Austin v. 25 Grove St. LLC

No.
2022-00716
Supreme Court of New York, Appellate Division, First Department
Austin v. 25 Grove St. LLC

Decided Feb 3, 2022
2022-00716 Index 155570/20 Beginning in May 2013, plaintiffs leased the

subject apartment at a monthly rent of $2, 950,
02-03-2022
increased to $2, 979.50 in June 2015. In 2014,
Maire Sheila Austin et al., Plaintiffs-Respondents- defendant's predecessor was receiving J-51 tax
Appellants, v. 25 Grove Street LLC, Defendant- benefits, but registered the apartment as "exempt"
Appellant-Respondent. Appeal No. 15228- due to "high rent vacancy" and based on
15228A No. 2021-03201 improvements, notwithstanding the 2009 ruling of
the Court of Appeals that rent-regulated
The Price Law Firm, LLC, New York (Joshua C.
apartments could not be removed from rent
Price of counsel), for appellant-respondent. David
stabilization while the building received J-51
Rozenholc & Associates, New York (Ellery
benefits (Roberts v Tishman Speyer Props., L.P.,
Ireland of counsel), for respondents-appellants.
13 N.Y.3d 270, 280 [2009]). In June 2015,
defendant's predecessor provided plaintiffs with a
The Price Law Firm, LLC, New York (Joshua C.
standard rent-stabilized renewal lease form, which
Price of counsel), for appellant-respondent.
contained a J-51 benefits rider stating that the
David Rozenholc & Associates, New York (Ellery apartment was rent stabilized as a result of the
Ireland of counsel), for respondents-appellants. building's receipt of J-51 benefits, which were set
to expire on or about June 30, 2018. In July 2020,
Before: Manzanet-Daniels, J.P., Webber, Oing, plaintiffs commenced this action.
Mendez, Higgitt, JJ.
The motion court correctly determined that
Order, Supreme Court, New York County (Phillip plaintiffs' apartment was subject to rent
Hom, J.), entered August 23, 2021, which denied stabilization and directed defendant to issue a
defendant landlord's motion for summary proper rent stabilized lease to them and to properly
judgment dismissing plaintiff tenants' rent register their tenancy with Division of Housing
overcharge claim and granted plaintiffs' cross and Community Renewal (DHCR). Although
motion for summary judgment declaring that the defendant contends that there was no need for
apartment is subject to rent stabilization, setting declaratory relief because it never denied that the
the legal base rent at $2, 500, and awarding rent apartment was subject to rent stabilization, it
overcharges and treble damages and attorneys' presented no evidence that it had offered plaintiffs
fees accordingly, unanimously modified, on the proper renewal leases under Rent Stabilization
law, to deny plaintiffs' motion as to the setting of Code (RSC) (9 NYCRR) § 2523.5 at any time
the legal base rent and the award of rent since 2015 or that it had taken steps to register the
overcharges, treble damages and attorneys' fees, apartment properly with DHCR.
and otherwise affirmed, without costs. Plaintiffs'
appeal unanimously dismissed, without costs, for
failure to perfect.
1
Austin v. 25 Grove St. LLC No. 2022-00716 (N.Y. App. Div. Feb. 3, 2022)
The parties agree that the court erred in setting the defendant's failure to provide proper rent-
legal regulated rent at $2, 500, which was the stabilized renewal leases raise questions of fact as
threshold for high rent deregulation between June to defendant's adherence to the rent stabilization
24, 2011 and June 24, 2015 (Rent Stabilization laws, summary judgment in plaintiff's favor based
Law [RSL] [Administrative Code of City of NY] on a finding of fraud is not warranted at this stage,
§ 26-504.2). For this reason, the calculation of rent given the parties' competing contentions as to the
overcharges is set aside. reasons for the discrepancies in the DHCR history
and questions of scienter (cf. Montera, 193 A.D.3d
To the extent plaintiffs seek to recover
at 107 ["Assumptions regarding the regulatory
overcharges that accrued before the enactment of
status of an apartment may amount to willful
the Housing Stability and Tenant Protection Act of
ignorance, which constitutes willful conduct"]
2019 (HSTPA), effective June 14, 2019, the
[internal quotation marks omitted]).
amendments to CPLR 213-a and Rent
Stabilization Law § 26-516 enacted under the Applying the pre-HSTPA law to the pre-HSTPA
HSTPA are not applicable (Matter of Regina overcharges, under the four-year lookback rule,
Metro. Co., LLC v New York State Div. of Hous. & there was no lease in effect and no rent history on
Community Renewal, 35 N.Y.3d 332, 386 [2020]). the base date of July 21, 2016. Under Rent
Plaintiffs are correct that, because defendant's Stabilization Code § 2523.5(c)(1), if an owner
predecessor provided them with a market-rate fails to offer a timely renewal lease, "the
lease claiming the apartment was deregulated in guidelines rate applicable shall be no greater than
2013, well after the Court of Appeals decided the rate in effect on the commencement date of the
Roberts v Tishman Speyer Props. (13 N.Y.3d at lease for which a timely offer should have been
280), defendant cannot claim reliance on DHCR made." The amount of overcharge, if any, during
guidelines when it deregulated the apartment (see the agreed-upon four-year look back period
Montera v KMR Amsterdam LLC, 193 A.D.3d beginning July 21, 2016, and through the present,
102, 105-106 [1st Dept 2021]). Nevertheless, cannot be determined on this record.
Regina Metro applies to this case insofar as it
As for treble damages, although "failure to timely
determined that Part F of the HSTPA governing
file annual disclosures with the DHCR cannot
rent overcharges cannot be applied retroactively to
support treble damages" (Corcoran v Narrows
overcharges that accrued before the enactment of
Bayview Co., LLC, 183 A.D.3d 511, 512 [1st Dept
the HSTPA.
2020]), the record is insufficient to resolve the
Plaintiffs argue that, regardless of whether the issue. Under the circumstances, the question of
HSTPA applies to any portion of its overcharge attorneys' fees should be determined with the
claim, the illegal conduct of defendant and their resolution of the overcharge claim.
predecessor warrants a finding of fraud as a matter
We have considered defendant's remaining
of law, permitting review of the entire rent history.
contentions and find them unavailing.
They cite to the initial improper offer of a market
rate lease during the period that the landlord was
receiving J-51 benefits, followed by an offer two
years later of a rent-stabilized renewal lease that
was not registered, and the failure to offer any
subsequent renewal lease and the registration of a
purportedly "fictitious" lease in 2018, which
defendant contends was merely an error. While
these irregularities in the DHCR rent history and
2
Austin v. 25 Grove St. LLC No. 2022-00716 (N.Y. App. Div. Feb. 3, 2022)

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Austin v. 25 Grove St. LLC

2022-00716 Index 155570/20 Beginning in May 2013, plaintiffs leased the

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