### Zhang v LLS Realty Assoc., LLC 2024 NY Slip Op 31551(U) May 1, 2024 Supreme Court, New York County Docket Number: Index No. 153095/2019 Judge: Shlomo S. Hagler Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York State and local government sources, including the New

York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.INDEX NO. 153095/2019 NYSCEF DOC. NO. 63 RECEIVED NYSCEF: 05/01/2024

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### SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. SHLOMO S. HAGLER Justice 

### -------------------X

JEROME ZHANG, ALVIN MARTY Plaintiff,

### -vLLS REALTY ASSOCIATES, LLC, Defendant. 

## -------------------X PART
INDEX NO. 153095/2019 MOTION DATE 09/14/2020 MOTION SEQ. NO. 002 DECISION + ORDER ON MOTION 17

The following e-filed documents, listed by NYSCEF document number (Motion 002) 29, 30, 31, 32, 33, 34,35,36,37,38,39,40,41,43,44,45,46,47,48,49,50,51,52,53,54, 55, 56,57,58,59,61,62 were read on this motion to/for JUDGMENT - SUMMARY Plaintiffs Jerome Zhang and Alvin Marty (tenants) are tenants ofapartment number 6 (the Apartment) in a building located at 203 Grand Street in Manhattan (the Premises). Plaintiffs commenced this action against defendant, LLS Realty Associates, LLC (landlord), the owner of the Premises, seeking ajudgment declaring that they are entitled to a rent-stabilized lease, damages for willful rent overcharge, and attorneys' fees. In motion sequence 002, tenants move pursuant to CPLR 3212 for summaryjudgmentin their favor. Landlord opposes the motion and cross-moves to dismiss the complaintpursuant to CPLR 3211 (a) (1) and (7) and CPLR 3212, andto compel tenants to pay ongoing rent and/or
use and occupancy pendente lite at a rate of$4,000 per month. For the following reasons, the motion is denied, and the cross-motion is granted only to the extent thatlandlord's request for use and occupancy pendente lite is referred to a Special Referee to hear and report.

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### BACKGROUND Tenants took occupancy ofthe Apartment on October 28, 2017 pursuant to a nonregulated lease at a monthly rent of$4,000. When the lease expired on October 31, 2018, tenants did not enter into a renewal lease, but remained inthe Apartment on a month-to-month basis, continuing to pay $4,000 a month through October 2020, at which pointtenants stopped paying rent. One orbothtenants still reside inthe Apartment, and itis undisputed that they have not paid rent since that time. Tenants initiated this action on March 25, 2019, alleging thatthe landlord illegally deregulated the Apartment in2012 and overchargedtheir rent. Landlord submitted an answer, setting forth general denials and affirmative defenses, including that tenants' claims are barred bythe applicable statute oflimitations. In its answer, landlord asserts that the Apartment was lawfully deregulated in 2012 by virtue ofthe fact that landlord performed improvements and took lawful increases in rent based upon such improvements, thereby exceedingthe $2,500 highrent vacancy deregulationthreshold in effect at the time. Landlord also interposed a counterclaim for attorney's fees. Tenants replied to landlord's counterclaim and now move pursuant to CPLR 3212 for summaryjudgmentintheir favor. Landlord opposes the motion and cross-moves to dismiss the complaint pursuant to CPLR 3211 (a) (1) and (7) and CPLR 3212, 1and to compel tenants to pay ongoing rent and/or use and occupancy pendente lite at a rate of$4,000 per month.

1 The ~ourt will treatthe cross-motion as a summaryjudgmentmotion given that both sides submitted evidentiary matenal and have clearly charted a summaryjudgment course (see California Suites, Inc. v Russo DemolitionInc., 98 AD3d 144, 155-156 [1st Dept2012]).

