| Matter of 73 Warren St., LLC v State of N.Y. Div. of Hous. &Community Renewal |
| 2012 NY Slip Op 04820 [96 AD3d 524] |
| June 14, 2012 |
| Appellate Division, First Department |
| In the Matter of 73 Warren Street, LLC, Appellant, v Stateof New York Division of Housing and Community Renewal et al.,Respondents. |
—[*1] Gary R. Connor, New York (Martin B. Schneider of counsel), for State of New YorkDivision of Housing and Community Renewal, respondent. Law Office of Noel Dennis & Associates, New York (Noel Dennis of counsel), for VictorSchrager, respondent.
Judgment, Supreme Court, New York County (Judith J. Gische, J.), entered August 13, 2010,which denied the petition seeking to annul the determination of respondent State of New YorkDivision of Housing and Community Renewal (DHCR) denying petitioner's application toderegulate a rent-stabilized apartment pursuant to the high-income rent decontrol provisions, anddismissed the proceeding brought pursuant to CPLR article 78, unanimously affirmed, withoutcosts.
Petitioner is the owner of a residential building in which respondent Victor Schrager hasrented an apartment since 1984. The building was not rent regulated until 1977, at which time itbecame rent-stabilized when petitioner began to receive J-51 tax benefits. It is undisputed that nolease received by Schrager ever advised him that his apartment was subject to regulation whenthe tax benefits expired, which they did in 1990.
Petitioner commenced a high-rent/high-income decontrol proceeding before DHCR, in whichit requested that Schrager verify that his household income was less than $175,000 for the twopreceding calendar years. The rent administrator denied the petition, stating that becausepetitioner became subject to the Rent Stabilization Law (RSL) (Administrative Code of City ofNY § 26-501 et seq.) by virtue of receiving J-51 tax benefits, the exclusion from"luxury decontrol" codified at Administrative Code § 26-504.1 applied.
Petitioner sought administrative review of the order, arguing that the expiration of the J-51tax benefits made the apartment eligible for luxury decontrol. It pointed to certain language in Roberts v Tishman Speyer Props., L.P.(62 AD3d 71 [2009], affd 13 NY3d 270 [2009]) that it claimed reflected this Court'sview that the luxury decontrol exclusion only applies while a building is currently receiving J-51benefits. Petitioner argued alternatively that Real Property Tax Law § 421-a (2) (f) (i)expressly allows for luxury decontrol of an apartment where the building became rent-stabilizedas a result of receiving a tax abatement, notwithstanding the [*2]Administrative Code § 26-504.1 exclusion. DHCR denied thepetition for administrative review, finding that the exclusion from luxury decontrol applies tothose housing accommodations that became or become subject to the RSL and regulations"solely by virtue of the receipt of tax benefits" pursuant to the J-51 program, even after theexpiration of such benefits. DHCR rejected the applicability of Roberts, noting that inthat case the J-51 benefits had not yet expired at the time of the dispute. As for petitioner'scontention concerning RPTL 421-a (2) (f) (i), DHCR acknowledged that "those apartmentswhich become subject to rent stabilization by virtue of the receipt of 421-a tax benefits dobecome eligible for luxury decontrol upon the expiration of those tax benefits." However, itnoted that petitioner did not receive the tax benefits it enjoyed pursuant to that particularstatutory scheme.
Petitioner commenced this proceeding to challenge the DHCR determination. It asserted thatthe determination was arbitrary and capricious, and contrary to law because it failed to recognizethat, pursuant to Roberts, petitioner became entitled to apply for luxury decontrol whenthe J-51 benefits expired. It further urged that all of the various statutory provisions of the RSLapplicable to buildings receiving an RPTL 421-a tax abatement should be read in pari materiawith those applicable to buildings receiving a J-51 abatement, including the provision permittingluxury decontrol of apartments regulated by virtue of RPTL 421-a. DHCR and Schrager arguedthat both Roberts and the exception to the luxury decontrol prohibition contained inRPTL 421-a (2) (f) (i) were inapplicable and lent no support to petitioner's position that luxurydecontrol was available to it.
