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Similis Mngt LLC v. Dzganiya

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Similis Mngt LLC v. Dzganiya

Postby TenantNet » Sun Nov 19, 2017 1:03 pm

Tags: discovery, overcharge

Summary: Tenant Granted Leave to Amend Answer, Conduct Discovery for Overcharge Claim

Citation:

Notes:

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Similis Mngt LLC v. Dzganiya
Court: Civil Court, New York
Attorneys for plaintiff Landlord-Petitioner: Kucker & Bruh, LLP.;
Attorneys for defendant Tenant-Respondent: Michael Pereira, of counsel to Jeanette Zelhof, Esq., Mobilization for Justice, Inc.
Judge: Judge John Stanley
Docket Number: 70345/16

Case Digest Summary

Petitioner sought to recover the subject premises from tenant for nonpayment of rent. Tenant moved to amend the answer, and conduct discovery alleging rent overcharge. The court found tenant presented a colorable claim of overcharge not discovered until preparing for trial, stating the matter would be addressed in the interest of judicial economy as petitioner was not significantly prejudiced. The amended answer raised claims asserting landlord engaged in a fraudulent scheme to unlawfully increase the legal regulated rent, noting it filed false annual rent registrations with DHCR, obscuring the fact a vacancy lease increased rent by 74 percent over a three year period. Tenant sought to conduct discovery beyond the statutory four-year look-back period. The court noted while petitioner submitted invoices to substantiate an apartment increase exemption, they did not support such a large increase. As tenant established a colorable claim of a scheme to overcharge rent, motion to amend was granted, but the discovery was limited to 2009 - the expiry date of the former long-term tenant's lease with the base rent to be considered here.

Full Case Digest Text

Numbered
Notice of Motion and Affidavits Annexed 1,2-3
Affirmation in Opposition 18,19
Reply Affidavits/Affirmation 27
Exhibits 5-17,21-26, 29
Memorandum of Law 4, 20
Affidavit/Affirmation/Acknowledgment of Service
Sur-Reply Affidavits/Affirmation

DECISION/ORDER

Based on the foregoing cited papers, the Decision/Order on this motion is as follows: Petitioner Similis Management LLC (“the Petitioner”) seeks recovery of the premises at 31 Bennett Ave., Apt. 4, New York, New York (“the premises”) from Respondent Nino Szganiya (“the Respondent”) for non-payment of rent. Respondent moves to amend the answer and for leave to conduct discovery. Petitioner opposes.

Respondent seeks leave to amend her answer because between the court date of March 24, 2017 and in preparation for the trial date on May 16, 2017 Respondent first discovered that there was a rent overcharge that was previously unknown. Petitioner opposes the motion by stating that it lacks merit and is prejudicial. Permission to amend pleadings should be “freely given” CPLR 3025, subd [b]). The decision to allow or disallow the amendment is committed to the court’s discretion. (Murray v. City of New York, 43 NY2d 400, 404-405.) “Mere lateness is not a barrier to the amendment. It must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine.” (Siegel, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR 3025:5, p 477.) (Edenwald Contr. Co. v. New York, 60 NY2d 957, 959 [1983].) As below in the discussion of the request for discovery, Respondent has presented a colorable claim of rent overcharge that was not discovered by the Respondent until preparing for trial. Rather than Respondent commencing a separate action to litigate this claim, in the interest of judicial economy, the matter will be addressed in this proceeding. Petitioner is not significantly prejudiced because it has an opportunity to prepare its defense.

The amended answer raises claims alleging Petitioner engaged in a fraudulent scheme to unlawfully increase the legal regulated rent. Respondent seeks leave for discovery to prove the claim and seeks a look back period longer than the statutorily allotted 4 years. Petitioner opposes. Respondent asserts that Petitioner filed false annual rent registrations with the Dept. of Housing and Community Renewal (“the DHCR”) thereby obscuring the fact that a vacancy lease increased the rent by 74 percent over the span of the 3 years from 2010 through 2012. This obfuscation was achieved by Petitioner spreading the rent increase over 3 years on the DHCR annual rent registrations so as to make it appear as if there were lawful and somewhat gradual increases in rent.

