GUN HILL ASSOCIATES LLC, Petitioner-Landlord, v. Aryam MARTINEZ, Respondent-Tenant.
Recitation, as required by C.P.L.R. § 2219(a), of the papers considered in review of this motion.
Notice of Motion with Affirmation [With Exhibits A-C] 1
Affirmation in Opposition & Memorandum Annexed [With Exhibit A] 2
Reply Affirmation 3
After oral argument held on December 15, 2020, and upon the foregoing cited papers, the decision and order on this motion is as follows:
FACTUAL AND PROCEDURAL HISTORY
This is a nonpayment proceeding commenced by Gun Hill Associates LLC, (“petitioner”), against Aryam Martinez, (“respondent”), seeking possession of 250 East Gun Hill Road, Apt. 4J, Bronx, NY 10467, (“the subject premises”), for unpaid rental arrears. The petition seeks monthly rent of $1,425.00 from August 2017 through March 2018 and a monthly rent of $1,460.00 from April 2018 through December 2018.1
Paragraph seven (7) of the petition states that the subject premises are not rent stabilized because “the subject premises became vacant after June 19, 1997 and the legal rent was in excess of $2,000.00 per month.”2
Petitioner alleges that the free market rents for the subject premises during the relevant times were $2,747.67 and $2,782.02, respectively, but that respondent was given a monthly “rent credit,” resulting in the above lower monthly rent sought in the petition.3
On June 14, 2019, the 2019 Housing Stability and Tenant Protection Act (“HSTPA”) became effective. Part F of the HSTPA made sweeping changes to provisions of the law affecting overcharge claims, including allowing such claims to “be filed at any time.” (2019 McKinney's Session Law News of NY, Ch. 36 at Part F, § 6 [June 2019] [amending CPLR § 213-a]). Significantly, Part F, § 7 holds that “this act shall take effect immediately and shall apply to any claims pending or filed after such date.” (see Dugan v London Terrace Gardens, LP, 186 AD3d 12, 18 [1st Dept 2020]).
Given these sweeping changes to the law, this court, applying the HSTPA, first granted respondent's motion to amend her answer to include an overcharge defense and counterclaim,4 and later granted her motion for discovery on her overcharge claim and to rebut petitioner's claims that the subject premises were deregulated.5
On April 2, 2020, the Court of Appeals issued its decision in Matter of Regina Metro. Co. LLC v New York State Div. of Hous. & Community Renewal, which holds that retroactive application of Part F of the HSTPA is unconstitutional. (35 NY3d 332 ).
Petitioner now seeks renewal of both of this court's prior decisions based on the change in the law stated in Regina Metro.
Given this court's reliance on Part F of the HSTPA in rendering its prior decisions, and the Court of Appeals’ decision in Regina Metro., petitioner's motion to renew must be granted, the decision and order granting leave to file an amended answer is modified, and the decision and order granting petitioner discovery is reversed.
A “motion for leave to renew is the appropriate vehicle for seeking relief from a prior order based on a change in the law,” (Dinallo v DAL Elec., 60 AD3d 620, 621, 874 NYS2d 246 [2nd Dept 2009]), and such motion “will be granted if the movant demonstrates that there has been a change in the law or an intervening clarification of the law that would change the prior determination.” (Petty v Dumont, 2010 NY Misc. LEXIS 3590, *6, 2010 NY Slip Op 32032[U] [Sup Ct, New York County 2010]; citing Roundabout Theatre Co. v Tishman Realty & Constr. Co., 302 AD2d 272, 272, 756 NYS2d 12 [1st Dept 2003]; Puello v City of New York, 118 AD3d 492, 492, 987 NYS2d 141 [1st Dept 2014] (“court properly granted renewal pursuant to CPLR 2221 (e) (2), based on the Court of Appeals decision which provided a clarification of the decisional law”).
“Renewal may be granted in the court's discretion, in the interest of justice” (Eddine v. Federated Dep't Stores, Inc., 72 AD3d 487, 487, 899 NYS2d 164 [1st Dept 2010]).
Petitioner argues that the court's orders were based upon the retroactive application of Part F of the HSTPA which, among other things, amended relevant law to allow an overcharge claim to be filed at any time, and imposes no time limit on how far back courts can look to determine whether an overcharge has occurred.
According to petitioner, renewal under CPLR § 2221(d)(2) is appropriate considering the Court of Appeals’ decision in Matter of Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal, which held that retroactive application of Part F of the HSTPA was unconstitutional. (35 NY3d 332, 349-350, 130 NYS3d 759 ).
Under Regina Metro., for overcharge claims that occurred pre-HSTPA, the four-year look-back period for overcharge and overcharge calculations should apply. Petitioner argues that under prior law, respondent's overcharge defense must be stricken as without merit and her related discovery motion must be denied.