The court denied the petition and dismissed it. It distinguished Roberts, noting thatRoberts "did not answer the question about whether luxury decontrol would be availableafter the [tax] benefits [had] expired." It further reasoned that "[p]ursuant to RSL §26-504.1, luxury decontrol does not apply to properties that are part of the 421-a program, exceptas provided in RPTL § 421-a (2) (f) (i) . . . [which] expressly permits luxurydecontrol after the expiration of the benefit period," but that "there is no similar expressprovision for the J-51 program." The court determined that RPTL 421-a and 489 should not beread in pari materia, so that luxury decontrol is permitted upon the expiration of J-51 benefits,because the provisions do not concern the same subject matter, and because, in any event, thestatutes are not ambiguous in providing that luxury decontrol is not available to building ownersparticipating in the J-51 program.
Our standard of review on this appeal is whether DHCR acted in an arbitrary and capriciousmanner, in violation of lawful procedures, or in excess of its jurisdiction (see Matter of Pell vBoard of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck,Westchester County, 34 NY2d 222 [1974]). This case turns on the meaning of severalstatutes and regulations, and the deference we are required to give the agency extends to itsinterpretation of them (see Matter of Salvati v Eimicke, 72 NY2d 784, 791 [1988]; Matter of Terrace Ct., LLC v New YorkState Div. of Hous. & Community Renewal, 18 NY3d 446, 454 [2012]).
The first relevant statute to consider is Administrative Code § 26-504 (c), whichprovides, in pertinent part: "Upon the expiration or termination for any reason of the benefits ofsection 11-243[[FN1]] or section 11-244 of the code or article eighteen of the private housing finance law any suchdwelling unit shall be subject to this chapter until the occurrence of the first vacancy of [*3]such unit after such benefits are no longer being received or if eachlease and renewal thereof for such unit for the tenant in residence at the time of the expiration ofthe tax benefit period has included a notice in at least twelve point type informing such tenantthat the unit shall become subject to deregulation upon the expiration of such tax benefit periodand states the approximate date on which such tax benefit period is scheduled to expire, suchdwelling unit shall be deregulated as of the end of the tax benefit period; provided, however, thatif such dwelling unit would have been subject to this chapter or the emergency tenant protectionact of nineteen seventy-four in the absence of this subdivision, such dwelling unit shall, upon theexpiration of such benefits, continue to be subject to this chapter or the emergency tenantprotection act of nineteen seventy-four to the same extent and in the same manner as if thissubdivision had never applied thereto." Pursuant to this section, an apartment that becomesrent-stabilized upon the building owner's receipt of J-51 benefits remains stabilized upon theexpiration of those benefits, except in two distinct instances: where the stabilized tenant vacates,or where the stabilized tenant had been consistently and properly notified in his leases that theapartment would become deregulated upon expiration of the tax benefits. The statute alsoprovides that if the building was already regulated when the owner began to receive tax benefits,it continues to be regulated upon expiration of the tax benefits under the statutory scheme thatinitially gave rise to regulation. Here, it is undisputed that because Schrager is still in possessionand was not given the requisite notices, the apartment continued to be rent-stabilized after theexpiration of the J-51 benefits.
