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Supreme Court, Appellate Division, First Department, New York.

IN RE: 370 MANHATTAN AVE. CO., L.L.C., Petitioner-Appellant, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent-Respondent, Winnie Stanton, et al., Intervenors-Respondents.

Decided: October 21, 2004

TOM, J.P., SULLIVAN, WILLIAMS, LERNER, SWEENY, JJ. Sidrane & Schwartz-Sidrane, LLP, Hewlett (Karen Schwartz-Sidrane of counsel), for appellant. Marcia P. Hirsch, New York (Louis A. Novellino of counsel), for New York State Division of Housing and Community Renewal respondent. David W. Weschler, The Legal Aid Society, New York (Kamber L. Brisbane of counsel), for respondents.

Judgment (denominated an order), Supreme Court, New York County (Debra A. James, J.), entered July 2, 2003, which dismissed the petition brought pursuant to CPLR article 78 to annul a determination of respondent Division of Housing and Community Renewal (DHCR) denying petitioner major capital improvement (MCI) rent increases, unanimously affirmed, without costs.

 Due process did not require DHCR to give petitioner prior notice that it was reopening the matter;  it merely required DHCR to notify petitioner of the reopening and give it an opportunity to respond (see Matter of Dowling v. New York State Div. of Hous. & Community Renewal, 249 A.D.2d 181, 183, 672 N.Y.S.2d 105 [1998], lv. denied 93 N.Y.2d 802, 687 N.Y.S.2d 626, 710 N.E.2d 273 [1999] ).   Petitioner had ample opportunity to be heard in the reopened proceeding.

Petitioner's argument that DHCR acted ultra vires in violation of State Administrative Procedure Act § 203, raised for the first time in its reply papers on appeal, is unpreserved and will not be considered (see e.g. Gregory v. Town of Cambria, 69 N.Y.2d 655, 656-657, 511 N.Y.S.2d 829, 503 N.E.2d 1366 [1986];  Lumbermens Mut. Cas. Co. v. Morse Shoe Co., 218 A.D.2d 624, 626, 630 N.Y.S.2d 1003 [1995] ).

 Petitioner's contention that DHCR violated Policy Statement 90-8 is unavailing.   The agency has discretion to either deny an MCI application or grant it conditionally (see Matter of Residential Mgt. v. Div. of Hous. & Community Renewal, 234 A.D.2d 154, 651 N.Y.S.2d 32 [1996], lv. denied 90 N.Y.2d 805, 661 N.Y.S.2d 831, 684 N.E.2d 281 [1997] ).   Petitioner's argument that it is arbitrary and capricious for DHCR not to explain when it will grant an application conditionally (i.e. what criteria it uses) is improperly raised for the first time in its reply papers on appeal (see Gregory, supra;  Lumbermens, supra ).

 Petitioner's claim that DHCR Policy Statement 90-8 required an inspection in January 2000 and/or May 2001 is unavailing.   The agency has discretion to decide if an inspection is necessary (see generally Matter of Merit Mgt. LLC v. New York State Div. of Hous. & Community Renewal, 278 A.D.2d 178, 718 N.Y.S.2d 336 [2000] ).

 Petitioner's argument that the agency could not consider violations after the date of its MCI application is without merit.  Rent Stabilization Code (9 NYCRR) § 2522.4(a)(13) clearly states that DHCR may consider violations through the date the application is determined.   The instant proceeding was properly reopened due to “irregularity in vital matters” (9 NYCRR § 2527.8;  see Matter of Atkinson v. Div. of Hous. & Community Renewal, 280 A.D.2d 326, 327, 720 N.Y.S.2d 463 [2001] );  hence, petitioner's application was pending until June 8, 2001, when the Rent Administrator denied it.   Finally, the existence of violations during the administrative review process is also relevant (see Matter of 251 W. 98th St. Owners, L.L.C. v. New York State Div. of Hous. & Community Renewal, 276 A.D.2d 265, 713 N.Y.S.2d 729 [2000] ).   This is consistent with the policy of the rent laws (see Matter of Rubin v. Eimicke, 150 A.D.2d 697, 698, 541 N.Y.S.2d 570 [1989], lv. denied 75 N.Y.2d 704, 552 N.Y.S.2d 109, 551 N.E.2d 602 [1990] ).

 DHCR's denial of petitioner's MCI application has a rational basis in the record and, hence, is neither arbitrary nor capricious (see e.g. Residential Mgt., 234 A.D.2d at 155, 651 N.Y.S.2d 32).   The agency was entitled to rely on reports of the New York City Department of Housing Preservation and Development (HPD) showing “C” (immediately hazardous) violations at the premises (see, e.g., Matter of Weinreb Mgt. v. New York State Div. of Hous. & Community Renewal, 295 A.D.2d 232, 744 N.Y.S.2d 321 [2002] ).   It was petitioner's burden to prove that all such violations had been removed (id.).   While petitioner cured many of the “C” violations listed in the May 2001 HPD report, it did not prove that it had cured all of them.

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