In opposition, respondent acknowledges petitioner's interpretation of Regina Metro. but argues that petitioner's motion to renew must be denied because Regina Metro. does not bar discovery beyond four years on the issue of unlawful deregulation.
Respondent also argues that Regina Metro. has no effect on the Court of Appeals’ prior ruling in Matter of Grimm v State of New York Div. of Hous. & Community Renewal Off. of Rent Admin., which allows the court to look beyond the four-year look back period where a colorable claim of fraud is established. (5 NY3d 358, 912 NYS2d 491 ).
In reply, petitioner argues that respondent's motion for discovery was based upon the overcharge claim in her answer, not improper deregulation.
HSTPA, Part F Amendments & Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal, 35 NY3d 332, 349-350, 130 NYS3d 759 
In Regina Metro., the Court of Appeals acknowledged that, prior to the HSTPA, “the RSL mandated that, absent fraud, an overcharge was to be calculated by using the rent charged on the date four years prior to filing of the overcharge complaint (the ‘lookback period’) as the ‘base date rent,’ adding any legal increases applicable during the four-year lookback period and computing the difference between that legal regulated rent and the rent actually charged to determine if the tenant was overcharged during the recovery period. In such cases, consideration of rental history predating the four-year lookback and statute of limitations period was prohibited.” (35 NY3d at 348.)
Although the court found that Part F of the HSTPA was intended to apply to pending cases where the overcharge calculation had not been decided at the time the HSTPA was enacted — cases like the instant proceeding (see Id. at 374) — such application could not pass constitutional muster.
Because, under prior law, owners were only required to “maintain and produce” records regarding rental increases for “ ‘four years prior to the most recent registration or annual statement for such accommodation’ (former RSL § 26-516[g]; see RSC § 2523.7[b],” and were not “ ‘required to produce any rent records in connection with (overcharge) proceedings ․ relating to a period that is prior to the base date’,” (Id at 353), applying Part F of the HSTPA to overcharge claims that accrued under prior law would greatly prejudice owners. (see also 3225 Holdings LLC v Imeraj, 65 Misc 3d 1219[A] at *3-4, 119 NYS3d 392 [Civ Ct, Bronx County 2019], wherein this court applied the HSTPA, Part F, in granting discovery but cautioned that “it would be patently unfair, unreasonable and prejudicial to petitioner to have to justify rent increases taking place up to 33 years ago when they, and prior owners, were under no obligation to maintain records relating to those increases.”).
The court found that “[r]ather than serving any of the policy goals of rent stabilization (which it would not), retroactive application of the overcharge calculation amendments would merely punish owners more severely for past conduct they cannot change — an objective we have deemed illegitimate as a justification for retroactivity.” (Id. at 384 [internal citations omitted]).
As such, the Court of Appeals concluded that retroactive application of the Part F amendments of the HSTPA was improper and such overcharge claims are to be resolved under the prior law. (Id. at 386.)
AMENDING THE ANSWER
Given the holding in Regina Metro., it is now clear that the alleged overcharge, which occurred prior to the enactment of the HSTPA, must be analyzed pursuant to the prevailing law at the time, and not under the Part F amendments.
In her proposed amended answer, respondent alleges that the legal rent for the subject apartment was registered as $955.47 in 2010, and subsequently registered at $1,911.53 the following year. Because the rent more than doubled, respondent concludes that she has been overcharged.6 Respondent makes no further claims or allegations regarding the alleged overcharge.
This court must therefore determine whether, under the prior law, respondent's proposed affirmative defense of rent overcharge has merit, as the law is clear that proposed defenses which “plainly lack merit” should be denied. (see Ollie Assoc. LLC v Santos, 64 Misc 3d 1208[A] at *2, 116 NYS3d 865 [Civ Ct, Bronx County 2019], citing Thomas Crimmins Contracting Co. v New York, 74 NY2d 166, 170, 544 NYS2d 580 ).
Under the prior law, “overcharge claims were subject to a four-year statute of limitations that precluded the recovery of overcharges incurred more than four years preceding the imposition of a claim” and “ ‘no determination of an overcharge and no award or calculation of an award of the amount of an overcharge may be based upon an overcharge having occurred more than four years before’ initiation of the claim.” (Matter of Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal, 35 NY3d at 353-353) [internal citations omitted].
Furthermore, “ ‘examination of the rental history of the housing accommodation prior to the four-year period preceding’ commencement of the overcharge action” was generally precluded under prior law. (Id. at 353 [internal citations omitted]; see also Thornton v Baron, 5 NY3d 175, 180, 800 N.Y.S.2d 118 ).
“Together, the statute of limitations, lookback provision and record retention rules formed an integrated scheme for calculating overcharges based on a closed universe of records pertaining only to the apartment's rental history in the four years preceding the filing of the complaint.” (Id. at 353).
