statement, Mr. President, and I wasn't going to speak on the issue because enough has been said. And the hour is late, but I just want to conclude by saying that we are doing something here and we're doing it together. We're doing it on both sides of the aisle, and we're doing it with the Speaker and with the Governor. And what are we doing? We are doing something that will, short term and long term, improve the quality of life for the people in New York City and for the people of this state. So I think that's something that all of us can relate to and that all of us can be proud of. Thank you, Mr. President. ACTING PRESIDENT KUHL: Secretary will read the last section. PACJLINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.55 1 s rue. And we for onths have sai ant l i l t at ould t t t t cept f r a f of t e eal ul n't si i , on't si t l i r i t i st t . a e ent, r. r t asn't i t ssue e enough has been said. And t t I j t ant l n et i e' ng tog h . e're doi i t d e' i it t i h the . And hat are we n We are dOing something t at i l, short erm r i pr ali f l h l e or it a f r t e l f t i st t . n t' et i t t l f s c f. , r. resi ent. N IDENT KUHL: ecret il t l st secti . THE SECRETARY' Section 2 ULINE . ILLI I I SHORTH 5663 1 act shall take effect immediately. 2 ACTING PRESIDENT KUHL: Call the 3 roll. 4 (The Secretary called the roll. ) 5 ACTING PRESIDENT KUHL: Senator 6 Leichter, to explain his vote. 7 SENATOR LEICHTER: Mr. President, 8 of course, the hour is late because whenever we 9 take up a bill of some significance or 10 importance, whether it be a budget or a bill of 11 this sort, the hour is always late. It's after i2 the deadline of the reporters. It's after many 13 of us are exhausted, and it's presented to us 14 with very little time to really look at and 15 analyze. 16 The fact of the matter is that 17 right now we have no protection for over 2 18 million tenants, and they deserve and they 19 require protection and for this reason I'm going 20 to support the bill. 21 But let me just say that when 22 Senator Bruno says, don't politicize it, why are 23 people scared. 2.4 million tenants were put up 24 against the wall. Somebody said, ready, aim, 25 but fortunately they were never able to pull t he PAULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.56 1 l t i mediatel . NG PRESIDENT KUHL: a l t ll T e e r ll. NG PRESIDENT KUHL: enat r ei t r plai his vote. ENATOR LEICHTER: r. Presi ent, r h henever e a il i c or ort het il f s , the is always late. It' aft r h ne the rep ers. It' aft r many st s s it im L t a l ze. att t t t e r t ct f r over 2 ill t t i t o I oi port t bi l. ut j t he at r n't olit hy ar l 2.4 mi li t ant ere put u ai all Somebody said, ready, ai , t f r t l er never l t u l t C E. WI LIMAN IFIED SHORTHAND REPORTER 5664 1 trigger. They weren't able to pull the trigger 2 because of the determined fight of the tenants, 3 because of the stand that the Assembly Majority 4 did and the Speaker. But the fact is that 5 tenants were frightened, and they had every 6 reason to be frightened .b.ecause there was a 7 determined effort fueled in large part by very 8 substantial campaign contributions by landlords 9 to push rent regulation over the brink. 10 The fact that not only are we 11 protecting tenants, but we are saving affordable 12 housing, and the , Majority in this house with a 13 few exceptions, never understood that it wasn't 14 just protecting the tenants now in possession, 15 it was a matter of protecting affordable 16 housing, a very scarce commodity. 17 So, Mr. President, there are many 18 things in this bill that I think are going to be 14 harmful, harmful not just to tenants, harmful to 20 the city of New York, harmful to other 21 communities, harmful to the family of New York, 22 but the main fact and the key fact is that those 23 who wanted to destroy all rent protection 24 failed. We do have rent protections 25 PAULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.57 9 rigg They weren't able t p~11 t e tr er t i fi t of t e tenants, an ss bl ajorit he . But t f ct i t t e er igh en er g e ecause there a a erm r i l art by ver st ti pai tr t l l r s t l t ver t e bri k. t t l r e t n t t i aff r bl si , t , ajori s it a ew t er t t asn't t n t n i po se sion, att t l si r r c modity. r r si t, r any n il t I t ar goi t be f l f l t j t t ts, har ful t or , ~ t t er munities, f l f il f Ne York, t ai 9Y f t i t at t ose ant st ll r t protecti led. We do have r nt prot ct substantiallv preserved in New York State. . WILLI SHOR REP TE 5665 1 For that reason, I vote in the 2 affirmative. Thank you. 3 ACTING PRESIDENT KUHL: Senator 4 Leichter will be recorded in the affirmative. 5 Senator Abate to explain her 6 vote. 7 SENATOR ABATE: Yes. Tonight 8 will be a night that I believe will be long 9 remembered particularly as a night that I 10 believe we averted disaster, particularly for 11 New York City. 12 Those of us who fought hard to 13 ensure, not to protect a system or protect a law 14 but to ensure that there was decent and 15 affordable housing in New York City, fought long 16 and hard and those of you in this room know who 17 was on the side of tenants, fought hard because 18 we understood what it meant if vacancy decontrol 19 came into place, or the Governor's plan became 20 law, because it was not just about protecting 21 those individuals who are currently in this 22 housing, but it was to protect the next 23 generation of seniors and of middle income 24 people and working class people and young people 25 and disabled because we needed to ensure that PAULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.58 I t i t irm ive. Thank you. TING PRESIDENT KUHL: at r ei t ill i t f ati e. at bat pl i her t . NATOR ABATE: e Tonight il i I l il l e ber rt l a i t t at I l e i t rt l f r or it . t t tem r t t l t t t as ecent and or it t l h oo h a t f t r eca s er o hat eant econtrol overnor' l a t t r t t h l r t i si t as t r t ct t next er t i r f iddle i e l or i l eople sabled because we needed t ensure t at . WILLI I SHORT R P 5666 1 they remained a part of our rich and diverse 2 fabric of our city. 3 We also understood that we had a 4 commitment to support strong and stable 5 neighborhoods so that people could live in those 6 neighborhoods for a long period of time and 7 invest in those neighborhoods. So I believe 8 today, tomorrow will come, another issue will 9 come before us, but the tenants will remember 10 for a long time who fought for them, who made 11 sure that affordable housing would. remain 12 constant in this city. 13 This is just a short-term fight. 14 I believe there will be other tenants' issues 15 and we need to remain vigilant so that working 16 class and middle income people have economic 17 opportunities as well as housing opportunities. 18 in every community around the city. We should 19 not divert from our ultimate task, which is to 20 build affordable housing. 21 We talk about economic 22 development. We talk about -jobs. We talk about 23 opportunity for everyone. Let's not lose sight 24 of the goal in mind and that is to build 25 PAULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.59 hey e ich c r i . so oo it ent ort o a t l gh h l l v i t gh h o o im n n those ighborhoods. So I beli o o ow il e, t ill t t il ber o im he ade t f r able housing would ai st t i t i cit . i j t rt er fi ht. e il t ts' i ai i i t t orki i dl i o pl ic portuniti ell usi pportuniti s o uni y around the city. e s ul t i rt f om r l i t , hi i t il f r bl housing. e ut e ic ent We talk about jobs. e t l about port i yo . Let's not l s si ht al i i t t i t uil E. WI LIMAN IFIED SHORTHA REPORTER 5667 1 it in this session and if not this session, as 2 early as possible next year. 3 ACTING PRESIDENT KUHL: How do 4 you vote, Senator Abate? 5 SENATOR ABATE: I vote yes. 6 ACTING PRESIDENT KUHL: Senator 7 Abate will be recorded in the affirmative. 8 Senator Goodman, to explain his 9 vote. 10 SENATOR GOODMAN: Mr. President, 11 I think it's generally known that there are a 12 number of us on this side who had views that 13 were not congruent with those of the Majority, 14 and enough has been said to indicate the 15 sincerity of purpose on both sides. 16 I would like to point out, 17 however, that this bill does achieve a degree of 18 protection for those of us who had great concern 19 about the constituents within our own Senatorial 20 Districts and within our city and, therefore, I 21 think this is a step in the right direction; but 22 I am reminded that it was Winston Churchill who 23 said that democracy is the worst form of 24 government known to man except for all the 25 PALiLLNE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.60 1 n o t , as ssi l next year. NG PRESIDENT KUHL: Ho d t enat r bat ENATOR A : I vote yes. N D L: enator bat il i t f ati e. s a , pl i i t . N OR OD : Mr. President, hin s eral t t r ar a ber h i s t at er t gr e t it t f t ajority, i i t t ri r s ot si es. l ik i t ut, ever i r f t o r t cer t st it enatorial istri it , r , I n i ut m i a inst hurchi l who t ocr i t orst f of ent t a cept f r all t e othp.r~ i'lnd jn onr own hi 7.i'lrrp. i'lnn ("llri n .~ U INE I SHOR 5668 1 fashion we've gone a long route to achieve what 2 I perceive as a bill essentially to preserve the 3 status quo. 4 Let's make no mistake about it, 5 what has been done tonight is no panacea. There 6 are at this very moment 30,000 backlog requests 7 for tenant adjustment of rents before DHCR in 8 Albany. There are some $62 million of claims of 9 tenants who believe that they've been improperly 10 charged, which have, in some instances been 11 pending for over ten years which have not been 12 touched. 13 There is a housing stock which is 14 in continuous decay and from which there can be 15 no long-range recovery unless we do find the 16 means by which to stimulate. new housing 17 construction. Government has the tools with 18 which to accomplish this. We've proven in the 19 past that with . selective and targeted tax 20 abatements, we can stimulate construction and 21 help the middle class to survive in decency and 22 in appropriate living conditions. 23 And finally, Mr. President, I'd 24 like to say that there is - still continuing 25 PAC?LINE E. WILLIMAN CERTIFIED SHORTHAIQD REPORTER Add.61 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5668 fashion ve go e on o hat I p ceive as a l t ly to erv h statu . t s i t s been done tonight is no panacea. r e h s ent 0 st or ~enant ustm l . There are s e $62 ill f im en ev ' properl i r hi ot bee . er si hi i t nu f o hi c be nl e f t eans by hich to sti ulate ousi st o Government has t e t ol it hi pli s. We've proven i t e ast t at ith l t a t t t t ents, e c st ulat constructi and el t iddl cl t sur i i decency and i propriate li i g conditions. nd fi all , r. President, I' l t s t at t ere is till conti i PAU E. WI LIMAN CERTIFIED SHORTHAND REPORTER 5669 1 which surfaced, frankly, surprisingly to some of 2 us, and to me in particular. In the year 1974 3 we created what was known as the Fair Housing 4 Anti-Demolition Act, which is designed to 5 prevent houses from being -- apartments from 6 being demolished and yet without any prior 7 discussion with any of us, to my knowledge, a proviso was put in this bill which permits the 9 undermining of a portion of that bill. 10 This is regrettable and 11 particularly regrettable is the way this seems 12 to have dropped out of the sky without fair 13 warning. 