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3 of 12 DISCUSSION Ona summaryjudgmentmotion, "the moving party mustmake a primafacie showing of entitlement tojudgment as a matter oflaw, tendering sufficient evidence to demonstrate the absence ofany material issues offact" (Trustees of Columbia Univ. in the City of NY. v D'Agostino Supermarkets, Inc., 36 NY3d 69, 73-74 [2020] (internal quotation marks and citations omitted]). "This burden is a heavy one and on a motionfor summaryjudgment, facts mustbe viewed in the light most favorable to the non-moving party" (Jacobsen v New York City Health & Hosps. Corp., 22 NY3d 824, 833 (2014] [internal quotation marks and citations omitted]). Where the moving party fails to make such a showing, the motion mustbe denied without regard to the sufficiency ofthe opposing papers (see Voss v Netherlands Ins. Co., 22 NY3d 728, 734 [2014]). Only afterthe moving party makes a primafacie showing does the burden shiftto the opposing party "to produce evidentiary proofin admissible form sufficientto establish the existence ofmaterial issues offact which require a trial ofthe action" (Bazdaric v Almah Partners LLC, _NY3d_, 2024 NY Slip Op 00847, **3, 2024 WL 674245 [2024] [quotation marks and citation omitted]). "Since [summaryjudgment] deprives the litigant of [their] day in court it is considered a drastic remedy which should only be employed whenthere is no doubt as to the absence oftriable issues" (Andre v Pomeroy, 35 NY2d 361,364 [1974]). The Rent-Stabilized Status ofthe Apartment Tenants claim they are entitled to a declarationthat their tenancy is subject to rent stabilization. In support oftheir motion, they submit Department ofHousing and Community Renewal (DHCR) registration information indicating that in 1984, the Apartment was registered
as rent-stabilized with a legal regulated rent of$300 a month and identifying the registered tenant as Marylou Prete (NYSCEF Doc. No. 26). The registration information indicates that

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4 of 12 Prete remained the registered rent-stabilized tenant pursuant to a series ofleases until June 30, 2012, at which point, her legal regulated rentwas $779.95 a month. Tenants also submit a 2- year lease extension agreement entered into by Prete on April 2, 2012 at a monthly rate of $836.50, as well as a surrender agreement, evincing that Prete surrendered the Apartment on August 20, 2012 (NYSCEF Doc. No. 37 at 19-21). The registration information shows that the Apartment was neverregistered as rent-stabilized subsequent to Prete vacating the Apartment in 2012. The next tenants to lease the Apartment on October 24, 2012, entered into a non-stabilized lease at a monthly rent of$3,100 (NYSCEF Doc. No. 37 at 19-21). According to tenants, landlord illegally de-regulated the Apartment when Prete vacated because the rent hadnot reached the $2,500 high-rent deregulation threshold for units that became vacant during that time. Tenants argue that while landlord claims the Apartment was subject to high-rent vacancy deregulation due to vacancy and individual apartment improvement (IAI) increases, the record establishes that landlord never actually performed all ofthe renovations needed tojustify the !AI-related rent increases claimedby landlord. In opposition, landlord contends that, absent fraud, the court is notpermitted to look back
more than four years into the rental history ofthe Apartment in orderto determine whether itwas properly deregulated pursuantto high-rent vacancy deregulation. 

### It contends that tenants have failed to set forth sufficient indicia offraud to warrant consideration ofthe rental history beyond the four-year period. Landlord further argues that even assuming the Apartment was improperly deregulated in 2012, it surpassed the high-rent threshold several times since 2012, before the repeal ofhigh-rent vacancy deregulation in June 2019. Forthe following reasons, neitherparty is entitled to summaryjudgment on this issue.

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5 of 12 Underthe law as it stood before the enactment ofthe Housing Stability and Tenant Protection Act of2019 (HSTPA) (L 2019, ch 36, effective June 14, 2019), rent-stabilized apartments were subjectto certain statutory rent increases, including a 20% increase for a twoyear lease upon vacancy (see former Rent Stabilization Law (RSL) § 26-511 [c] [5-a]) and for significant improvements made to the apartment, known as IAis (see former Rent Stabilization Code (RSC) [9 NYCRR] 2522.4 [a][l], [4]). In addition, the lawprovided for deregulation of vacantrent-stabilized apartments that reached a threshold legal regulated rent (including increases based onvacancy and/or IAis) pursuant to "high-rentvacancy deregulation"2 (former RSL §26-504.2 [a]); see generallyRoberts v Tishman Speyer Props., L.P., 13 NY3d 270 [2009]). The high-rent vacancy deregulation threshold in effect atthe time Prete surrendered the Apartment onAugust 20, 2012 was $2,500 (see former RSL §26-504.2; former RSC§ 2520.11 [r] [5];Austin v 25 Grove St. LLC, 202 AD3d429, 430 [1st Dept 2022]). Under pre-HSTPA law, CPLR213-a and RSC§ 2626.1 (a) (2) set forth a four-year statute oflimitations for rent overcharge claims and a four-year look back period for records that may be considered in adjudicating such claims. The HSTP A extended these time frames to six years. In Matter of ReginaMetro. Co., LLCv New YorkState Div. of Haus. & Community Renewal (35 NY3d 332, 363 [2020]), the Court ofAppeals held that the extension did not apply retroactively to conduct preceding the enactment ofthe HSTPA. Since tenants initiated this action priorto the HSTPA's effective date, their claims mustbe decided based upon pre-HSTPA lawand therefore the four-year rule applies to their overcharge claim.