To determine whether an overcharge occurred under the prior law, one must look at the base rent, the legal regulated rent four years prior to the overcharge claim, plus any subsequent lawful increases. (Id. at 353). The base rent would either be the rent indicated on the annual registration statement or, if the owner is no longer required to file same because the apartment was deregulated more than four years prior to the overcharge complaint, “the rent actually charged on the base date — i.e., four years prior to the overcharge complaint — even if no registration statement had been filed reflecting that rent.” (Id. at 354) (“[W]here [the] apartment had been deregulated more than four years prior to the filing of an overcharge complaint, and the tenant failed to promptly challenge the deregulated status of the apartment, there might be no rent registration on file for the base date or, indeed, any time within the four-year lookback period.” Id. at 354).
Here, the proposed overcharge claim was filed in May 2019.7 As such, the base date is four years prior, or May 2015. Pursuant to the DHCR apartment registration history for the subject premises, the legal rent for the apartment was registered as $2,340.19 on July 23, 2014 and registered as exempt on June 11, 2015.8
While the base date of May 2015 falls between the two registration dates, calculation of the rent using either base date yields the same result. Using the base date of June 2015, the court's analysis begins and ends with the fact that the apartment was already exempt for high rent. Respondent therefore cannot make out a meritorious claim for an overcharge as her apartment was a market rate unit as of the base date. (see Id. at 357) (“In overcharge cases where tenants had not challenged the status of their apartments within four years of deregulation, the improper deregulation predated the lookback period and, thus, the rent charged on the ‘base date’ was a free market rent that had not been registered.”).
Even using the base date of July 2014, with a base rent of $2,340.19, respondent's overcharge claim has no merit. The apartment registration shows the apartment as vacant in 2014 and 2015. Petitioner thereafter took an 18% vacancy increase for one year. An 18% increase from $2,340.19 (or $243.02), yields a new rent of $2,574.21. According to DHCR's Historical Deregulation Rent and Income Thresholds,9 if the rent for a rent stabilized apartment at that time was $2,500.00 or more, the apartment could be properly deregulated. As such, the vacancy increase in 2015 was sufficient to deregulate respondent's apartment.
Although the pre-Regina fraud exception to the four-year lookback rule still exists, respondent has made no such claim in her answer. (see Id. at 354) (There remains a “limited common-law exception to the otherwise-categorical evidentiary bar, permitting tenants to use such evidence only to prove that the owner engaged in a fraudulent scheme to deregulate the apartment.”).
Respondent's overcharge claim rests solely on the allegation that the rent for the apartment “more than doubled” in 2010.10 Indeed, the answer does not hint at fraud, much less allege specific indicia thereof. Because “a mere allegation of fraud alone, without more, will not be sufficient to require DHCR to inquire further” (Grimm v State Div. of Hous. & Community Renewal, 15 NY3d 358, 367, 912 NYS2d 491 ), and because a significant rent increase alone is insufficient indicia of a fraudulent scheme (see Matter of Boyd v New York State Div. of Hous. & Community Renewal, 23 NY3d 999, 2014 NY Slip Op 04806 ), the court cannot look beyond the four-year period to determine whether respondent's overcharge claim has merit.
Given the foregoing, upon renewal, petitioner's motion seeking reversal of the court's July 3, 2019 Decision and Order, to the extent that the court allowed respondent to interpose the affirmative defense of a rent overcharge, is granted. As this court previously found that the proposed laches defense also lacked merit, the court now modifies its July 3, 2019 Decision and Order to hold that the respondent is allowed to amend her answer solely to the extent of interposing the breach of the warranty of habitability defense and counterclaim and her defense of failure to receive the alleged oral rent demand.
“To justify disclosure, a movant must demonstrate ‘ample need’ for a claim or defense. Requests for disclosure should be carefully tailored to obtain information necessary to a tenant's defenses or counterclaims.” (Smilow v Ulrich, 11 Misc 3d 179, 182, 806 NYS2d 392 [Civ Ct, New York County 2005] [emphasis added], citing New York Univ. v Farkas, 121 Misc 2d 643, 647, 468 NYS2d 808 [Civ Ct, NY County 1983]).
Courts will consider several factors in determining whether the “ample need” standard is met, including “whether the party seeking discovery has asserted facts to establish a claim or defense” and “whether there is a need to determine information directly related to the claim or defense ․” (Mautner-Glick Corp. v Higgins, 64 Misc 3d 16, 18-19 [App Term, 1st Dept 2019] [emphasis added], citing New York Univ. v Farkas, 121 Misc 2d at 647).
Here, respondent has not alleged either a claim or defense of improper deregulation.