14 So let it be said there is still 15 much to be done. We must build new housing; we 16 must clean up the bureaucratic mess, and we must 17 see that the rent laws which are now on the 18 books as a result of this bill are properly 19 carried out and justly handled in the interests 20 of all of our citizens. 21 ACTING PRESIDENT KUHL: How do 22 you vote, Senator Goodman? 23 SENATOR GOODMAN: I'm voting in 24 the affirmative. 25 PAULIIVE. E. WILLIMAI^ CERTIFIED SHORTHAND REPORTER Add.62 hi r n f o in icular. I t year 1974 hat a ai ousi nti e olit ct, hi i esi t t rom t f o oli et it ut a pri r o i l e, a 8 t i hi it t ~ i i f a orti of t at bi l. i r t rt l r t l i t ay t i se s t f t it ut fair arni g. i till u o We must buil ne housi g; we ust r ucrat ess, e ust t l hi r n on t e l il erl e t t l t t l f r i s. NG SIDENT KUHL: o t , enat r ood an? N OR ODM : I' voti i r ati . NE. I I N SHORT 5670 1 Goodman will be recorded in the affirmative. 2 Senator Oppenheimer to explain 3 her vote. 4 SENATOR OPPENHEIMER: This is 5 very important for Westchester, because we have 6 a near emergency, I would say, in our county 7 with moderate cost housing. 8 We have for a long time, for at 9 least two decades, been talking about the urgent 10 need to build housing of a moderate cost in our 11 county. We find that most of the personnel that 12 help us in our government like our firemen, our 13 policemen, our teachers, they can not afford to 14 live in our county because the stock is so 15 limited in moderate cost housing, and we do have 16 a problem in the county with -- with communities 17 that do not want to offer a haven for modest 18 cost housing. We call it NIMBY., "not in my back 19 yard." 20 We have to do something to build 21 housing now; otherwise I see that my county may 22 become a county of extremes, of wealthy people 23 and very poor people and no housing for . the 24 middle class. So I am looking to -- to -- for 25 PAULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.63 1 5 il f ati e. o l t . ENATOR OPPENH IMER: This i ort estchester e er l r t i oderat st housi g. , f r t w kin t t r ent i oderat st i our t We find that most of the personnel that e t r f re , our l ce , r r ot aff r t iv t i s i i oderat st usi , a e do have em t it - it c munities t ant ff r a a f r odest st si We call it NIMBY~ t ar . e t s ethi t buil si ; t i I s t at y county may nt f t es, f ealt y people r or e pl a n housi f r iddl l So I am looking to -- t -- for P I E. WI LIMAN ERTIFIED SHORTHAND REPORTER 5671 1 this housing, but I am very thankful that we 2 have this legislation tonight which will help us 3 to maintain those units that we do have, however 4 insufficient. I^' 5 I would be remiss if I didn't 6 mention one other thing. I feel very distressed^^ 7 at the way government has sort of come to a 8 standstill because of this issue. It points to, 9 that while I know Senator Goodman was saying 10 democracy is the worst form of government but 11 it's the only one we have that's the best of all 12 governments: I'm not getting that right, but 13 you get the clue. 14 The fact is -- it's getting 15 late. The fact is that there were avenues. We' 16 could have moved to a conference committee. It 17 would have assisted us, and I hope we will take 18 that as a lesson for the future. 19 ACTING PRESIDENT KUHL: How do 20 you vote, Senator Oppenheimer? 21 SENATOR OPPENHEIMER: Yes. 22 ACTING PRESIDENT KUHL: Senator 23 Oppenheimer will be recorded in the negative. 24 Announce the results. 25 VOICE: Affirmative. PAULINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.64 s f l t t e s io t hi ill hel us o ai t n those ts that we do h , ff t. i I i n't ent t I f el very distre sed h e t rt f c e t a stil f t i i e. i t t , hi ow t ocr h ors orm ent t s h t' t best of a l e t . I' not ge ti t at ri ht, but et t cl e. ett e. The fact i h re e avenues. e d to a co erence co it ee. It oul I e ill t l f r t fut re. NG IDENT KUH : Ho d t , enat r ppenhei er? EN IM : Yes. N IDENT KU : Senator ppenhei er ill r i t e negative. nnounce t results. OI E: fir ative. . I I IFIED SHORTHA REPORTER 5672 1 THE SECRETARY: Ayes 59, nays 2 one, Senator Gonzalez recorded in the negative. 3 ACTING PRESIDENT KUHL: The bill 4 is passed. 5 Senator Bruno. 6 SENATOR BRUNO: Mr. President, I 7 believe there are three resolutions at the 8 desk. Can we have the titles read -- by some of 9 our members and they are Senator Saland, Farley 10 and Seward. 11 ACTING PRESIDENT KUHL: Return to 12 the order of motions and resolutions. Secretary 13 will read the title of the first resolution. 14 THE SECRETARY: By Senator 15 Farley, Legislative Resolution 1835, 16 congratulating Stanley and Frances Tonko upon 17 the occasion of their 50th Wedding Anniversary. 18 ACTING PRESIDENT KUHL: Question 19 is on the resolution. All those in favor 20 signify by saying aye. 21 (Response of "Aye.") 22 Opposed, nay. 23 (There was no response. ) 24 Senator Rosado, why do you rise? 25 Did ou want to s eak on the resolution Senator PAC: LINE E. WILLIMAN CERTIFIED SHORTHAND REPORTER Add.65 TA : Ayes 59, nays at onzal i t egati e. NG IDENT KUHL: he ill s . at r runo. N O : Mr. President, I e l t t t Can we have t e tit r - b s e f e ber enat r al , Farl e ard. NG IDENT KUHL: etur t h t ons and resolutions. ecret r il f t fi t r sol ti . TA : By Senator r egisl t esoluti 1835, grat l t n t l r c s onko upon i 0t e ding niversary. N IDENT KU L: uesti he res ution. A l t s i f r i i aye. f " ye.") pposed, nay. a r se. at r osa , h ri i vou want t snea o t ion Senator VLINE . ILLI I IE SHORTH REPORTER ASSEMBLY DEBATE TRANSCRIPTS 1997 LAWS OF THE STATE OF NEW YORK CHAPTER 116 RENT REGULATION REFORM ACT OF 1997 Add.66 NYS ASSEMBLY JUNE 19, 1997 you to take the one bill on the A calendar directly on debate. Once we have completed that, we will go back to the B calendar. There are three bills. I'll ask you to consent the B calendar. There are three bills on the B calendar, but the third bill will be subject to an amendment. So, we'll only take the first two bills on consent. Let's take the A calendar on debate, please. THE SPEAKER: The Clerk will call the bill. No. 481, Committee on Rules (Silver, Lopez). An act to enact the Rent Regulation Reform Act of 1997; to amend Chapter 576 of the . Laws of 1974, amending the Emergency Housing Rent Control Law relating to the control of and stabilization of rent in certain cases, Chapter 274 of ihe Laws of 1946, constituting the Emergency Housing Rent Control Law, Chapter 329 of the Laws of 1963, amending the Emergency Housing Rent Control Law relating to the recontrol of rents in certain cases, the Emergency Housing Rent Control Law, Chapter 555 of the Laws of 1982, amending the General Business Law and the Administrative Code of the City New York relating to conversion of rental residential property to cooperative or condominium ownership in the City of New York and PAGE 259 Add.67 \flIECtERK.:-=--BiIl- No~':':-~Hr1534-6 ,j Rules Report t NYS ASSE:MBL Y JUNE 19' 1997 'Chapter 402 of the Laws of 1983, amending the General Business Law relating to conversion of rental residential property to cooperative or condominium ownership in certain municipalities in the counties of Nassau, Westchester and Rockland, in relation to their periods of effectiveness; to amend the Emergency Housing Rent Control Law, the Emergency Tenant Protection Act of 1974, the Administrative Code of the City New York and the Tax Law, in relation to eliminating rent regulation for certain high income tenants; to amend the Administrative Code of the City New York and the Emergency Tenant Protection Act of 1974, in relation to limiting rent increase after vacancy of a housing accommodation; to amend the Public Housing Law, the Administrative Code of the City New York, the Emergency Tenant Protection Act of 1974, the Emergency Housing Rent Control Law and the Local Emergency Housing Rent · Control Act, in relation to succession to a rent regulated housing accommodation; to amend the Penal Law, in relation to harassment of rent regulated tenants; to amend the Emergency Tenant Protection Act of 1974 and the Administrative Code of the City New York, in relation to registration of rents and charges related thereto; to amend the Civil Practice Law and Rules, in relation to a four year statute of PAGE 260 l Add.68 , I ... , Cha . f NYS ASSEMBLY JUNE 19' 1997 limitations for residential rent overcharges; to amend the Real Property Actions and Proceedings Law, in relation to proceedings to recover possession; to amend the Administrative Code of the City New York, in relation to demolition of rent regulated housing accommodations; to amend the Real Property Law, in relation to warranty of habitability. THE SPEAKER: Governor's message is at the desk, the Clerk will read. THE CLERK: Pursuant to the provisions of Section 14 of Article III of the Constitution and by virtue of the authority conferred upon me, I do hereby certify to the necessity of an immediate vote on Senate Bill No. 5553/Assembly Bill No. 8346. The facts necessitating an immediate vote on this bill are as follows: This bill is necessary to extend and reform the rent control laws. Because this bill has not been on your desks in final form for three calendar legislative days, this message is necessary to permit its immediate consideration. THE SPEAKER: Mr. Sullivan, Edward Sullivan. PAGE 261 Add.69 , troll NYS ASSEMBLY JUNE 19' 1997 MR. E. SULLIVAN: Mr. Speaker, I'mjust going to make a couple of comments on this bill and ask my colleague, Vito Lopez, if my observations are correct. As I understand it, in terms of luxury decontrol, so-called "luxury decontrol" -- THE SPEAKER: Mr. Sullivan, would you suffer an interruption? MR. E. SULLIVAN: Surely. THE SPEAKER: Perhaps we can get Mr. Lopez to do a brief explanation of the bill. Maybe, he'll answer some of your questions in a brief explanation. MR. E. SULLIVAN: If you would like to. THE SPEAKER: It won't be on your time. MR. E. SULLIVAN: Certainly. THE SPEAKER: Mr. Lopez. ~R. LOPEZ: What we have before us, I'm proud to bring here tonight, is a six-year extender for rent regulations. I will broadly explain the bill and then answer all the questions that people would like to pose. This bill is a six-year extender. It lowers the PAGE 262 Add.70 , j I NYS ASSEMBLY JUNE 19' 1997 luxury decontrol threshold from $250,000 to $175,000. The current standards as far as the $2,000 rent level and the two consecutive income years are still in place. This bill has added a right of first refusal as it pertains to luxury decontrol. There is a vacancy allowance which is somewhat different. This is basically -- there is a whole scheme to this, but initially it talks about a 20 percent vacancy allowance for two-year leases and something slightly less for a one-year lease. Succession rights continue with certain types of modifications. It removes nieces, nephews, aunts and uncles and there