The second statute we must grapple with is Administrative Code § 26-504.1, enactedas part of the Rent Regulation Reform Act of 1993. It provides: "Upon the issuance of an orderby the division, 'housing accommodations' shall not include housing accommodations which: (1)are occupied by persons who have a total annual income, as defined in and subject to thelimitations and process set forth in section 26-504.3 of this chapter, in excess of the deregulationincome threshold, as defined in section 26-504.3 of this chapter, for each of the two precedingcalendar years; and (2) have a legal regulated monthly rent that equals or exceeds thederegulation rent threshold, as defined in section 26-504.3 of this chapter. Provided, however,that this exclusion shall not apply to housing accommodations which became or become subjectto this law (a) by virtue of receiving tax benefits pursuant to section four hundred twenty-one-aor four hundred eighty-nine of the real property tax law,[[FN2]] except as otherwise provided in subparagraph (i) of paragraph (f) of subdivision two of sectionfour hundred twenty-[*4]one-a of the real property tax law, or (b)by virtue of article seven-C of the multiple dwelling law." This provision authorizes luxurydecontrol for eligible stabilized apartments, with one important general exception; thoseapartments that are regulated "by virtue of receiving tax benefits" cannot be decontrolled basedon income or the amount of the legal rent (we set aside for now the "exception" to the"exclusion" provided for in RPTL 421-a [2] [f] [i]).
Petitioner asserts that the exclusion contained in Administrative Code § 26-504.1 doesnot apply to Schrager's apartment. In so arguing, it attempts to read into the otherwise silentstatute a caveat that ineligibility for luxury decontrol is limited to apartments that arecurrently receiving tax benefits. For this, it relies on certain of this Court's statements Roberts v Tishman Speyer Props., L.P.(62 AD3d 71 [2009], supra). In Roberts, we interpreted section 26-504.1 toprovide that a building receiving J-51 tax benefits is subject to the luxury decontrol prohibitioneven if it was already subject to rent stabilization at the time it accepted the benefits. We statedthat "it is clear to us that the impact of the J-51 and rent stabilization statutes is that allapartments in buildings receiving J-51 tax benefits are subject to the RSL during the entireperiod in which the owner receives such benefits" (62 AD3d at 81 [emphasis supplied]).Petitioner seizes on the emphasized language as support for its position that once J-51 benefitsexpire, a building is still subject to the RSL (except for apartments that are vacated or receivedthe requisite notice under Administrative Code § 26-504 [c]) but not the luxury decontrolprohibition. We reject this interpretation. First, on its face, the language only addresses theapplication of rent stabilization to buildings receiving tax benefits, and not the application of theluxury decontrol exclusion. Moreover, in Roberts, the building was still receiving J-51benefits, and this Court had no reason to consider whether upon their expiration the owner couldapply for luxury decontrol of individual apartments.
Petitioner further points out that in Roberts we stated that "the RSL provides thatupon expiration of the J-51 tax benefit period, those apartments previously subject to regulationby other mechanisms continue to be covered 'to the same extent and in the same manner as if [theJ-51 benefits] had never applied thereto (RSL § 26-504 [c])' " (62 AD3d at 83). Petitionerclaims that the phrase " 'as if [the J-51 benefits] had never applied thereto' necessarily means thatluxury decontrol would return as an available decontrol method once the benefits expired." Thisinterpretation also is wrong. First, this Court was not construing Administrative Code §26-504 (c) in Roberts. Rather, by quoting it, we were merely offering support for ourpoint that "the overall statutory scheme [of subjecting buildings receiving tax benefits to rentregulation] . . . makes no distinction based on whether a J-51 property was alreadysubject to regulation prior to the receipt of such benefits" (62 AD3d at 83). Further, and in anyevent, it is plain from the statute that the Legislature simply intended to provide that a buildingthat is already regulated when it begins to receive J-51 benefits continues to be regulated for theoriginal reason when the tax benefits expire and an apartment is vacated or a nonvacating tenantreceived the notice described in the section. Presumably, under those circumstances the ownercould resort to luxury decontrol. However, here there was no vacatur or notice, so even if thebuilding had been regulated before the receipt of tax benefits, that fact would be irrelevant.
