Court Opinion

ID: 9950826
Source: CourtListenerOpinion
Date Created: 2024-03-14 20:10:24.442881+00
Date Added: 2024-06-11T14:36:55.888020
License: Public Domain

Avenue Second Owner LLC v New York State Divi. of
             Hous. & Community Renewal
               2024 NY Slip Op 30771(U)
                     March 11, 2024
           Supreme Court, New York County
        Docket Number: Index No. 158525/2023
                  Judge: Arlene P. Bluth
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                                                                                                                     INDEX NO. 158525/2023
  NYSCEF DOC. NO. 34                                                                                           RECEIVED NYSCEF: 03/11/2024

                                   SUPREME COURT OF THE STATE OF NEW YORK
                                             NEW YORK COUNTY
            PRESENT:             HON. ARLENE P. BLUTH                                            PART                              14
                                                                                      Justice
            ---------------------------------------------------------------------------------X   INDEX NO.          158525/2023
             AVENUE SECOND OWNER LLC,
                                                                                                 MOTION DATE         03/04/2024
                                                         Petitioner,
                                                                                                 MOTION SEQ. NO.         001
                                                 -v-
             NEW YORK STATE DIVISION OF HOUSING AND
             COMMUNITY RENEWAL,

             Respondent
                                                                                                   DECISION + ORDER ON
             MATTHEW BROOKS (APARTMENT 5A), NORA BROOKS
             (APARTMENT 5A), BRANDEN GUY (APARTMENT 4A),                                                 MOTION
             MILDRED GUY (APARTMENT 4A), DIANE E. MCLEAN
             (APARTMENT 4B), KIM-NORA ANN MOSES (APARTMENT
             3A), ROBERT SCHMIDT (APARTMENT 3A)

                                                         Intervenor-Respondents.
            ---------------------------------------------------------------------------------X

            The following e-filed documents, listed by NYSCEF document number (Motion 001) 1- 9, 10, 11, 12, 13,
            14, 15, 16, 17, 18, 19, 20, 21, 23, 25, 29, 30, 31
            were read on this motion to/for                                                       ARTICLE 78                       .

                      The petition to annul a determination by respondent New York State Division of Housing

            and Community Renewal (“DHCR”) is denied.

            Background

                      This proceeding concerns a DHCR decision related to a property owned by petitioner on

            Second Avenue in Manhattan. Petitioner observes that there was a residential building on this

            property that contained four rent-regulated apartments and that, pursuant to a DOB order, the

            property was demolished in 2015. The building was evacuated after a gas explosion and fire that

            caused a partial collapse. A new mixed-use building was constructed on the site following the

            demolition.

             158525/2023 AVENUE SECOND OWNER LLC vs. NEW YORK STATE DIVISION OF HOUSING                              Page 1 of 5
             AND COMMUNITY RENEWAL
             Motion No. 001

                                                                           1 of 5
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                                                                                                  INDEX NO. 158525/2023
  NYSCEF DOC. NO. 34                                                                       RECEIVED NYSCEF: 03/11/2024

                    The central issue in this proceeding is petitioner’s contention that DOB improperly found

            that each of these rent-regulated apartments had seven rooms while petitioner contends that they

            had five rooms. The number of rooms is critical as that is how DHCR calculated the amount of

            the stipends that petitioner was required to pay to the prior tenants of these apartments.

                    The dispute was brought before the Rent Administrator (“RA”). The RA noted that

            petitioner filed an application on July 29, 2019 for DHCR related to these former tenants

            (NYSCEF Doc. No. 4). It observed that the demolished building “had five (5) stories and

            contained eight (8) Class A Units. At the time of the fire the subject four (4) apartments were

            subject to Rent Regulation” (id. at 1).

                    The RA concluded that “the owner is responsible for the payments of demolition stipends

            to the affected tenants pursuant to the Operation Bulletin 2009-1 and is not obligated to offer the

            subject tenants an apartment in the new building. Based upon the HUTS database and I-Cards,

            each of the 4 apartments had seven rooms. Therefore, the stipend amount payable to the tenants

            should be based upon [the] seven room count in accordance with Operational Bulletin 2009-1

            and RSC” (id. at 2).

                    Petitioner then brought a petition for administrative review (“PAR”). DCHR noted that

            while the owner contended that there were five rooms in each apartment, the tenants claimed

            there were seven rooms according to a DHCR database (NYSCEF Doc. No. 3 at 2). It observed

            that:

                    “OB 2009-1, which directly addresses demolition proceedings such as the one
                    herein, states that, when calculating stipends in cases such as this one, the number
                    of rooms in an apartment is to be determined based on registration with this Agency
                    (i.e., the number of rooms "as registered"). The Commissioner finds that all four
                    subject apartments are registered with this Agency as having seven rooms and have
                    never been registered as having any other room counts. Therefore, the RA correctly
                    found that stipends for the subject apartments must be calculated using seven rooms
                    per apartment, as reflected by the registrations for such apartments. The

             158525/2023 AVENUE SECOND OWNER LLC vs. NEW YORK STATE DIVISION OF HOUSING            Page 2 of 5
             AND COMMUNITY RENEWAL
             Motion No. 001

                                                          2 of 5
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                                                                                                    INDEX NO. 158525/2023
  NYSCEF DOC. NO. 34                                                                        RECEIVED NYSCEF: 03/11/2024

                   Commissioner further notes that I-Cards will not affect a room count for the
                   purposes of calculating stipends in cases such as this one when there is clear
                   evidence of the number of rooms registered and registration is how room count is
                   calculated in these cases pursuant to OB 2009-1 as explained above. It is noted that
                   registrations are made by the owner(s)” (id.).