are some other aspects that have been changed. We have included in this bill new penalties against landlords who harass tenants. We have a new Class E felony provision. This bill also has developed a modified form of rent escrow and we could talk more about that, I am sure. It has a clause, a modification in the demolition clause. It has offsetting damages. It makes a modification on the joint jurisdiction between Division of Housing and the courts. And it addresses the high-rent vacancy. So, I tried to cover the eight or nine areas in the subtitles, and I welcome your specific questions and anyone else's. THE SPEAKER: Mr. Sullivan. PAGE 263 .. r Add.71 , U - ,... ( ( . NYS ASSEMBLY JUNE 19' 1997 MR. E. SULLIVAN: Mr. Speaker, I'm pretty well satisfied with that explanation. I was just going to ask him if that was the case. I'm satisfied with that explanation. I do feel that there are parts of this bill that I have strong disagreements with, but there are many parts that I have strong agreements with. In sum, I think we lost a few battles, but won the war, and so I'll be very happy to vote in the affirmative. Thank you. THE SPEAKER: Thank you, Mr. Sullivan. Mr. Stringer, why do you rise? MR. STRINGER: Yes, Mr. Speaker. On the bill. THE SPEAKER: Mr. Stringer on the bill. MR. STRINGER: I think that your valiant efforts that have now resulted in protecting the tenants that we wanted very much secured in their homes has been accomplished. I think that you stared down Governor Pataki and Joe Bruno and made it very clear that we were not going to allow people to be put into the streets and out of their homes and communities that they built. It seems to me that that was accomplished. But, I rise tonight simply to make an observation PAGE 264 Add.72 ( c ... · · , i k: i k: { NYS ASSEMBLY JUNE 19, 1997 and to tell you that while I think we certainly stared down attempts -- Could I have some order, Mr. Speaker? It's hard to hear. THE SPEAKER: The House will come to order. Mr. Stringer. MR. STRINGER: Thank you. While I think that we have accomplished much in this bill. I think you have stared down attempts to hurt 2. 7 million in this State. I rise tonight to vote against this bill because I believe that we can do better, that we must do more in the area of affordable housing. I think parts of this bill that we had to swallow in order to protect people will end up, in the long run, putting people with modest means in jeopardy. I think we have to be mindful of the fact that when you talk about rent deposits, you have to be very careful to understand that the people who are in Housing Court to begin "":ith are the very people who can't afford to put that money in the court, and as a result, they will be hanging in the balance. We did not and we were not able to do comprehensive Housing Court reform, maybe that will come later. Maybe Joe Bruno and George Pataki will be committed to that, and PAGE 265 Add.73 ~it NYS ASSEMBLY JUNE 19, 1997 I'm hopeful that that will be the case. I also think it's fairly incredible that here we have the State Senate Majority Leader who in 1993 in the Senate, like the Assembly, was supposed to issue a report that talked about rent regulation and the effects of vacancy decontrol, the effects of affordable housing in the City and the surrounding suburbs, and that report, by the Senate was never issued. So, it was never about the issue of how we should deal with rent regulation. This fight was really about a political maneuver that, fortunately, for the most part failed. So, I cast my vote in the negative. Praising you and the Assembly Majority, and I look forward to a time when we can come to this Assembly and deal with issues like affordable housing and not take out political battles on the people of modest means and the ·poorest people in the City. Thank you. THE SPEAKER: Mr. Faso. MR. PASO: Mr. Speaker, on the bill. THE SPEAKER: Mr. Faso, on the bill. MR. PASO: Mr. Speaker, few people in this room PAGE 266 Add.74 po r F F NYS ASSEMBLY JUNE 19' 1997 will probably have any reason to remember the name of Nguyen Co Thach, but we should not forget some of the things he said as the Vietnamese Foreign Minister a few years ago at a crowded news conference filled with the world's press. Mr. Thach, then the Foreign Minister of Vietnam said that, and I quote, "A romantic concept of socialism ... " unquote, had destroyed Vietnam's economy in the years after the Vietnam War. He admitted that price controls had artificially encouraged demand and discouraged supply. Mr. Thach said, and again I quote, "The Americans couldn't destroy Hanoi, but we have destroyed our city by very low rents. We realized it was stupid and we must change that policy." And in Vietnam and in Ho Chi Minh City, they no longer regulate their rents. Whether it's the Communists who tried to regulate the cost of housing in post-war Vietnam or the kings who tried to control the price of bread in Medieval Europe or President Jimmy Carter trying to control the price of gasoline in the United States in the late 1970s, the result of government attempts to rig prices has always been the same. You can rewrite the rent regulation laws all you PAGE 267 Add.75 l\1 , NYS ASSEMBLY JUNE 19, 1997 want, but you cannot rewrite the laws of economics. Price floors which prohibit prices below a certain minimum always cause surpluses. And price ceilings which prevent prices from exceeding a certain maximum always cause shortages. If you capped the price of food in New York City, you would have a food shortage. If you capped the price of umbrellas, you would have an umbrella shortage. And since we are continuing to control the price of housing, we are going to continue to have a shortage of housing in the City of New York. / { Fundamentally, my colleagues, there exists a different perspective on this issue between the various sides. Supporters of continuing the 50-year system under the guise of a continued housing emergency have come to believe in a sense of entitlement. The sense of entitlement is, indeed, pervasive. It is as if they believe that renting an apartment is morally and legally akin to owning an apartment. Thus, the belief that rental apartments can be handed off to relatives as though it was titled property, passing through an estate. Except that in this transaction, estate taxes aren't due. ( _ _) Those who oppose the system believe that renting PAGE 268 Add.76 : NYS ASSEMBLY JUNE 19, 1997 (; \- is not akin to owning, that the person who acquires property has title to it, is responsible for the payment of taxes and insurance, who is legally liable when one is injured on it, who must pay the principal and interest on the mortgage, who takes the financial risk to own the property. That person whose name is on the title to the property actually has a higher legal status by history, by right and tradition then one who merely leases a property. Indeed, if it is not the large -- it is not the large property owner who I am most concerned with. It is the small owner, often immigrant or minority in poor neighborhoods who are most ill-treated by the existing system. There are, to be fair, some important reforms contained in this legislation. If Senator Bruno and others had not made this an issue over the past six months, we would not have the payment of rent during a housing dispute, we would not have additional luxury decontrol and we would not have some of the other changes which, I think, will gradually open the marketplace. But, nonetheless, I feel constrained to vote against this legislation. Absent a monopoly situation, the government should not set prices of commodities, whether it is bread or widgets or PAGE 269 Add.77 K NYS ASSEMBLY JUNE 19, 1997 housing. If the government were to decide that its citizens suffered from an iron and protein deficiency and that the price of steak should, therefore, be $1.19 a pound, my colleagues, pretty soon we would have a shortage of steak, most of which would be poor quality. The small amount of quality steak would be available to the rich, the connected or the lucky. I know we have many good people in this State and in this Chamber who fervently believe that we must continue rent regulation. But no action of this Legislature can ever repeal the laws ( of supply and demand. Perpetuation of this system will guarantee a perpetuation of the housing shortage. It will perpetuate the adversarial relations between landlords and tenants and perhaps, most importantly, it will perpetuate a perception that we, in this State, are not serious about dealing truthfully and honestly with our citizens as to the true ramifications of this system which has shackled growth and opportunity in the greatest city not only in this State and nation, the . City of New York. Mr. Speaker, I feel constrained to vote against the legislation. THE SPEAKER: Read the last section. PAGE 270 Add.78 ( (_ NYS ASSEMBLY JUNE 19, 1997 THE CLERK: This act shall take effect immediately. THE SPEAKER: Mr. Straniere to explain his vote. MR. STRANIERE: No, Mr. Speaker, on the bill please. THE SPEAKER: Do you want the roll call withdrawn? MR. STRANIERE: Please. I move to withdraw the roll call at this time. THE SPEAKER: The roll call is withdrawn. Mr. Straniere. MR. STRANIERE: Mr. Speaker, this has been a very difficult six months for all of us who serve here in Albany, and certainly it was a time of great tension and discomfort to so many people throughout the metropolitan area, particularly in the City of New York. And, Governor George .Pataki, I believe, is to be given great credit for his uncanny ability to bring us together and to forge a solution to a very difficult problem, as he has done over the three years he has served as our Chief Executive. PAGE 271 Add.79 : lt NYS ASSEMBLY JUNE 19' 1997 And the end product tonight, I believe, achieves the objectives that the Governor set forth when about a month ago he proposed a system that would provide protection, as he said, for 99 percent of the tenants in our City and would provide, in his opinion, the encouragement for new construction, rehabilitation and modest returns to owners of properties in the City of New York. So, in a sense, tonight's bill that is before us achieves many of those objectives. At least, I'm sure as we pass this bill, many here believe those objectives will be achieved. However, I am somewhat skeptical that the final product that we have before us, is in fact, going to provide the inducement for new construction that we need so badly in the City of New York. In the '20s we were building 100,000 units a year of new housing. In the '60s we were building 30,000 units a year in new housing. Last year there were 8,000 units up from about 6,000 the year before. I'm not convinced that by the terms of this legislation we are going to see the minimum of 20,000 units a year over the next five years made available to the people of our City, as w~ seek to replace the abandonment of property, which is running PAGE 272 Add.80 , NYS ASSEMBLY JUNE 19, 1997 .... about three times the rate of new construction. I'm also very concerned about the ability of small landowners -- property owners, in particular, to be able to properly