Rent Reform Applies to All Pending Cases

[consigliere]

This article, by John Caher, appears in the November 22nd online edition of the New York Law Journal:
 
Rent Reform Applies to All Pending Cases
 
New York's highest court Thursday unanimously held that the Rent Regulation Reform Act of 1997 applies in every respect to all pending fair-market cases.
 
But Matter of Gilman v. New York State Division of Housing and Community Renewal, 133, divided the Court of Appeals over whether bureaucrats in this case properly used new evidence to reverse their initial determination.
 
The long-running Matter of Gilman, a case that has been watched closely by the real estate bar, centered ultimately on the issue of whether the Division of Housing and Community Renewal (DHCR) acted properly when it allowed a landlord to submit new data on comparative rents. On that issue, the Court split 4-3.
 
The case began more than a decade ago, when Anne Gilman moved into a Manhattan apartment that was in the process of being converted from a rent-controlled to a rent-stabilized unit. One month after moving in, Gilman challenged the $2,075 monthly rent by lodging a Fair Market Rent Appeal with DHCR. More than three years passed until DHCR set the initial rent at $1,011 per month and directed the landlord to refund over $50,000 in excess rent.
 
Five more years passed before DHCR decided the landlord's appeal, reversed itself and decided that Gilman owed an additional $47,000 in back rent. In the interim, the Rent Regulation Reform Act of 1997 (RRRA), which governs the way rental histories are utilized in the adjudication of overcharge complaints, was enacted.
 
Supreme Court rejected the DHCR ruling and reinstated the order of the rent administrator because of the "extreme" delay in resolving the matter.
 
The Appellate Division, First Department, reversed in a 3-2 ruling that said the DHCR determination was rational and valid. Thursday, the Court of Appeals reversed in a 4-3 opinion.
 
In the prevailing opinion, Judge Richard C. Wesley was critical of the lengthy delay in addressing the matter and said DHCR's decision to reopen the record and consider new comparability data was improper absent "any showing that this owner could not have earlier provided that information."
 
"The acceptance of new evidence on appeal is generally contrary to appellate practice simply because it is unfair to allow a party, on appeal, to rewrite the factual record in the proceeding," Judge Wesley wrote. The majority said that even though the RRRA changed the admissibility standards for comparable rents in a Fair Market Rent Appeal, it did not eliminate the sufficiency requirements at the administrative level.
 
"Agencies are required to abide by their own regulations," Judge Wesley wrote. "[D]HCR acted irrationally in accepting the new comparability data without any showing that the change in the law affected the owner's ability to provide that data."
 
Also in the majority were Chief Judge Judith S. Kaye and Judges George Bundy Smith and Carmen Beauchamp Ciparick. Judge Victoria A. Graffeo dissented in an opinion joined by Judges Howard A. Levine and Albert M. Rosenblatt.
 
In dissent, Judge Graffeo acknowledged that "the RRRA did change the rules midstream." However, she said that since the new law applies to all pending proceedings, the Court should have granted DHCR "appropriate deference in fashioning procedures to respond."
 
Robert E. Levy of Manhattan argued for Gilman, and Sheldon Melnitsky of Manhattan represented DHCR.
 
Levy said Thursday the narrowly drawn decision "means the automatic re-openings that DHCR has done without cause are no longer possible. It means they have to have a showing that evidence was previously unavailable for some reason. I would obviously prefer that it be much broader, but the idea is to win and we did that."
 
Melnitsky was not immediately available for comment.
 

[mjr203]

what does the end result mean for that particular tenant? was her rent reset to the lower level?

[consigliere]

This is how the majority opinion concluded:
 
In this case, the rules were changed in midstream -- a journey that was excruciatingly and unnecessarily long. DHCR's view of the 1997 statute would impose a $47,000 judgment against Gilman (who has vacated the apartment) in favor of an owner that chose not even to appear in this article 78 proceeding. The new statute cannot rationally be construed to allow the owner in this case to have a second chance at establishing comparable rents without showing that it could not have provided the requisite evidence at the earlier proceeding. DHCR seeks to extend the intended sweep of the RRRA so far as to extinguish the sound policy basis of the good cause requirement for new data at a PAR. Thus, on remand, the agency should require the owner to show good cause prior to reviewing its comparability data.
 
Accordingly, the order of the Appellate Division should be reversed, with costs, and the matter remitted to Supreme Court with directions to remand to the Division of Housing and Community Renewal for further proceedings in accordance with this opinion.
 

[NYHawk]

Here's where the complete case can be found. Go to the URL, pick the option "search by word" and type in DHCR. New York Slip Opinion Service

<small>[ November 22, 2002, 09:47 PM: Message edited by: NYHawk ]</small>

[configdotsys]

I have no idea what any of the above means.

Is this decision good for the tenant or not?

[consigliere]

The decision will probably be good for this particular tenant, whose rent will most likely be restored to $1,011 (the amount originally set by DHCR), plus the applicable Rent Guidelines Board increases, instead of by using the rents of comparable apartments.
 
However, the decision is bad for tenants in general, because the four-year rule will now apply to Fair Market Rent Appeals (FMRAs), as well as to ordinary rent overcharge cases.
 
You can read the full text of the decision in Matter of Gilman v. New York State Division of Housing and Community Renewal for more information.