In the Matter of Anne Gilman,
Appellant,
v.
New York State Division of
Housing and Community Renewal
et al.,
Respondents.
2002 NY Int. 148
WESLEY
In this proceeding brought by petitioner-tenant to determine the proper initial rent for her rent-stabilized apartment, the Division of Housing and Community Renewal (DHCR) overturned the Rent Administrator's determination and set a higher initial rent based on data first submitted by the owner on appeal nearly a full decade after the tenant commenced her proceeding. We conclude that at that stage DHCR should not have accepted the owner's evidence without any showing of good cause.
In 1990, Anne Gilman moved into an apartment previously
subject to rent control and exercised her right to seek
readjustment of the $2,095 stabilized rent by commencing a Fair
DHCR inexplicably failed to send the forms until Gilman
filed an article 78 mandamus proceeding to compel the agency to
resolve her FMRA.[1]
Faced with the mandamus proceeding, on April
4, 1994, DHCR provided the owner an answering package with a
Notice of Clarification attached. The notice explained that the
owner could submit comparability data for use in determining the
apartment's fair market rent. If the owner failed to submit the
data, the Rent Administrator would be required to calculate the
fair market rent based solely on a rent guidelines formula (see
Matter of Ullman Estates v New York City Conciliation & Appeals
Bd., 97 AD2d 296, 298 [1st Dept 1983], affd , 62 NY2d 758 1984]).
The notice also explained that when an owner submitted rents from
other rental units, they had to be legal rents. To establish
legal rents for comparable rent-stabilized apartments, the
owner had to show that notice of the stabilized rent was served
on the first rent stabilized tenant[2]
and that the notice was
On July 22, 1994, the Rent Administrator issued an order setting the initial legal regulated rent, based solely on the guidelines, at approximately $1000 per month less than the amount originally charged by the owner. The owner then timely filed a petition for administrative review (PAR) of the Rent Administrator's decision. The owner objected to DHCR's refusal to grant more time to obtain the proper documentation, but did not seek to have those documents included in the appellate record. It also never indicated that the documents did not exist. Gilman opposed the PAR and objected to the introduction of any new evidence.
Nothing happened in the PAR proceeding for five years.
In June 1999, DHCR notified the owner that as a result of the
DHCR's Deputy Commissioner ruled that the new data
submitted by the owner pursuant to the Rent Regulation Reform
Act of 1997 must be reflected in the determination of the fair
market rent, and it calculated a new rent for the apartment
based on that data. The newly adjusted rent resulted in Gilman
owing the owner over $47,000 for back rent. Gilman commenced
this CPLR article 78 proceeding to annul DHCR's determination,
arguing that the RRRA of 1997 did not affect the regulations
On appeal, Gilman asserts that DHCR erred when it determined that the RRRA of 1997 affected the proof requirements for comparability data in a FMRA and that the agency was precluded from considering the owner's comparability data at the PAR level. Because the DHCR regulations require a showing of good cause to introduce new evidence at the PAR level, and no such showing was made in this case, we conclude that DHCR's determination should be annulled and a new hearing held.
In reviewing an administrative agency determination, we
must ascertain whether there is a rational basis for the action
in question or whether it is arbitrary and capricious (see e.g.
Matter of Nehorayoff v Mills, , 95 NY2d 671, 675 [2001]). We
conclude that the RRRA of 1997 is applicable to FMRAs. Although
the legislation amended only that section of the Rent
Stabilization Law (§ 26-516) dealing with overcharge complaints,
a FMRA is a procedural vehicle for a tenant to claim an
overcharge in the initial stabilized rent. Furthermore, the
overcharge complaint provisions of the statute do affect initial
legal regulated rents which tenants seek to readjust in FMRAs
(see Rent Stabilization Code § 2522.3; Matter of Muller v New
York State Div. of Hous. & Community Renewal, 263 AD2d 296, 302-
303 [1st Dept 2000], lv denied , 95 NY2d 763 [2000]). Thus, when
The RRRA clarified and reinforced the four-year statute of limitations in rent overcharge claims and limited examination of the rental history of the housing accommodation prior to the four-year period preceding the filing of a complaint (see L 1997, ch 116, § 33). DHCR rationally concluded that the statute also, in effect, eased the legal sufficiency requirements for comparability data by removing the strict proof of notice requirements as a collateral issue in identifying comparables in rent overcharge claims and fair market rent appeals. The legislation was designed to alleviate the burden on owners to retain that paperwork indefinitely. The four-year rule simplified the process (see Governor's Mem approving L 1997, ch 116, 1997 McKinney's Session Laws of New York, at 1923 [A number of regulatory reforms are included in the legislation to simplify the administration of rent laws while protecting the rights of tenants and owners]).