maintain their apartments and thereby provide adequate, safe, secure, sanitary housing accommodations for the people, again, particularly in the City of New York and particularly in the more modest neighborhoods and communities that make up our five boroughs. We also, by this legislation, I believe, deny the taxpayers in the City of New York the right to see that property owners, in fact, pay their fair share of real estate taxes since tax rolls are related to rent rolls. And surely, we will not create the mobility that we need in the City of New York so that particularly younger people who are just starting out, either coming to our City or have been educated in our City and seek to find starter apartments will be able to do so. And this, I think, remains a difficult problem unresolved by this legislation. It would seem to me, Mr. Speaker, that the costs of rent control and rent regulation continue to fall most heavily on the people we espouse to seek to protect the most, those of a more PAGE 273 Add.81 l' t NYS ASSEMBLY JUNE 19' 1997 modest means in our City, while continuing to provide substantial subsidies to the more affluent New Yorkers who live in some of the more attractive neighborhoods and will continue to pay a rent level that is far below what we might describe as market conditions. I am pleased to see that there are provisions that our Housing Courts will now be mandated to apply so that when there are disputes small property owners will have an opportunity to have justice, equity and fairness before the courts as those disputes are, in fact, heard. .so, Mr. Speaker, while this legislation brings to a close a very difficult period in our City, I must be constrained to vote in the negative because it fails, I believe, to represent the kind of substantial change in public policy that will serve the long-term interests of all the people in the City of New York. Thank you. THE SPEAKER: Mr. Guerin. MR. GUERIN: Thank you, Mr. Speaker. On the bill. The people of my Assembly District have been having a difficult time understanding the thrust of legislation that PAGE 274 Add.82 , t:' i. \ NYS ASSEMBLY JUNE 19, 1997 protects the rents of folks who make $175,000 a year because their rent happens to be less than $2,000 a month. This was empiricalized about two weeks ago when I received a letter from a person who I know who has a very substantial estate, an estate that I would suspect that no one of the floor of this Assembly could afford, hundreds of acres bordering the Hudson River, an old mansion, who, when I saw the address on this, I thought that they would implore me to be sure that we did some significant changes in rent regulation, and instead I discovered that they wanted to keep things the same because they happened to have a rent-regulated apartment in the City of New York. These folks probably make several million dollars a year, but apparently have an apartment that is less than $2,000 a month. And, so the people of my District who make, maybe, an average income of $22,000 are having an awfully difficult time understanding tonight why we felt compelled to protect people making $175,000. I think the other thing that the people my Assembly District are going to have a difficult time understanding is that there is a cost to what my colleague, Bob Straniere, talked about when he says that we're only going to build 6- to 8,000 units in this past PAGE 275 Add.83 NYS ASSEMBLY JUNE 19, 1997 couple of years. But you were building 100,000 as you did in the 1920s during the Great Depression, that translates into an awful lot of jobs and it's been studied that it's approximately maybe as many as 60,000 jobs and these are jobs for sheetrockers, carpenters, electricians, maintenance workers. And so, I believe that tonight we have, once again, passed legislation or about to pass legislation that will underutilize the talents of the people of New York State who want to go to work, who want to see the economic engine of New York City at a full level and I believe this legislation will impact that negatively. And, finally, the people of my Assembly District would have a difficult time also understanding that it's been calculated that this rent regulation issue costs as much as $10 million a week in lost revenue. And I know that in the following weeks, we are going to substantially discuss helping the SUNY system, helping school tax relief, discussing the child care medical programs and the many other things that we have to address. And $10 million a week is an awful lot of money. And so, I'm hoping tonight that while, indeed, we are protecting those who are disabled and those who are elderly, those PAGE 276 Add.84 •, .:. NYS ASSEMBLY JUNE 19, 1997 who are in some other way handicapped, there is no question, we're also protecting a lot of people who are much better, off than the people who live, by and large, in most of our Assembly Districts, and so only time will tell what the true cost of this is. Regrettably, it's going to take six years to find out. But, I will be casting my vote in the negative. And I really hope that notwithstanding the failings of this bill that there will be something good that comes from it. THE SPEAKER: Mr. Grannis. MR. GRANNIS: Mr. Speaker, I am -- I guess we're not quite yet voting on the bill, I'm just letting you know that I'm going to be a proud supporter of the bill when the vote is taken. I think when this fight started six months ago, Senator Bruno and then later on, Governor Pataki, seriously underestimated the strength and the tenacity and the preparedness of the tenant movement and more importantly, of the Assembly Democrats to stand up for the working men and women who are the tenants in the roughly 1,100,000 rent regulated apartments in this State that are protected by this bill for another six years. I think it was an extraordinary fight and I know PAGE 277 Add.85 NYS ASSEMBLY JUNE 19' 1997 :,._· ..... , you have done so already, Mr. Speaker, privately but I would like to publicly not only thank you for your resolve in standing up for those tenants and the working class families who live in those apartments, but your staff who did such an outstanding job in not only keeping this debate alive and keeping the focus where it deserved to be on those who were trying to attack this rent regulation system that is so critically important for maintaining the housing stability and the economic stability of the greatest city in the State and certainly the greatest city in the country. I want to thank you and your staff, particularly, for this extraordinary victory that I think is represented by this bill. I would like to, just in closing, read a quote. It's a quote, I'll tell you where it comes from in a second .. But the quote is, "I believe this is going to lead to more open competition, to more . housing choices and more affordable housing choices for all New Yorkers, while protecting the more than one million tenants who have relied, with justification, on a system that has been in place for more than 50 years. " Governor Pataki made that statement today at a press conference in praising this resolution, in praising this bill and in voicing his support for the bill, contrary to some of the statements PAGE 278 Add.86 , ,. {' . . ., NYS ASSEMBLY JUNE 19' 1997 ,· ~· that were made here, as one of the principal negotiators, who fashioned this bill that is here before us. And I think he's recognized it has value, I hope the majority here will recognize its value. And I know that the 2.5 million residents of New York City and New York State who live in rent regulated apartments will certainly recognize the value of what we're doing here tonight. And I thank you very much for your leadership on this bill. THE SPEAKER: Mr. Lopez to close. MR. LOPEZ: The last two months, I think I attended 26 town hall meetings, and they were in every community and every type of community, Latinos, Blacks, whites, Republicans, Democrats, in every borough, except for Staten Island, I was not invited, but I was in every borough but Staten Island. I visited close to 20,000 people and not only did we talk, but we had dialogue, ongoing dialogue. It took a lot out of me. It was several in one night, many on Saturday and Sunday. And, overwhelmingly the people there asked us to do something to keep this system in place. ' ' And these were senior citizens, these were people who most of the people were working class individuals. Whether they were retired or PAGE 279 Add.87 , ( NYS ASSE:MBL Y JUNE 19' 1997 ···--. ·. ·-..· not, there were hundreds and hundreds of hours of work. And when you do do things, you get to learn the qualities of certain people, and I think individuals are tested on how they handle crises. Well, I was fortunate, and I know that when people -- you know, sometimes I'm uncomfortable in doing this because people think there is a reason behind that. But there isn't. I really believe that Shelly Silver, the Speaker of the Assembly, in those three or four months, hundreds of hours of meetings, carefully looking at this, helping orchestrate and willing to listen to everyone with the bottom line that he was going to protect the tenants. Most people, even people in this House right now, thought that was an impossible I task. He did it, he orchestrated it well. The staff around him, and I will note them before I end, did a superb job and even some of the press. I mean, it was interesting and someone has to -- I couldn't follow the press because in the early parts of the pages of the newspapers, I usually read them, they talked about what a great struggle and how bad the tenants were having it, and the editorials were taking a different position, and that was on the daily routine and someone who is a little bit more sophisticated could g1ve me a PAGE 280 Add.88 K 1J , ... , ....... 1 i NYS ASSEMBLY JUNE 19' 1997 perspective, but Shelly entered a dialogue and put together a great strategy. And that strategy was reflective of the needs of the people of New York State and New York City. He orchestrated and developed a bill, this particular bill. I believe, we are here, and as someone said earlier, politics is an art of compromise, well he really prevailed and he's done an outstanding job. But, he went beyond the issue. People were talking about that we don't have-- if we had rent protection, we could ( not ever get out of rent regulations. It stymies the whole issue of new construction. Well, according to the survey that we base whether we have rent protection or not, we went from 3. 7 to 4.0. So all those numbers about how many units were built or not, something is missing since we are gradually moving to that 5 percent threshold. But, this Speaker, understanding that there is an affordable housing and an affordable rental crisis, this State, in the last five years went from the 26th state to the 6th worst state, and this is not only New York City, this is Statewide. The people want to end this. The Speaker has put together and orchestrated that well, "A Build New York" where 15- · PAGE 281 Add.89 , e ( .. '....