2 The HSTPA repealed high-rent vacancy deregulation. However, the HTSPA states that "any unit that was lawfully deregulated priorto June 14, 2019, shall remain deregulated" (L 2019, ch 39, Part Q, §8,10; seeMatter of Hoy v New York StateDiv. of Haus. & CommunityRenewal, 204 AD3d 568 [1st Dept2022]). · 153095/2019 ZHANG, JEROMEvs. LLS REALTY ASSOCIATES LLC Motion No. 002 ' Page 5 of 12


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6 of 12 In the context ofan overcharge claim, review ofan Apartment's rental history outside the four-year lookbackperiod is permitted only where the tenant produces evidence ofa fraudulent scheme to deregulate (see Casey v Whitehouse Estates, Inc., 39 NY3d 1104, 1106 (2023]; Burrows v 75-25 I53rdSt., LLC, 215 AD3d 105, 113 [1st Dept 2023]). Importantly, however, a tenantmay "challenge the deregulated status ofan apartment at any time during the tenancy" and "[u]pon such a challenge, consideration ofevents beyond the four-year period is permissible if done not for the purpose ofcalculating an overcharge butrather to determine whether an apartment is regulated" (Matter of I50 E. ThirdStLLCv Ryan, 201 AD3d 582, 583 [1st Dept 2022] [internal quotation marks and citations omitted] [emphasis added]; see Matter of AEJ534 E. 88th, LLCv New York State Div. of Hous. & Community Renewal, 194 AD3d 464, 469 [1st Dept2021]; Matter of Kostic v New YorkState Div. of Hous. 

### & CommunityRenewal, 188 AD3d 569,569 [1st Dept 2020]). The landlord argues that under RSC§ 2526.1 (a) (2) (iii), consideration ofevents beyond the four-year period is notpermitted where, as here, the status ofan apartment purportedly deregulated pursuantto high-rent vacancy deregulation is being challenged. RSC 

### § 2526.1 (a) (2), which addresses rent overcharge complaints, states: "A complaintpursuantto this section must be filed with the DHCRwithin four years of the first overcharge alleged, and no determination ofan overcharge and no award or calculation ofan award ofthe amount ofanovercharge may be based upon an overcharge having occurred more than four years before the complaint is filed." Subsection (a) (2) (iii), upon whichplaintiffrelies, goes onto state: "Except in the case of decontrolpursuant to [high-rent vacancy deregulation] or[highrent high-income deregulation], nothing contained in this section shall limit a determination as to whether a housing accommodation is subjectto the RSL and this Code" (emphasis added).

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7 of 12 Landlord arguesthat since subsection (a) (2) (iii) expressly excepts high-rent vacancy deregulation from its departure from the four-year rule, the four-year rule is applicable when deciding a claim challenging the status ofan apartment deregulated pursuant to high-rent vacancy deregulation. Landlord's argument in this regard is consistent with the law requiring a landlord to retain rental history and IAI records for only four years (see Regina, 35 NY3d at 353; Matter of Haskin v New York State Div. of Haus. 

### & CommunityRenewal, 203 AD3d 603, 604 [1st Dept 2022]; Fuentes v KwikRealtyLLC, 186 AD3d 435,438 [1st Dept2020]). The examination of suchrecords is necessary to the determination ofwhether an apartment was lawfully deregulated pursuantto high-rent orhigh-rent high-income vacancy deregulation. Placing no limit onthe lookback period requires a landlord to retain such records indefinitely. There is also case law at the Supreme Court level supporting landlord's argument (see Matter of Notarberardino v New York State Div. of Haus. & CommunityRenewal, 58 Misc 3d 1210 [A], 2017 NY Slip Op 51964 [U] at *3 [Sup Ct, NY County 2017] ["Petitioner's claim that the apartment's regulatory status is not subjectto the limitations period and may be challenged at any time contravenes ... 9 N.Y.C.R.R. 2526.1 (a) (2) (iii), expressly exceptingapartments decontrolleddue to high rentfrom the regulation's provision that lifts the limitations period for determinations ofan apartment's status under the RSL orRSC"] [ emphasis in original]). However, landlord's position does not comport with controlling case lawholding that the deregulated status ofan apartment may be challenged at any time and that events outside ofthe
• four-year period may be considered ifdone to determine whether an apartment is regulated (see Matter of 150