                   Petitioner contends that this determination was arbitrary and capricious and observes that

            the precise number of rooms cannot be calculated because the former building was demolished.

            It maintains that DHCR’s imposition of a requirement that the number of rooms derive from the

            registration statement is improper under the State Administrate Procedure Act (“SAPA”). It

            argues that under SAPA, there should have been a notice and comment process and DHCR

            cannot implement a rule without abiding by this procedure. Petitioner insists that I-cards (cards

            used as part of inspections) are far more accurate and they should be considered here.

                   DHCR observes that it promulgated the relevant regulations (Operational Bulletin 2009-

            1) in February 2009 and that it established procedures for demolition applications. It claims that

            the Appellate Division, First Department has already found that these regulations (“OB 2009-1”)

            are valid and so its application here is permissible. It points out that I-cards are only available for

            buildings constructed prior to 1938 whereas relying on rent registrations is applicable to all

            regulated buildings, meaning the latter is a uniform standard.

                   The intervenor-respondents submit an answer in which they insist the PAR should be

            upheld (NYSCEF Doc. No. 32).

                   In reply, petitioner argues that even if DHCR did not have to follow SAPA, that does not

            mean that all portions of OB 2009-1 are proper.

            Discussion

                   “It is a long-standing, well-established standard that the judicial review of an

            administrative determination is limited to whether such determination was arbitrary or capricious

             158525/2023 AVENUE SECOND OWNER LLC vs. NEW YORK STATE DIVISION OF HOUSING              Page 3 of 5
             AND COMMUNITY RENEWAL
             Motion No. 001

                                                           3 of 5
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                                                                                                  INDEX NO. 158525/2023
  NYSCEF DOC. NO. 34                                                                       RECEIVED NYSCEF: 03/11/2024

            or without a rational basis in the administrative record and once it has been determined that an

            agency's conclusion has a sound basis in reason, the judicial function is at an end. Indeed, the

            determination of an agency, acting pursuant to its authority and within the orbit of its expertise,

            is entitled to deference and even if different conclusions could be reached as a result of

            conflicting evidence, a court may not substitute its judgment for that of the agency when the

            agency's determination is supported by the record” (Partnership 92 LP v State Div. of Hous. and

            Community Renewal, 46 AD3d 425, 428-29 [1st Dept 2007], affd 11 NY3d 859 [2008] [internal

            quotations and citations omitted]).

                     Here, the Court finds that DHCR’s determination was rational. The instant situation

            presents a unique set of circumstances. DHCR was tasked with calculating the number of rooms

            in apartments that had been previously demolished. It relied upon OB 2009-1 which provides

            that where an owner’s application relating to demolishing a building is granted, an owner may

            “Pay the tenant a stipend which shall be the difference between the tenant’s current rent and an

            amount to be calculated using the demolition stipend chart per room per month, multiplied by the

            actual number of rooms in the tenant’s housing accommodation, but no less than three rooms”

            (NYSCEF Doc. No. 13 at 4). The rooms are defined as the number of rooms that are registered

            (id.).

                     The Court observes that contrary to petitioner’s argument in the moving papers, the OB

            2009-1 is not a rule wherein SAPA’s procedures about rulemaking are applicable (128 Hester

            LLC v New York State Div. of Hous. & Community Renewal, 146 AD3d 706, 708 [1st Dept

            2017] [noting that “DHCR Operational Bulletin 2009–1 is not a ‘rule’ for purposes of the State

            Administrative Procedure Act”]).

             158525/2023 AVENUE SECOND OWNER LLC vs. NEW YORK STATE DIVISION OF HOUSING            Page 4 of 5
             AND COMMUNITY RENEWAL
             Motion No. 001

                                                          4 of 5
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                                                                                                     INDEX NO. 158525/2023
  NYSCEF DOC. NO. 34                                                                           RECEIVED NYSCEF: 03/11/2024

                    Petitioner’s revised argument in reply is that the Court should nevertheless require that I-

            cards, which are not available for every building, should be used; this is without merit. This

            Court’s role in an Article 78 proceeding is to consider whether DCHR’s decision was rational;

            the Court’s role is not to micromanage how DHCR calculates the number of rooms. As DHCR

            noted in its PAR decision, these registrations “are made by the owner” (NYSCEF Doc. No. 3 at

            2). DHCR’s position that it uses these registrations in order to create a uniform standard

            applicable to all buildings justifies their use here. Here, there is no dispute that petitioner filed

            the registrations, the registrations stated each of these apartments had seven rooms, and they

            were never registered as having any other room count.

                    To the extent that petitioner claims in reply that a hearing is required, that request is

            denied as it was raised for the first time in reply.

                    Accordingly, it is hereby

                    ADJUDGED that the petition is denied and this proceeding is dismissed without costs or

            disbursements.

                    3/11/2024                                                             $SIG$
                      DATE                                                        ARLENE P. BLUTH, J.S.C.
             CHECK ONE:                X   CASE DISPOSED                   NON-FINAL DISPOSITION

                                                                                                    □
                                           GRANTED          X   DENIED     GRANTED IN PART              OTHER

             APPLICATION:                  SETTLE ORDER                    SUBMIT ORDER

                                                                                                    □
             CHECK IF APPROPRIATE:         INCLUDES TRANSFER/REASSIGN      FIDUCIARY APPOINTMENT        REFERENCE

             158525/2023 AVENUE SECOND OWNER LLC vs. NEW YORK STATE DIVISION OF HOUSING              Page 5 of 5
             AND COMMUNITY RENEWAL
             Motion No. 001

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