- . NYS ASSEMBLY JUNE 19' 1997 to 18,000 new units will be built a year. If people· are committed to resolving this issue, we could build our way out. Six times 18 is 108,000 units. The gap between 4 percent and 5 percent is 20,000 units. We have a challenge before us. We do have a real challenge before us. We could build our way out and at the same time create the jobs that people say that are necessary, revitalize communities that need it. The Speaker has put together that strategy. The Assembly has done it. The challenge in the weeks ahead is whether we make ( the commitment. \ \. Also, so that people can know that this is somewhat balanced, we did not just meet with the tenants, although we met principally with the tenants. We met with hundreds and hundreds of small landlords. In that budget plan is the restore program which will help elderly landlords get subsidies to do repairs and that was the largest increase ever, you know, at least in the last 20 years. The Speaker has made that commitment. We have made that commitment. I believe this is a tremendous victory under the circumstances. When we walk around, I hear many people arguing that it was not a perfect deal. Since I have been here I have PAGE 282 Add.90 , i 'c. ' • NYS ASSEMBLY JUNE 19, 1997 never seen something that is perfect, and if it was perfect, then probably there are a lot of problems with it. I would like to end by thanking people who put in hundreds of hours, people who struggled, people who had only one dedication, which was to resolve this in a way that tens of thousands of people would not suffer, and they did an outstanding job, those people are Don Lebowitz, who is an unbelievably brilliant individual. He has been around a long time, but he did a great job; Debbie Van Amerongen, in the same league, an outstanding individual, Sean Fitzgerald, Jennifer Jorgensen; Brian Coffin, Jonathan Harkavy. The person who helped sell this and helped do it in such a remarkable way and a person who kept on making phone calls and having conver- sations, who did an excellent job on how to get this across because the substance that we put together in the package could not have been done without Pat Lynch's work. Jennifer Cunningham and Fred Jacobs, they're stars on many areas. Once again, they became stars on this particular issue. The last three people, Karen McCann, I think people know of Karen, she's a fantastic individual, helped a lot in this process. Two newcomers, Joanne Barker and Daniel Conviser who PAGE283 Add.91 i k: NYS ASSEMBLY JUNE 19' 1997 helped put the other parts of the bill together, somewhat outside the jurisdiction of the Housing Committee. People blended together, did an outstanding job. The Speaker of the Assembly, in my opinion, is a true hero to not only the tenants of New York State but to the residents of New York State, and I am proud that we are moving this bill. I wish it could be slightly better, but he did an outstanding job. Thank you. (Applause) THE SPEAKER: Read the last section. 1 THE CLERK: This act shall take effect immediately. THE SPEAKER: The Clerk will record the vote. MR. WINNER: Slow roll call.· THE SPEAKER: A slow roll call has been requested. The Clerk will call the roll slowly. · Mr. Luster. MR. LUSTER: Thank you, Mr. Speaker. To explain my vote. You may wonder why an Upstater is taking the PAGE 284 Add.92 , ' NYS ASSEMBLY JUNE 19, 1997 time of his colleagues to explain his vote on a bill that doesn't directly affect his district. I think it is a legitimate question. I ri$e because this issue has been used, Mr. Speaker, in an attempt to drive a wedge between Downstate and Upstate. And we have heard statements emanate from members of this Body to that effect. Well, as an Upstate representative, I want to assure my colleagues that this issue does not do that, and this issue brings us together because we understand what the problems are of tenants in New York City and in the suburbs and we know that our Downstate colleagues understand the problems that we Upstaters face with regard to property taxes and other problems. We are one State. This issue has not driven us apart. The other reason I rise is to respond to some of the comments that I heard on the floor tonight that raised some philosophical questions. So I, too, would like to read a quote: "The man who wrongfully holds that every human right is secondary to his profit must now give way to the advocate of human welfare who rightfully maintains that every man holds his property subject to the general right of the community to regulate its use to whatever degree the public welfare may require." Words by a great New Yorker, PAGE 285 II Add.93 ,"'-" --~,.\ ( \ ( s i NYS ASSEMBLY JUNE 19' 1997 ( somebody I think we all admire, somebody, certainly, who Governor Pataki admires because he has told us this on a number of occasions, Teddy Roosevelt. Thank you. (Applause) THE SPEAKER: Mr. Espaillat to explain his vote. MR. ESPAILLAT: Mr. Speaker, I rise to explain my vote, representing a community that has over 60,000 regulated units where the medium income of our families is $18,000 of which ( 34 percent of it is used to pay rent. And although some of the provisions in the bill, like the vacancy allowance, will place a little hurt in our families, it comes nowhere near close to the hurt that vacancy decontrol would impose on this community, perhaps one of the most vulnerable communities in regard to rent regulation and rent protection. So, I commend you, Mr. Speaker, for the fine work. You have stepped up and protected the tenants of my community and perhaps this will serve as a good lesson to understand that we come here representing not only the affluent, not only the people who are a little bit better off, but also the people who are the PAGE 286 Add.94 - ~"" , i k: NYS ASSEMBLY JUNE 19' 1997 .···.·-.. , ,. i, . ; needy and the most vulnerable. So, feliciaz, Mr. Speaker, for some of you who don't understand more than one language, that is congratulations. THE SPEAKER: Thank you. (Applause) Mr. Espaillat in the affirmative. Mr. Prentiss. MR. PRENTISS: Thank you, Mr. Speaker. To explain my vote. On merits alone it's clear to me that rent control laws are a 1940s dinosaur that is eating up the New York City housing market. I haven't heard anything here tonight to convince me otherwise. No other state has rent control. This is a rent control that unfairly subsidizes the rents of some wealthy apartment dwellers who can pay more. Furthermore, it allows tenants to indefinitely pass on their rent regulated apartments to relatives and friends. It seems to me that we should let the laws of economics work, putting more apartments onto the open market. When the renter dies or moves on, it would encourage more housing development in New York City by PAGE 287 Add.95 , nn NYS ASSEMBLY JUNE 19' 1997 giving landlords better returns on this, their investments. As a matter of fact, that did happen m the neighboring State of Massachusetts where rent control was expired and as a result there has been, in Boston, particularly, much more housing development, property tax revenues have increased. Speaking as an Upstate legislator, I have received many, many letters from constituents, many, many phone calls from constituents urging that I vote no on rent control laws. In particular, they just don't seem to understand how we can subsidize renters down there with household incomes of $125,000 a year, $150,000 a year, $175,000 a year. I represent one of the largest Assembly Districts in this State, fourth largest in terms of number of people, and most of the people I represent are working people, middle income people, and they don't make that kind of money. This is unfair, Mr. Speaker, if the Speaker of the Assembly cannot blink one iota because I see no real compromise here, neither can I. Why should-- ripped off -- THE SPEAKER: How do you vote, Mr. Prentiss? MR. PRENTISS:-- Upstate taxpayers keep getting PAGE 288 Add.96 , in 1. ld ISS: NYS ASSEMBLY JUNE 19, 1997 / / . '; .. THE SPEAKER: How do you vote, Mr. Prentiss? MR. PRENTISS: --subsidizing New York City. I vote no. THE SPEAKER: Mr. Prentiss in the negative. Ms. Glick. MS. GLICK: Mr. Speaker, to explain my vote. And it's very hard, this is a bill that provides protection for working and middle class New Yorkers who have worked hard to build their neighborhoods, who want to raise their children in the communities in which they have settled, do not wish to be dislocated based purely on profits. It is the centerpiece for so many communities of the most active and committed people. People have said that it's good for us to protect the elderly. Well, this bill is the only way that the senior citizens' rent increase exemption provisions could have been extended. If we weren't passing this bill, we would not be protecting those seniors making less than $18,000 a year. Many of those seniors are in their apartments not only because the rent is affordable but because there are neighbors ( I •;o '-..... ~.-: :.: . who assist them in maintaining their independent living. PAGE 289 Add.97 subsi i ( ( /···o·.,. :·-;. ~ '0.: "'-·•.;.;.;>y NYS ASSEMBLY JUNE 19, 1997 This bill is a neighborhood preservation bill. My constituents, whether they live in a rent regulated apartment or a market rate apartment or own their apartment, as I do, believe that this is the right way to preserve our neighborhood. This is the heart and soul of what makes New York, New York- its neighborhoods. For people who do not live in New York, who don't visit New York, who don't care about New York City, perhaps, they cannot understand that. I invite you to come there and see. This is how George Pataki started out his career as a law student and then as a young married individual. He lived in, I believe, three apartments. And I am proud to vote -- THE SPEAKER: Ms. Glick, how do you vote? MS. GLICK: --in the affirmative to preserve our neighborhoods. THE SPEAKER: Thank you. Ms. Glick in the affirmative. Mr. Crowley. MR. CROWLEY: Mr. Speaker, I, too, want to rise to congratulate you and Assemblyman Lopez for a wonderful, PAGE 290 Add.98 rk - i , NYS ASSEMBLY JUNE 19, 1997 ( wonderful compromise. There are a lot of things in this bill that we all don't agree with and are not happy with. But there is far more that we do agree with. Because of your leadership, we stand here today enacting a six-year extender, that's unheard of. In myeleventh session now, eleven years in the Assembly, I've never heard of a six- year extender for this type of legislation. And I listened to the arguments from the other side this evening and I found a great deal of inconsistency in some of the arguments. I really believe that the answer is building, as ( Assemblyman Lopez said, the answer to this problem is building. And if you build more affordable housing to bring the vacancy rate over five percent, there is nothing to argue about anymore. There is no reason to come back here to pass this law again. We won't need these types of laws because they no longer will go into effect once we get over 5 percent. I don't know what the landlords and the developers are afraid of, but the solution has always been in their hands. I also want to applaud many of the leaders of the tenants rights groups, some of whom are here this evening in the balcony who did an outstanding