### E. ThirdStLLCv Ryan, 201 AD3d at 583; Matter of AEJ534

### E. 88th, LLC, 194 AD3d at 469; Matter of Kostic, 188 AD3d at 569; see alsoMatter of Bazan vNew YorkState

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8 of 12 -Div. of Hous. 

### & CommunityRenewal, 189 AD3d 495,496 [1st Dept 2020] [where landlord claimed that approximately 10 years prior to the filing ofthe overcharge complaint, itperformed renovation work onthe subjectunit, andthat the unit then became deregulated due to high-rent vacancy, DHCRcould reviewrecords priorto the base date in orderto determine the apartment's regulatory status, but could not do so in orderto calculate an overcharge where there was insufficient indicia offraud]). This court is bound by such case lawand, therefore, for the purpose ofdetermining the status ofthe Apartment, the four-year rule does not apply. Accordingly, tenants need not produce evidence ofa fraudulent scheme in orderto look beyond the four-year period withregard to the determination ofthe Apartment's regulatory status. That said, tenants have not mettheirburden ofdemonstrating as a matter oflawthat the Apartment was unlawfully deregulated in 2012. Tenants assert thatthe rent increases inthe apartment's rental history are based onfabricated IAis. They contend that the Apartment's appearance is inconsistentwiththe amount ofIAis needed to have reached the deregulation threshold in 2012 andthat documents produced by landlord during discovery do not evidence all ofthe expenditures needed to have done so. Further, tenants assert that while landlord claims to have spent over $6,000 in materials via credit card on July 15, 2012, this charge was incurred before Prete surrendered the Apartment and therefore could not possiblyjustify an !AI-related rent increase upon her vacating the Apartment. Tenants contend that this shows that landlord's IAI documentation was contrived 

### in order to avoid paying overcharge damages and having the Apartment declared rent-stabilized. Tenants' proofis insufficient to establish, prima facie, that the Apartment is subject to rent stabilization. The evidence does not demonstrate as matter oflawthat the IAis were not performed, and tenants cannot sustaintheir burden by pointing to gaps in landlord'sproof(see

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9 of 12 generally e.g. Vasquez v Ridge Tool Pattern Co., 205 AD3d 657,661 [1st Dept 2022]). Norhas landlord demonstrated as a matter oflawthat itperformed sufficient IAis in 2012, so as to deregulate the Apartment through high-rent vacancy. Indeed, ''the determination ofwhether work constitutes an IAI supporting a rent increase is one to be resolved by the factfinder inthe
same manner as other issues, based onthe persuasive force ofthe evidence submitted by the parties" (Ampim v 160 E. 48th St. OwnerIILLC, 208 AD3d 1085, 1086-1087 [1st Dept 2022] [internal quotation marks and citation omitted]; Ruggerino v Prince Holdings 2012, LLC, 170 AD3d 568,569 [1st Dept 2019]). Landlord argues that even assuming the work on the Apartment was notperformed in 2012 and that the Apartment did notbecome deregulated through high-rent vacancy atthattime, the Apartment qualified for high-rent vacancy several times since then. While landlord may present evidence that the Apartment was properly deregulated at some point after 2012 but before tenant's tenancy commenced in 2017, landlord's figures assume thatthe rent charged upon Prete vacating the Apartment in 2012 was lawful

-- i.e., based upon IAis that were actually performed. Since questions offact exist with regard to this issue, landlord is not entitledto summaryjudgment on this basis. In sum, neither party is entitled to summaryjudgment as to the status ofthe Apartment. Rent Overchar2e and Attorney's Fees 

### In order for tenants to be entitled to the recovery ofovercharges and attorney's fees, the Apartment mustbe subjectto rent stabilization. In the event the Apartment is notrent-stabilized, the claims for rent overcharges and attorney's fees will be dismissed (see Gourin v 72A Realty Assoc., L.P., _AD3d _, 2024 NY Slip Op 01985, **2 [1st Dept 2024]). Since issues offact exist as to the status ofthe Apartment, neither party is entitled to summaryjudgment on these