According to Respondent, the scheme is as follows. The 2010 registration states the legal regulated rent is $863.49 for a lease that ends on July 31 of 2011. The rent registration for the following year of 2011 lists the premises as vacant and the rent increased from $863.49 to $1,243.42. This listed increase was posted despite the fact that that same year’s registration lists the premises as vacant with no tenant in residence and no lease in effect. In the following year of 2012, the DHCR rent registration filed by Petitioner lists the premises as vacant/lease with an inexplicable rent increase from $1,243.42 registered in 2011 to $1,500 registered in 2012. This 2012 registration states that there was a one year lease in effect that began in the previous year of 2011 on August 1 and ends on July 31, 2012. There is an inconsistency in these registrations spanning these three years. For example, among other things, the 2011 registration lists the apartment as vacant without a tenant or lease when it appears there were leases in effect. One lease expired on July 31, 2011 and the next lease commenced on August 1, 2011. Then, there is the unexplained increased in 2012 to arrive at a rent of $1,500.

In a summary proceeding in which a party moves for disclosure under CPLR 408, the pertinent criteria for consideration include: (1) whether the movant has asserted facts to establish a cause of action; (2) whether a need to determine information directly related to the cause of action has been demonstrated; (3) whether the requested disclosure is carefully tailored so as to clarify the disputed facts; (4) whether any prejudice will result; and (5) whether the court can fashion or condition its order to diminish or alleviate any resulting prejudice (New York Univ. v. Farkas, 121 Misc.2d 643, 468 N.Y.S.2d 808; see also, Plaza Operating Partners v. IRM [U.S.A.], Inc., 143 Misc.2d 22, 539 N.Y.S.2d 671). Here, Respondent established ample need by demonstrating a colorable claim that the annual rent registrations for 2010 through 2012 were improper along with the fact that there was a 74 percent increase in rent over 3 years. The indicia of this scheme is not based solely on the inordinate increase in rent over the three year period. It is also based on Petitioner’s DHCR registrations which are inconsistent on their face.

Courts have allowed for the lookback period to extend beyond the 4 years from the base date when there exists a colorable claim of fraud. Matter of Grimm v. State of NY Div. of Hous. & Community Renewal Off. of Rent Admin., 15 NY3d 358 (2010). Grimm makes clear that, in general, a mere increase in rent is insufficient to establish a colorable claim. There must be an indication of a fraudulent scheme to increase rents in violation of the Rent Stabilization Law. Merriam Webster dictionary defines scheme as “a plan or program of action; especially: a crafty or secret one.” Here, it is plausible that the 44 percent increase in rent registered in 2011 was the result of an apartment increase exemption (“AIE”) and a long-term tenant vacancy increase whereby the rent increased from $863.49 to $1,243.42. Petitioner does submit some of the invoices to substantiate an AIE increase but these invoices do not appear to support such a large increase. This alone may not be enough to substantiate a colorable claim of fraud under Grimm. However, in addition, Petitioner fails to explain the basis for an increase from $1,243.42 to $1,500 in the rent registration for the following year of 2012.

Petitioner also fails to submit any of the leases for this time period. Notably, the lease of Norigia Rodriguez that commenced on August 1, 2011 which set the legal regulated rent of $1,500 which could substantiate Petitioner’s claim of a proper legal regulated rent.

Respondent has established a colorable claim of a scheme to overcharge rent. However, Respondent’s request for a lookback period to 1992 is unreasonable and overly burdensome. In order to relieve Petitioner of prejudice, the discovery period shall commence on August 1, 2009 to the present. The look back begins on August 1, 2009 because that is the date of the expiration of the lease of the former long term tenant with a legal regulated rent of $863.49 and is the base rent to be considered here.

Respondent’s motion to amend the answer is granted and the answer is deemed timely filed. This proceeding is marked off calendar for discovery. Documents to be provided within 45 days and depositions to occur within 30 days of production of documents. Either party may restore by motion.

This constitutes the decision and order of the court.

Dated: October 3, 2017
New York, New York
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