job of getting their message across. PAGE 291 Add.99 / ( ele · NYS ASSEMBLY JUNE 19' 1997 And I, Mr. Speaker, vote finnly in the affirmative. THE SPEAKER: Mr. Crowley in the affirmative. MR. Weisenberg. MR. WEISENBERG: Mr. Speaker and my colleagues, I do congratulate all the leaders who got together. We came up here Sunday on Father's Day to solve this problem. But I didn't come alone, I came with two busloads of people from the City of Long Beach, and by the way, I don't think New York City is the greatest city in the world because it's second to Long Beach. However, let me tell you the facts. The fact that the people in my community, basically, one-third senior citizens were really in a situation of devastation. I have a lady who called me from Sloan-Kettering who was not only battling cancer but was worried that if she got out of the hospital after her victory over the cancer, that is, she was wondering if she had an apartment. We have landlords down there for years who gave these people a very difficult time. They harassed anybody who got involved, they took personal lawsuits against people in their upper 70s to try to get them out and not renew their leases. So, this was a very, very important situation that PAGE 292 Add.100 ,.. \ , , rm 1 ver ./ \ ', __ · .. .. NYS ASSEMBLY JUNE 19' 1997 this legislation that takes place tonight.' It's vitally important to the quality of life and the complexion of our City, for those who don't understand, was that people are paying a median for a one-bedroom apartment, rent controlled, if you will, $850 a month. That's not cheap. But if they did not have this kind of a protection and they have lived there for over 30 years, that they, in fact, would have to be paying $14- to $1600 and we would lose a whole segment of our society, elderly people, retired people on fixed incomes who would be out. And the City of Long Beach is a city of diversity, we want to have everybody have the availability to enjoy the beautiful resources of our community. This would have made it only for the wealthy. And that's not what our city would ever survive on. So, you don't realize how important this victory is. It's a victory for our leadership, it's a victory for all of us, but most importantly, it's a victory for the people who were depending on us to protect their quality of life. So, I congratulate all the leaders, all the politicians who were involved. It took you a damn long time, but the answer really is the people were the victors in this regard. PAGE 293 Add.101 , NYS ASSEMBLY JUNE 19' 1997 I vote yes. (Applause) Mr. Weisenberg in the affirmative. Mr. Gottfried. MR. GOTTFRIED: Thank you, Mr. Speaker. We've tried our best to get this message across to a lot of our colleagues. I think we have succeeded somewhat. But the basic fact is the rent laws help people, predominantly working people and their families protect their homes. It's as simple as that. c It's as important as that. And this legislation protects their homes. Governor Pataki and Senator D 'Amato and Senator Bruno throughout their .careers have done everything within their power to destroy those laws, to destroy the ability of working people and their families to protect their homes. You can hiss, if you want, I would hiss at that record, too. This legislation does some body blows to those laws but it does them because the Governor and Senator D' Amato and Senator Bruno did their level best to destroy those laws. The bulk of what this legislation does is to defeat the effort to destroy those laws. ,.•"*~..,. (_;~i And I think, you know, it was said earlier that PAGE 294 Add.102 , ,r0. -- NYS ASSEl\fBLY JUNE 19' 1997 Governor Pataki brought people together. Well he and Senator Bruno certainly did by launching their attack to destroy the laws that help people in the metropolitan area protect their homes, they brought 2. 7 million New Yorkers together more solidly and more vocally than ever before. And let all New Yorkers remember for years to come that it was Governor Pataki and Senator Bruno and Senator D' Amato and all of those who try to support and strengthen them who led that fight to destroy the laws that helped people protect their homes. If this legislation tonight were not to become law, what we would get would be even more damage at those folks hands to the laws that protect New Yorkers, and that is why this legislation must become law tonight and I am proud to vote in the affirmative. THE SPEAKER: Mr. Gottfried in the affirmative. Mr. Ravitz. MR. RAVITZ: Thank you, Mr. Speaker; To explain my vote. I think to sum up what these last six months have been for the tenants of New York City and the surrounding areas, has PAGE 295 l, ll Add.103 ~ry M , . r .. r ( . . · NYS ASSEMBLY JUNE 19, 1997 been a roller coaster. We have put people through highs and lows. I think all of us who represent tenants understand the fears and concerns that they have because they couldn't wake up during the course of a day without turning on their TV or their radio or reading a newspaper and seeing the fact that their lives were a big question mark hanging over their head in terms of were their homes going to be protected. And I think many of you saw the fears and concerns that they had when they came up here and for many of them it was a big sacrifice to come up here, to get on a bus, to drive two and a half hours, if you're in your 50s, 60s that takes a lot of real, real energy to make sure that your voices are concerned. And let me also just mention maybe one possible suggestion, Mr. Speaker. I hope that we build enough housing in the next six years so that as my colleague has said, this law does not have to even be renewed again. But, if we do have to go through this discussion again, we ought to do it in a much more reasonable way. We ought to be able to have both sides of the issue begin to sit down very early on. We ought to have a joint Conference Committee, both sides of the aisle, both Houses, to begin to discuss these issues much PAGE 296 Add.104 NYS ASSEMBLY JUNE 19' 1997 earlier on in the session so that we do not have people who are constantly waiting to see what is going to happen, and we certainly don't wait to the very end of this law to expire before we renew the laws. We owe the people that, Mr. Speaker. We owe the people an opportunity to rest better -- THE SPEAKER: Mr. Ravitz-- MR. RAVITZ: --and hopefully tonight when they wake up tomorrow morning, they will have a sigh of relief. I will be voting in the affirmative. Thank you, Mr. Speaker. THE SPEAKER: Mr. Ravitz in the affirmative. Mrs. Clark. MRS. CLARK: Thank you, Mr. Speaker. On behalf of the many senior citizens who have been frightened for about six or seven months now about where they would live if rent control laws would expire, particularly in the City of New York but in other places, I want to add my voice of praise to you and Chairman Lopez and to the staff who have worked to accomplish what I consider a major feat in getting this rent control bill done. PAGE 297 Add.105 l\1 , itz it i I \ ( NYS ASSEMBLY JUNE 19, 1997 These semors won't forget. They will not forget how many nights they laid awake wondering what might happen to . them, and I think we'll see that they won't forget when it's tim~ to vote next year. Thank you. THE SPEAKER: How do you vote? MRS. CLARK: I vote in the affirmative. THE SPEAKER: Mrs. Clark in the affirmative. Mrs. Arroyo. MRS. ARROYO: Thank you. I am voting in the affirmative for it. I want to express only one point here: I'm very afraid with what has happened in the past three weeks, Mr. Speaker, it is going to remove you from that chair and probably on January 3, 1999 you will be sitting on the Second Floor of this building. THE SPEAKER: Out of order. MRS. ARROYO: Thank you. THE SPEA~R: How do you vote, Mrs. Arroyo? Mrs. Arroyo in the affirmative. Mr. Ramirez. PAGE 298 Add.106 l'ITY ,1 / " ru ime EAI\ER: i . ,/ ~- 1 \. NYS ASSEMBLY JUNE 19, 1997 MR. RAMIREZ: Mr. Speaker, I don't know how you follow the prior speaker. THE SPEAKER: How do you vote? MR. RAMIREZ: Let me, however, attempt to explain my vote. I, first, of course, want to add my voice and I felt it was my responsibility to at least raise one point, but let me add the voice to the rest of my colleagues in applauding what has been an outstanding job on your part and on the part of Assemblyman Vito Lopez, who did an outstanding job, who was tireless ahd who went throughout the State wherever he was asked. I think that he is to be commended because he carried our task and he did that in a very, very skillful manner. Mr. Speaker, I rise to vote in the affirmative because I believe that this is a good bill. For the poor and working people of the State of New York, I believe that this is a good bill. It is a bill that achieves a lot of the objectives that we had hoped would continue to be the law of the land. I believe that there is in the area of rent deposits, which will change long-held notions of the rights of poor people. I think that that is the one area that challenges most of PAGE 299 Add.107 ~m n NYS ASSEMBLY JUNE 19, 1997 us who come from poor communities. But I also believe that even m that area, Mr. Speaker, it has been narrowly tailored so that we can assure the basic rights of the people who we are elected to represent. I would like to close in saying that I am a resident, as well as a citizen of New York City and New York State, but in issues such as this, Mr. Speaker, it is one of the few times when succession begins to look real good. Thank you, Mr. Speaker. THE SPEAKER: How do you vote? MR. RAMIREZ: I vote in the affirmative. THE SPEAKER: Mr. Ramirez in the affirmative. Mr. Sanders to close. MR. SANDERS: Well, that's a heavy burden. I better do this fast. Mr. Speaker, in the 20 years that I have been privileged to serve in this House and participated in many, many debates over rent regulations and housing, I think one thing that I have learned is that those people who oppose rent regulations, I will never change your mind. And for those people who take a different PAGE 300 Add.108 in y Ii NYS ASSEl\fBLY JUNE 19' 1997 point of view than I, you will never change my mind. There is a difference in philosophy and a difference in ideas about what is government's responsibility and I think that, perhaps, the debate over rent regulations is one that will go on eternally. So rather than spending my few brief moments in rehashing why I believe this is a good bill, knowing I will never change a single mind on this issue, I'd rather spend my moment, Mr. Speaker, in just saying to you publicly that in all of my years of public service, I believe that this is one of those rare moments where inspired leadership and intelligence has prevailed in providing New York State with what I believe is the appropriate law to protect people in an appropriate way. So, I want to thank you, Mr. Speaker, on behalf of all of my constituents and 2.5 million other people, and to thank Vito Lopez and a couple of folks sitting up in the gallery, the leaders of the tenant movement, in bringing forth this agreement. I vote in the affirmative, sir. THE SPEAKER: Mr. Sanders in the affirmative. The Clerk will announce the results. (The Clerk announced the results.) PAGE 301 Add.109 M , NYS ASSEM.BL Y JUNE 19' 1997 i ·.