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10 of 12 claims (seeAmpim v 160 E. 48th St. OwnerIILLC, 208 AD3d 1085, 1087 [1st Dept 2022] ["In light ofthe foregoing questions offact relating to the rent-stabilized status ofthe apartment, the motion court properly declined to reach the question ofwhether overcharge damages and attorneys' fees were warranted onthis record"]). Use and Occupancy The court "hasbroad discretion in awarding use and occupancy pendente lite" (43rd

### & Deli, Inc. v ParamountLeasehold, L.P., 107 AD3d 501,501 [1st Dept 2013]; see Kingsley v 300 W. 106th St. Corp., 162 AD3d 420,421 [1st Dept 2018]; AlphonseHotel Corp. v 76 Corp., 273 AD2d 124, 124 [1st Dept 2000]). While "the court may look to the amount ofrentpaid under a prior lease between the parties in setting use and occupancy, priorrent is only probative, not dispositive, on the issue" (43rdSt. Deli, Inc., 107 AD3d at 501 [citations omitted]). In the event the Apartment is found to berent-stabilized, use and occupancy is limited to the legal regulated rent plus any applicable guideline increases (see Clermont YorkAssoc. v Feher, 31 Misc 3d 10, 11-12 [App Term, 1st Dept 2011];AnsoniaAssoc. v Bozza, 186 Misc 2d 845, 846 [App Term, 1stDept 2000]). The court may refer the issue to a referee (see 43rdSt. Deli, Inc., L.P., 107 AD3d at 501). Here, the issue ofthe rate at which use and occupancy should accrue, based onthe last registered rent of$779.95, plus any applicable rent guideline increases, shall bereferred to a Special Referee to hear and report. This setting ofuse and occupancy pendente lite will be without prejudice to the rights ofeither party with respect to the ultimate determination ofany of the issues inthis action (see Levinson v 390 W. EndAssoc., L.L.C., 22 AD3d 397,402 (1st Dept 2005];Ampim v 160 E. 48th St. Owner IILLC, 2021 WL 3513915 [Sup Ct, NY County 2021), affd 208 AD3d 1085).

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11 of 12 CONCLUSION Accordingly, it is ORDERED that plaintiffs' motion for summaryjudgmentpursuantto CPLR 3212 is denied; and it is further ORDERED that defendant's cross-motion to dismiss the complaint pursuant to CPLR 3211 (a) (1) and (7) and CPLR 3212, and to compel tenants to pay ongoing rent and/or use and occupancy pendente lite is granted only to the extentthat the issue ofthe appropriate amount for
use and occupancy pendente lite for the subject apartment is referred to a Special Referee to hear and report with recommendations, exceptthat in the event ofand upon the filing ofa stipulation ofthe parties, as permitted by CPLR4317, the Special Referee, or otherperson designated bythe parties to serve as referee, shall determine the aforesaid issue; and it is further ORDERED that the portion ofdefendant's cross-motion, regarding use and occupancy pendente lite, is held in abeyance pending receipt ofthe report and recommendations ofthe Special Referee and a motionpursuantto CPLR4403 orreceipt ofthe determination ofthe Special Referee orthe designated referee and the cross-motion is otherwise denied; and it is further

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12 of 12 ORDERED that counsel for the party seeking the reference or absent suchparty, counsel for defendant shall, within 30 days from the date ofthis order, serve a copy ofthis order with notice ofentry, together with the completed Information Sheet upon the Special Referee Clerkin the General Clerk's Office inRoom 119 at 60 Centre Street, who is directed to place this matter
on the calendar ofthe Special Referee's Part for the earliest convenient date.

5/1/2024

DATE CHECK ONE:
APPLICATION: CHECK IF APPROPRIATE:

# ~ CASE DISPOSED GRANTED**□** DENIED SETTLE ORDER INCLUDES TRANSFER/REASSIGN

153095/2019 ZHANG, JEROMEvs. LLS REALTY ASSOCIATES LLC Motion No. 002 ' SHLOMO S. HAGLER, J.S.C. NON-FINAL DISPOSITION GRANTED IN PART SUBMIT ORDER FIDUCIARY APPOINTMENT

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