In the Matter of 670 River Realty Corp. et al. v. New York State Division of Housing and Community Renewal
Attorneys and Parties
Brief Summary
Rent stabilization compliance and enforcement: failure to amend rent registrations and roll back to the legal regulated rent (LRR) after a rent overcharge order; use of hearsay in administrative hearings; per-violation civil penalties.
The Supreme Court, New York County, denied the Article 78 petition to annul the New York State Division of Housing and Community Renewal (DHCR) determination and dismissed the proceeding.
The Appellate Division vacated the Supreme Court's order and judgment procedurally and treated the petition as transferred for de novo substantial-evidence review under CPLR 7804(g) [procedure requiring transfer to the Appellate Division when a substantial-evidence issue is raised], then confirmed DHCR's determination.
Substantial evidence (CPLR 7803[4] [scope of review—substantial evidence]) supported 16 violations of a Rent Administrator (RA) overcharge order: petitioners failed to file amended rent registrations for 2016–2018, continued using invalidated LRRs in 2019–2023 registrations, and billed/contracted for rents matching the improper registrations (invoices, renewal lease, rent ledger, and 14‑day demand/nonpayment pleadings). DHCR permissibly relied on hearsay documents (9 NYCRR 2051.3[d][2][i] [administrative hearing evidence rule allowing hearsay and documentary submissions]); credibility determinations received deference. The access-denial argument was unpreserved and, in any event, irrelevant to collecting above‑LRR rent. The management company and agent were liable because an agent is an “owner” (9 NYCRR 2520.6[i] [agent included in definition of owner]). Civil penalties totaling $36,000 were authorized and not excessive: Admin. Code § 26‑516(c)(1) and RSC § 2526.2(c)(1) [allow a civil penalty of at least $1,000 and up to $2,000 for the first offense], plus RSC § 2526.2(b) and Admin. Code § 26‑516(b) [permit up to $250 per violation for knowing violations]. DHCR did not exceed its jurisdiction (CPLR 7803[2] [question of agency power]), and the penalties did not shock the conscience (CPLR 7803[3] [arbitrary/capricious or abuse of discretion, including penalty review]).
Background
Following a rent overcharge order by the Rent Administrator, petitioners were directed to file amended rent registrations for 2016–2018 within 60 days using the RA‑set legal regulated rent (LRR), roll back and recompute the rent, and base subsequent registrations on the corrected LRR. Petitioners did not file amended registrations and continued registering 2019–2023 rents using the invalid LRR. DHCR found that invoices, a November 30, 2020 renewal lease (term commencing March 1, 2021), petitioners’ rent ledger, and amounts sought in a 14‑day demand and nonpayment case all matched the incorrect registrations. The tenant did not appear at the hearing, but DHCR admitted the tenant’s documents and affirmations; petitioners offered no proof undermining their authenticity. DHCR assessed civil penalties on a per‑violation basis, totaling $36,000.
Lower Court Decision
The Supreme Court (New York County) denied the Article 78 petition and dismissed the proceeding, leaving DHCR’s determination intact.
Appellate Division Reversal
The Appellate Division vacated the Supreme Court’s order and judgment solely to treat the matter as a transferred substantial‑evidence proceeding under CPLR 7804(g). On de novo review, it confirmed DHCR’s determination, finding substantial evidence of 16 violations of the RA’s order, holding hearsay admissible and probative under 9 NYCRR 2051.3(d)(2)(i), deferring to DHCR’s credibility findings, rejecting unpreserved/irrelevant defenses, affirming agent/management liability under 9 NYCRR 2520.6(i), and upholding $36,000 in civil penalties as authorized and not excessive under Admin. Code § 26‑516(c)(1), RSC § 2526.2(c)(1), and RSC § 2526.2(b)/Admin. Code § 26‑516(b).
Legal Significance
Reaffirms the transfer-and-review framework for Article 78 cases raising substantial evidence (CPLR 7804[g]; CPLR 7803[4]) and confirms DHCR’s authority to impose per‑violation penalties for noncompliance with rent overcharge orders (Admin. Code § 26‑516[c][1]; RSC § 2526.2[c][1]; RSC § 2526.2[b]; Admin. Code § 26‑516[b]). Clarifies that hearsay can constitute substantial evidence in DHCR hearings (9 NYCRR 2051.3[d][2][i]) and that agents/management companies may be treated as “owners” for liability purposes (9 NYCRR 2520.6[i]). Emphasizes preservation rules for Article 78 review and the Pell proportionality standard for penalties (CPLR 7803[3]).
Landlords must promptly amend rent registrations and roll back rents to the legal regulated rent after an overcharge order; documentary hearsay can prove violations, agents can be held liable as owners, and DHCR may impose significant per‑violation penalties that will be upheld if supported by substantial evidence.