·· .: \",'.·.;· The bill is passed. (Applause) Mr. Bragman. MR. BRAG MAN: Thank you, 1\1r. Speaker. We already advanced the B calendar. I'm going to ask you to take the B calendar on consent, the first two bills. The third bill, as I indicated before, there is an amendment by Mr. Keane. Let's take the first two bills on consent, please. THE SPEAKER: Let's take the first bill on consent. The Senate bill on the second one is on its way over. THE CLERK: Bill No. (H) 8336, Rules Report No. 486, Committee On Rules. An act making appropriations for the support of government. THE SPEAKER: On the motion of Mr. Farrell, the Senate bill is before the House. Without objection, the Senate bill is advanced. Message from the Governor, the Clerk will read. THE CLERK: Pursuant to the provisions of Section 14 of Article III of the Constitution and by virtue of the authority conferred upon me, I do hereby certify to the necessity of an immediate vote on Senate Bill No. 5551. PAGE 302 Add.110 , ,- \. ' ... -' Mr ,/" .' IC SELECT PRESS RELEASES FROM NEW YORK’S EXECUTIVE AND LEGISLATIVE BRANCHES ON THE RENT REGULATION REFORM ACT OF 1997 CHAPTER 116 Add.111 05/17/1997 14:33 518-473-7559 STATE OF NEW YORK EXECUTIVE CHAlvffiER GEORGE E. PAT AKI, GOVERNOR Press Office 518-474-8418 212-681-4640 http:/ /www..:;;tate.ny.us ALBANY PRESS OFFICE FOR RELEASE: IMMEDIATE, Monday June 16, 1997 STATEMENT FROM GOVERNOR GEORGE E. PATAKI PAGE 02 "We have worked to protect tenants, create competition in the housing market and ensure that government did not regulate housing in the future. All three goals have been met.'' "All tenants but a handful of millionaires are protected because I believe that we must not · change the rent laws that so many people have counted on for years. "I have stated repeatedly that we must not change the rent laws in the middle of the game for tenants who have come to rely on rent control, which has been a part of the fabric ofN ew York for generations. They are protected and the rules they have counted on will not change. "I have said from the beginning that was my goal. It is now reality. "1 have said repeatedly that too many apartments have been kept vacant for too lorig because they were priced well under market value, which has only served to create shortages and stifle competition. "This agreement fixes that situation by bringing three of four apartments to fair market levels, bringing countless units back into the rental pool so that more apartments are available for the middle class and bringing more fairness to New York State's housing market. ''We have insisted that those who create new housing must be assured that the heavy hand of government regulation does not choke off incentives or development in the future. "By passing a law that specifically ensures that State govefl1:ment will not interfere in the housing market for the future, we have guaranteed that new affordable housing will finally be built in the city and throughout the state -- creating new construction, new jobs, new hope and new opportunity for all New Yorkers. "By passing the toughest new criminal laws in the nation to crack down on dishonest landlords, tenants rights will be protected at historic new levels, as they should. · "Tonight's agreement is not perfect, but it goes a long way toward undoing what 50 years of too much government, too many regulations and too much government meddling has done to destroy the housing market in New York City. · Add.112 MB l / wwstate o ! nun " . l ixm l " . ern ~ . . . 05/17/1997 14:33 518-473-7559 ALBANY PRESS OFFICE PAGE 03 "We have won a great victory. a victory that can be shared by all New Yorkers. "The coming years will prove that by unleashing the spirit of freedom in New York City's housing market. we will create one of the greatest booms of all time. "The end result of today's agreement is simply more choice, more affordability, more availability of housing for working men and women throughout New York City, and great state. "I want to thank all those who stood by the principle that it is time for fundamental: sweeping reform in the housing market. Today we have much to celebrate. "In particular, I want to thank the editorial boards ofthe New York Times, New York Post, New York Daily News, Newsday and Westchester/Rockland Gannett for their steadfast commitment to change and support for the direction of our policies and programs. "I want to thankthe millions ofNew Yorkers who put principle above politics and helped to bring about this historic change and the beginning of a new era ofhousing in New York State." ### Add.113 , , T , t l .rn itrn J h 05/17/1997 14:33 518-473-7559 ALBANY PRESS OFFICE PAGE 04 Agreement on Reform of Rent Protection Statutes The agreement will contain the following elements: I. Protecting Tenants Rent regulations will be continued for all tenants as presently constituted, subjected to the changes and reforms noted below for a period of six'years. II. Vacancy Allowances For an apartment that is vacant on June 15, 1997, landlords will be entitled to the following vacancy allowance: A. For two-year leases, upon vacancy of an apartment, the landlord shall be entitled .to increase the rent by 20 percent, plus any additional vacancy increases as noted below. B. If the lease is for one year, the 20 percent increase shall be reduced by the difference between a two-year increase and one-year increase as authorized by the Rent Guidelines Board. For example, if the Board approves a 3 percent increase for one year and a 5 percent increase for r.vo years, the two-year lease shall increase by 20 percent and the one-year lease . shall increase by 18 percent. C. In addition to the vacancy allowances noted above, for a vacant apartment where the previous tenant had lived for eight or tnore years, the landlord shall be entitled to a 0.6 percent increase above the 20 percent vacancy allowance for each year the previous tenant occupied the apartment. For example, if the prior tenant was in the apartment for 10 years, the landlord would be ,entitled, for a two-year lease, to increase the rent by the 20 percent vacancy allowance plus an additional 6 percent. If the tenant was in occupancy for 20 years, the increase would be 20 percent plus and an additional 12 percent. D. For apartments that rent for $300 or ~ess, in addition to the vacancy allowances as noted above, the rent would increase by $100 upon vacancy. In the event the rent for the apartment was $300 to $500, upon vacancy the landlord would get the vacancy allowances noted above or $1 00, whichever is greater. III. Succession The rights of an individual to succeed the tenant named on the lease would be limited by removing nieces, nephews, aunts and uncles from those authoriz~d to succeed the prior tenant. The right of succession without a vacancy allowance shall be limited to one generation only. For example, a son or daughter could continue in the occupancy after the mother or' father dies without a vacancy allowance. Add.114 _ ~ ' IS , . tw O m (0 ! , ' J Wl t r e 518-473-7559 ALBANY PRESS OFFICE PAGE 05 Upon the next vacancy, the apartmen~ shall be subject to the vacancy allowances but qualified successors shall have the right to continue in occupancy by matchirig the rent under the · formula of payment in section II. IV. Regulatory Reform Provides for reform of regulatory provisions in statute to simplify the administration of rent regulations without jeopardizing tenant rights, including: codifying the four-year statute of limitation for contesting rent; fixing the problems associated with the $10 filing fee paid to city; and ending the concurrent jurisdiction ofthe State Division ofHousing and Coriunun.ity Renewal and the Courts for rent disputes. V. Luxury Decontrol The level for luxury decontrol would be lowered from $250,000 to $175,00 and the minimwn rent would be.$2,000. · . VI. Escrow In cases where there is a dispute between the landlord and tenants. the tenant would be required to pay the rent into escrow. Housing Court would have no discretion in this regard, but after two adjournments would be required to order the payment into escrow. In buildings with 12 or fewer units, notwithstanding the above, any undisputed amount of rent shall be paid by the tenant to the landlord and the balance of the disputed amount shall be paid into escrow. The payment of the undisputed amount shall be without prejudice to either party's legal rights. VII. New Construction · Includes a statutory provision guaranteeing all new housing construction after the date of the bill to ensure it will not be subject to rent stabilization or rent control unless subject to controls under current law or any new benefit program as a result of the voluntary acceptance of a government program which currently would place such units under rent stabilization. The Division of Housing and Community Renewal shall be authorized to contract with the development group such certifications as are necessary to guarantee such rights. VIII. Tenant Harassment Tough new penalties on landlords who harass tenants as stated in the Executive proposal shall be incorporated into the legislation. IX. Demolition In any building set to be demolished occupied by three or fewer tenants, who constitute 10 percent or less of the overall dwelling units, the ov.rner can relocate the tenants to comparable anartments. includimz location. for the same or lower rent. Add.115 05/17/1997 14:33 trn n . nn nn I t mm · . , ~ · O'-"'l r ,. i NEWS • FROM • SENATOR '""'1[ ~ JOSEPH L. BRUNO MAJORITY LEADER CONTACT: John McArdle {518) 455-2264, Marcia White {518) 455-31Sl FOR RELEASE: Immediate, Thursday, December 5, 1996 BRUNO CALLS FOR END TO RENT REGULATIONS Calls for immediate vacancy decontrol, expanded luxury decontrol & continued protections for elderly and disabled In a speech to the Rent Stabilization Association (RSA) today in Manhattan, Senate Majority Leader Joseph L. Bruno called for an end to "rent regulation as we know it," beginning when the current rent regulation law expires on June 15th, 1997. Senator Bruno said the best way to resolve the housing shortage in New York would be to create an open, competitive housing market and provide incentives and assistance for new housing construction. "Rent regulations may have made sense when they were put in place after World War II, but since then they have devastated the New York City housing market and hurt the city's economy," Senator Bruno said. "They are the single, greatest impediment to creating new housing opportunities for New Yorkers. "For too long, we simply extended rentregulations and allowed the city's housing stock to deteriorate. But next year will be different. We are going to liberate the city and take aggressive actions to increase the availability and affordability of housing. We are going to move to an open, competitive housing market and Wf' are going to begin by ending rent regulation as we know it. 11 Senator Bruno said that the law governing rent regulation expires on June 15th. He said the law will not be extended and that current regulations will end. Senator