IN RE: 186 NORFOLK LLC (2026)

.2025–06093

2025–05745

.

Kucker Marino Winiarsky & Bittens, LLP, New York (Ray Madraymootoo of counsel), for appellant.

Mark F. Palomino, New York State Division of Housing and Community Renewal, New York (Dawn Ivy Schindelman of counsel), for respondent.

Judgment (denominated an order), Supreme Court, New York County (Verna L. Saunders, J.), entered on or about July 14, 2025, denying the petition to annul the July 12, 2024 determination of respondent New York State Division of Housing and Community Renewal (DHCR), which denied petitioner the right to charge a first market rent upon its petition for administrative review, and dismissing the proceeding brought pursuant to CPLR article 78, unanimously affirmed, without costs.

Judgment (denominated an order), Supreme Court, New York County (Arthur F. Engoron, J.), entered April 16, 2025, denying the petition to annul the July 11, 2024 determination of respondent DHCR which denied petitioner the right to charge a first market rent upon its petition for administrative review, and dismissing the proceeding brought pursuant to CPLR article 78, unanimously affirmed, without costs.

The determinations were not arbitrary and capricious or affected by an error of law (CPLR 7803[3];  see Matter of Pell v Board of Educ. 0f Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 N.Y.2d 222, 231 [1974] ).  The Rent Stabilization Code “provides no ‘first rent’ mechanism,” such that the ability for landlords to charge a first rent “is only an administratively created policy” (Matter of Devlin v New York State Div. of Hous. & Community Renewal, 309 A.D.2d 191, 193 [1st Dept 2003], lv denied 2 NY3d 705 [2004], citing Matter of 300 W. 49th St. Assoc. v New York State Div. of Hous. & Community Renewal, Off. of Rent Admin., 212 A.D.2d 250, 253 [1st Dept 1995] ).  As applicable here, DHCR's Operational Bulletin 95–2 provides two avenues by which DHCR “may” find that a “first rent” is appropriate — either where the owner “significantly changes the perimeter and dimensions of an existing housing accommodation” or where the owner “creates a housing accommodation in space previously used for nonresidential purposes.”

Under the first method, DHCR rationally concluded that taking 20 square feet from a common area hallway and adding it to the subject units' bathrooms did not effect a “reconfiguration plus obliteration of the prior apartment's particular identity” (Matter of Devlin, 309 A.D.2d at 194;  cf.  Dixon v. 105 W. 75th St. LLC, 148 AD3d 623, 628 [1st Dept 2017] [allowing first rent where the landlord added “a penthouse ․ attached to the existing apartment with a staircase”] ).  DHCR rationally found the change to be minimal, given appellate court decisions finding larger additions insufficient to warrant a first rent (see Matter of Devlin, 309 A.D.2d at 192–193 [removal of 86 square feet from bedroom];  Roker Realty Corp. v. Gross, 163 Misc.2d 766, 767–768 [App Term, 1st Dept 1995] [“enlargement of the apartment's outer walls by the inclusion of a closet” from neighboring unit] ).

Under the second method, DHCR rationally concluded that the 20 square feet, in which petitioner placed a washing machine, did not create a housing accommodation, regardless of whether the hallway qualified as space previously used for nonresidential purposes (see Matter of LL 410 E. 78th St. LLC v Division of Hous. & Community Renewal, 44 NY3d 232, 237 [2025] ).  Petitioner's argument, that the addition of the laundry area to the preexisting apartments created new apartments in previously nonresidential space, is misguided.

We have considered petitioner's remaining contentions and find them unavailing.