Respondent's proposed amended answer does not iterate any sort of claim or defense of improper deregulation. In fact, even her motion seeking leave to amend fails to mention improper deregulation of her apartment. Respondent merely alleges an overcharge claim due to the large jump in the registered rent in 2010.11
The only reference in respondent's proposed amended answer that can be remotely construed as referring to improper deregulation is in Paragraph 4, which states that “Respondent denies the allegations contained in paragraphs 4, 5, 6, 7, and 8 of the petition.”12 As paragraph 7 of the petition alleges that the premises are not subject to rent regulation, the most respondent has done is deny petitioner's claim that the apartment is not subject to rent stabilization.13 Respondent has not, however, alleged any defense, affirmative defense, objection in point of law, or counterclaim that the apartment was improperly deregulated.
Indeed, the first time respondent ever even makes a reference to the apartment being improperly deregulated is in her discovery motion, where she alleges that discovery is required to “prove her claim of overcharge and unlawful deregulation.” In the memorandum in support of her discovery motion, respondent alleges, for the first time, that she has “asserted facts that show that Petitioner has created significant doubt that the subject apartment was lawfully deregulated,” and that petitioner “engaged in a scheme to unlawfully deregulate the subject apartment.” However, these belated claims aside, the proposed amended answer contains no such allegations.
Under these circumstances, it cannot be said that respondent has ample need for information necessary to any claim or defense raised by her. Although this court has previously held in its January 28, 2020 Decision and Order that respondent was entitled to discovery on the proper deregulation of the subject premises because petitioner must prove same as part of its prima facie case at trial, upon renewal, the court reconsiders and reverses this prior holding.
Respondent has not established ample need for discovery for something that petitioner must prove at trial as part of its prima facie case. (see Diagonal Realty, LLC v Linares, 70 Misc 3d at *2). The discovery requested is not directly related to a claim or defense interposed by the respondent. (see Smilow v Ulrich, 11 Misc 3d at 185-186).
Indeed, the law is clear that “while the burden of demonstrating ‘ample need’ for discovery related to a cause of action is necessarily lower than prevailing on a cause of action at trial, discovery in a summary proceeding should not be permitted for the purposes of formulating a cause of action or a defense to an action.” (699 Venture Corp. v Zuniga, 69 Misc 3d 863, 873, 133 NYS3d 191 [Civ Ct, Bronx County 2020], citing New York Univ. v Farkas, 121 Misc 2d at 647) “Indeed it is possible, ‘even without discovery’ to ‘adequately allege[ ] a misrepresentation or failure to disclose a material fact, falsity, scienter, justifiable reliance and damages’ ” (699 Venture Corp. v Zuniga, 69 Misc 3d at 873, citing Kaufman v Cohen, 307 AD2d 113, 121, 760 NYS2d 157 [1st Dept 2003]).
Given the foregoing, respondent's motion for discovery, predicated entirely on her overcharge claim and her belated allegation of improper deregulation, is denied in its entirety.14
Based on the foregoing, it is So Ordered, that petitioner's motion to renew and to modify court's prior orders dated July 3, 2019 and January 28, 2020 is granted to the extent that respondent's request for leave to interpose an affirmative defense and counterclaim of rent overcharge and respondent's request for leave to conduct discovery from 2010 to present are both denied. This constitutes the decision and order of the court. A copy will be sent by email to the parties. The parties will receive email notification of a date and time for a virtual appearance in Part F.
1. See Petition.
2. See Id.
3. See Exhibit A to petitioner's opposition to respondent's discovery motion.
4. See Decision and Order dated July 3, 2019
5. See Decision and Order dated January 8, 2020.
6. See Proposed Amended Answer at Par. 11-13.
7. See Proposed Amended Answer.
8. See DHCR apartment registration history.
9. See https://hcr.ny.gov/system/files/documents/2018/10/deregulationrentincomethreshold.pdf & https://hcr.ny.gov/system/files/documents/2020/11/fact-sheet-36-02-2020.pdf.
10. See Proposed Amended Answer at Par. 11-13.
11. See Proposed Amended Answer at Par. 11-13.
12. Id at Par. 4.
13. See Exhibit A to respondent's motion for leave to amend.
14. These major shifts in the law have led to similar reversals. For example, the Appellate Division, First Department, in Fuentes v Kwik Realty LLC (186 AD3d 435 ) held, in accordance with Regina Metro., that while a “rental history may be examined beyond four years to determine rent-stabilized status, it may not be used for the purpose of calculating an overcharge” unless the claimant puts forth “sufficient indicia of fraud.” In doing so, the Appellate Division had to recall and vacate its own prior Decision and Order. In that prior Decision and Order (178 AD3d 451 [Dec 3, 2019]), the court, applying the recently passed HSTPA, held a “[r]ental history may be examined beyond four years to determine rent-stabilized status, as well as for the purpose of calculating an overcharge.” That December 2019 Decision itself recalled and vacated the court's prior Decision and Order of July 30, 2019 (174 AD3d 483).
Shorab Ibrahim, J.
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