Bruno said rent regulations for senior citizens and the disabled would be continued and that programs to expand benefits for low income seniors will be considered. "We must ensure that rent protections remain for our most vulnerable citizens, seniors and the disabled," Senator Bruno said. "We must, therefore, maintain rent regulations for these residents and consider other assistance programs to assure that seniors and the disabled can continue to live independently and with dignity." Senator Bruno said he would consider expanding the Senior Citizen Rent Increase Exemption program, which acts aS· a kind -of circuit breaker to protect seniors from paying too high a percentage of their incomes for rent. . . MORE @ PRINTED ON RECYCLED PAPER Add.116 ( I ( 91 8. t t regulati " s · . Beyond ending state rent regulation laws, Senator Bruno said that other aggressive actions are needed to increase the availability and affordability of housing in the city to meet the new demands of an open and competitive housing market. "State rent regulations cost city taxpayers billions of dollars in lost revenue and in costs to maintain and renovate buildings," Senator Bruno said. "But these regulations are not the only problem. New York City's tangled web of regulations, including local zoning and environmental regulations, have been a disincentive to the creation of new housing and have hampered the .renovation of existing housing. "New York City has a punishing housing procedural review," Senator Bruno said. "The city's environmental regulations are more stringent than state or federal laws. No other American city has strangled its housing market through government intervention and regulation like New York." Senator Bruno said he will work with Governor Pataki, Speaker Silver, Mayor Giuliani and the City Council to change or eliminate state and local regulations which are frustrating the development of new housing in New York City. He pledged to work with state, city and federal government officials to make a renewed effort to provide financial assistance and incentives that encourage new housing construction. "Moving from rent regulations to an open market cannot be achieved overnight, 11 Senator Bruno said. "We need some time to allow for the creation of new housing, to increase availability and competition. 11 Senator Bruno proposed a two-year transition period which would begin when the current rent regulation law expires, starting with immediate vacancy decontrol to place all units into the open market once they are vacated and a reduction in the income limits on luxury decontrol. Senator Bruno said that after a two-year transition period, all remaining regulated housing, with the exception of units occupied by senior citizens and the disabled, would be deregulated. He pointed to studies that concluded there would be no significant rent differentials for most of the people affected. "A 1993 Harvard University study concluded that there was no substantial difference in the average regulated and unregulated rents outside of central Manhattan and that rents outside central Manhattan would not be substantially impacted by de-regulation," Senator Bruno said. Senator Bruno said other studies have underscored the negative impact rent regulations have had on the availability and quality of housing in New York City. "According to the Manhattan Policy Research Institute, New York City needs to add 20,000 units a year just to stay even with the growing population and 40,000 units a year to improve housing conditions and lower prices," Senator Bruno said. OVER Add.117 Vail " ." ill Il ar@ cat@ "That same study noted that since 1980, New York has lost about 136,000 more units of housing than it has gained, while the number of New York households has risen by 112, 000. Senator Bruno noted that in a good year, New York City loses between 14,000 and 19,000 units a year. "In 1994, just 4,000 new housing units were added when ten times that were needed," Senator Bruno said. "Average annual construction of housing units has fallen from 18,000 in the 1970's to 11,000 in the 1980's to 7,500 in the 1990's." . Senator Bruno said an Arthur Andersen study in 1994 concluded that it took an average of 19 years from the time the city forecloses on a building until it sells it. The study estimated that each foreclosed building owed an average of $36 , 000 in property taxes when the city took title. The City then spent on average $2.2 million to own, manage and prepare for sale, each building it took over. "It is estimated that it will cost the city $10.6 billion, including $1.3 billion in lost tax revenues, to maintain, operate and prepare thes~ buildings for sale, . even if the city does not take over a single additional building," Senator Bruno said. "Although Mayor Giuliani has an aggressive program to reduce the number of buildings the city owns through foreclosure, government cannot solve the housing problem by itself. "We are facing a tremendous challenge," Bruno concluded. "However, I believe that together we can energize New York City's housing industry to increase the quality, quantity and affordability of housing while still protecting our most vulnerable citizens." #### Add.118 . Ob e - , II 1 "That same study noted that since 1980, New York has lost about 136,000 more units of housing than it has gained, while the number of New York . · households has risen by 112, 000. Senator Bruno noted that in a good year, New York City loses between 14,000 and 19,000 units a year. "In 1994, just 4,000 new housing units were added when ten times that were needed," Senator Bruno said. "Average annual construction of housing units has fallen from 18,000 in the 1970's to 11,000 in the 1980's to 7,500 in the 1990's." Senator Bruno said an Arthur Andersen study in 1994 concluded that it tobk an average of 19 years from the time the city forecloses on a building until it sells it. The study estimated that each foreclosed building owed an average of $36,000 in property taxes when the city took title. The City then spent on average $2.2 million to own, manage and prepare for sale, each building it took over. "It is estimated that it will cost the city $10.6 billion, including $1.3 billion in lost tax revenues, to maintain, operate and prepare thes~ buildings for sale, even if the city does not take over a single additional building," Senator Bruno said. "Although Mayor Giuliani has an aggressive program to reduce the number of buildings the city owns through foreclosure, government cannot solve the housing problem by itself. "We are facing a tremendous challenge," Bruno concluded. "However, I believe that together we can energize New York City's housing industry to increase the quality, quantity and affordability of housing while still protecting our most vulnerable citizens." =II### Add.119 rk.· b . . . o . #111 - .......--.------,. N E W S· • F R 0 M: • S E .N A T o· R'. · il JOSEPH L. BRUNO MAJORITY LEADER CONTACT: John McArdle (518) 455-2264, Marcia White (518) 455-3191 http://www .senate.state.ny. us FOR RELEASE: Immediate, Thursday, June 19, 19~7 STATEMENT BY SENATE MAJORITY LEADER JOSEPH L. BRUNO Rerit Regulation L~gislation The rent regulation bill that will be acted on by the State Senate today represents the most significant reforms .of the rent regulatioi1 system in the past fifty years. These reforms will benefit everyone in New York City and the entire state. This bill achieves all of the objectives I established at the outset. It will improve the housing market in New York City, while maintaining rent protections for virtually every tenant, except for the most wealthy. In particular, the bill addresses two major problems with rent regulations by raising unrealistically low rents to market rates and clearing the way for new investment in housing. · Thisbill will bring more than three-quarters of the.'~me million rent regulated apartments to market rates and it will remove some of the regulatory burdens that have prevented the construction of new housing and the rehabilitation of existing units. As these changes take effect and the availability of housing increases, we will see the eventual deregulation of all apartments in New York. This was never an issue about tenants and building owners, it was an issue about improving the housing market and the benefits that would come from doing that. I am satisfied that we have accomplished that. As time goes on there will be recognition that more substantial changes were made to the system than ever. This has been a long discussion, but what we have accomplished will benefit everyone; It makes positive changes to the failed system of rent control and when we look back, people will recognize that these were substantial changes for the better. ·.: ' #### @PRINTED ON RECYCLED PAPER Add.120 . t . n l tioll cit l:J,ousin . bi "~ mil , . , ~ , '. ···-~;~-~blySpeakerSheldon Silver ___ P_re_s_s_R_el_ea_s_e • · .. ··:· .. ::::·: ... :.;: ::·· Contact: Patricia lynch (212) 312·1400 (518) 455-3791 Charles Carrier (518) 455-3888 ASSEMBLY.STATE.NY.US SILVER DECLARES VICTORY FOB TENANTS FOR IMMEDIATE RELEASE: June 19, 1997 Today, I am declaring victory for all the tenants and the 2.7- rnillion middle-class families who rely on our rent laws to stay in their homes. We have agreed to extend rent laws for another six years. In doing so, we have defeated attempts to establish vacancy decontrol. We have fought back efforts to create a system that would have resulted in harassment of tenants and a rent market that would have seen a devastating rise in rents and the ruin of the downstate region. Instead, we have addressed hardship cases in which apartments have been occupied by the same renter for a long period of time, succession rights and luxury decontrol. There will be no vacancy decontrol. Landlords will receive an increased vacancy bonus. statutory protections will continue with no adjustment to market-rate rent. The special circumstances of hardship will be set in statute, not left to the decision of the Rent Guidelines Control Broad. Existing succession rules would be preserved with tha modification that nieces, nephews, aunts, uncles and in-laws would no longer be in the line of succession. Succession rights will continue into the futur~, with the landlord entitled to the vacancy bonus after a second generation of succession. For example when an apartment passed from a mother to her daughter and then to her granddaughter, the landlord would be entitled to the vacancy bonus increase when the granddaughter assumes tenancy, but statutory protections would continue. current luxury decontrol thresholds would be modified and indexed to inflation, based on the Consumer Price Index. The income threshold would fall to $175,000 for each of two successive years and the rental threshold to $2,000 a month. This has been a long and difficult fight. But as I promised when the rent war was begun in December, my first priority would be to maintain middle-class families in New York. We have succeeded in protecting you. I declare victory on your behalf. Add.121 :A~$ef:nbly Speaker Sheldon r s s / s t Ly - •• ~~ Con~ ',"':' "," ....... , R m ~i e a~ 6 ~ill re, Curr i!