Petitioner argues alternatively that, even if the exclusion from luxury decontrol continuedafter the J-51 benefits expired, the exception to the exclusion provided by Administrative Code§ 26-504.1 applies. Again, that section states that luxury decontrol does not apply tobuildings [*5]regulated by virtue of the receipt of tax benefits,"except as otherwise provided in subparagraph (i) of paragraph (f) of subdivision two of sectionfour hundred twenty-one-a of the real property tax law, or . . . by virtue of articleseven-C of the multiple dwelling law." Real Property Tax Law § 421-a provides anexemption from local taxes for new multiple dwellings. Subdivision (2) (f) (i) provides that afterthe expiration of the benefit, the building remains regulated but the owner may seek to deregulateapartments based on luxury decontrol.
The subdivision is clear that it applies only to buildings exempted from taxes pursuant toRPTL 421-a. Nevertheless, petitioner argues that RPTL 421-a (2) (f) (i) should be construed toinclude buildings receiving tax benefits of any stripe, including J-51 benefits. It contends that thesubdivision should be read in pari materia with RPTL 489, the enabling legislation for J-51benefits, because both statutes advance a similar goal of encouraging the creation of residentialhousing, and both should be construed to provide the same system of advantages anddisadvantages. Thus, the argument goes, if one scheme permits the owner to seek luxurydecontrol notwithstanding the receipt of tax benefits, so should the other.
DHCR and Schrager argue that there is no need to compare the two statutory schemesbecause the Legislature, in enacting RPTL 421-a, said clearly that only buildings receiving taxbenefits under that section are entitled to apply for luxury decontrol, and explicitly and purposelyexcluded buildings receiving J-51 benefits. In any event, they argue, the two statutory schemesare sufficiently distinctive that the doctrine of in pari materia does not apply. For example, theyargue, the benefits under RPTL 421-a are essentially for residential buildings that come intobeing because of new construction, while J-51 benefits are essentially reserved for existingbuildings that are substantially rehabilitated. They assert that it is not surprising that theLegislature permitted luxury decontrol for owners of the former type of building but not thelatter.
"[S]tatutes in pari materia are to be construed together and as intended to fit into existinglaws on the same subject unless a different purpose is clearly shown" (BLF Realty HoldingCorp. v Kasher, 299 AD2d 87, 93 [2002] [internal quotation marks omitted], lvdismissed 100 NY2d 535 [2003]). However, "[t]he general rule that the meaning of a statutemay be determined from its construction in connection with other statutes in pari materiais not one of universal application, but is resorted to only in search of legislative intent; and therule cannot be invoked where the language of the statute is clear and unambiguous" (McKinney'sCons Laws of NY, Book 1, Statutes § 221 [a], Comment, at 376). This rule of constructiondoes not apply here because the legislative intent is clear. Administrative Code § 26-504.1expressly states that, generally, luxury decontrol shall not apply to buildings that are stabilizedbecause of their receipt of tax benefits pursuant to either the RPTL 421-a program or the J-51program. However, the exception to this exclusion refers to the former only. A strong assumptioncan be made that had the Legislature meant to create an exception to the prohibition for bothtypes of tax benefit programs, it would have done so. Further, if the exception were to beconstrued to apply to both tax benefit schemes, then the exception would entirely swallow therule and render the exclusion meaningless. Well established rules of statutory constructionrequire the avoidance of such a result (see Canal Carting, Inc. v City of N.Y. Bus. Integrity Commn., 66 AD3d609, 611 [2009], lv denied 14 NY3d 710 [2010]). Because the legislative intent isclear, we need not address petitioner's argument that the statutory schemes underlying RPTL421-a tax benefits and J-51 tax benefits are substantially similar.[*6]
DHCR's interpretation of the relevant statutes wasrational. Accordingly, the court properly upheld its determination denying the petition foradministrative review of the order dismissing the high-rent/high-income decontrol proceeding.Concur—Mazzarelli, J.P., Catterson, Renwick, Abdus-Salaam and Manzanet-Daniels, JJ.[Prior Case History: 2010 NY Slip Op 31955(U).]
Footnote 1: J-51 benefits derive from thissection.
Footnote 2: This act enabled the institutionof tax incentives to rehabilitate buildings, including the J-51 program.