The Legislature specifically directed that the RRRA of 1997 apply to all cases pending before the DHCR. The agency acted rationally when it informed owners of the new legislation and its effect on comparability data. The new statute, however, said nothing about the wholesale introduction of new evidence at the appellate level.
In this case, DHCR acted irrationally in allowing new
The acceptance of new evidence on appeal is generally
contrary to appellate practice simply because it is unfair to
allow a party, on appeal, to rewrite the factual record in the
proceeding. Consistent with this principle, when conducting a
PAR, DHCR is limited to the facts and evidence before the rent
administrator as raised in the petition (see 9 NYCRR 2529.6).
New facts can be admitted only in narrow circumstances -- where
petitioner submits with the petition certain facts or evidence
which he or she establishes could not reasonably have been
offered or included in the proceeding prior (id. [emphasis
added]). When the petitioner establishes good cause to consider
the new evidence, DHCR may remand the matter for redetermination
to allow the rent administrator to consider the new evidence (see
id.). This Court also has recognized that similar good cause
provisions in the Rent Stabilization Code permit DHCR to accept
late filings for good cause shown at 'any state of a proceeding'
-- that is, at any point before the Commissioner has entered a
At oral argument, DHCR argued that the data submitted in 1999 could not have been accepted by the Rent Administrator in 1994, and thus that good cause was established for receipt of the comparables. That argument falls short. Clearly, the data submitted in 1999 would not have been accepted in 1994 because, in 1999, DHCR did not ask for the same documents. The salient point, however -- which DHCR concedes -- is that it does not know whether the owner had documentation in 1994 necessary to prove that its comparability data was legally sufficient. DHCR can only surmise that the owner did not have those documents.[4]
Even though the RRRA of 1997 relaxed the legal
sufficiency requirements for comparable rents in FMRA
proceedings, it did not repeal the requirements for introducing
new evidence at the PAR level. Agencies are required to abide by
their own regulations. When Gilman objected to the introduction
of the new comparability data, DHCR should have asked the owner
to show good cause to justify its receipt (see Matter of Frick v
Bahou, , 56 NY2d 777, 778 [1982][the rules of an administrative
>(290 AD2d at 286-287). Pursuant to DHCR's notice to the owner in 1994, the owner could establish comparable rents by showing that when the apartments became rent stabilized a notice was served on the tenant and it went unchallenged for 90 days. That requirement does not seem insurmountable for this long-term owner. Thus, DHCR's failure to require the owner to show that it could not previously have submitted comparability data can only be viewed as irrational.The tenant contends, and [DHCR] does not deny, that the data eventually submitted to the Commissioner in 1999 consisted of apartments 'which between 1986-1990, had been vacated by the prior rent-controlled tenant and which had been initially registered with the agency as a stabilized apartment unit, i.e., no more than four years prior to Ms. Gilman's application and one year after it, as provided in the regulation' (see RSC [9 NYCRR] § 2522.3[e]). Thus, this is the same evidence that should have been submitted to the District Rent Administrator for inclusion in the administrative record in 1994.
In this case, the rules were changed in midstream -- a journey that was excruciatingly and unnecessarily long. DHCR's view of the 1997 statute would impose a $47,000 judgment against Gilman (who has vacated the apartment) in favor of an owner that chose not even to appear in this article 78 proceeding. The new statute cannot rationally be construed to allow the owner in this case to have a second chance at establishing comparable rents without showing that it could not have provided the requisite evidence at the earlier proceeding. DHCR seeks to extend the intended sweep of the RRRA so far as to extinguish the sound policy basis of the good cause requirement for new data at a PAR. Thus, on remand, the agency should require the owner to show good cause prior to reviewing its comparability data.
Accordingly, the order of the Appellate Division should be reversed, with costs, and the matter remitted to Supreme Court with directions to remand to the Division of Housing and Community Renewal for further proceedings in accordance with this opinion.
Matter of Gilman v New York State Division of Housing and Community Renewal
No. 133 GRAFFEO, J., dissenting:
Because we conclude that the Division of Housing and Community Renewal (DHCR) acted rationally in accepting comparable rent data based on its interpretation of relevant provisions of the Rent Regulation Reform Act of 1997, we respectfully dissent.
In May 1990, Anne Gilman moved into a Manhattan apartment previously subject to rent control. Pursuant to Rent Stabilization Code § 2523.1, the building owner notified Gilman of the initial legal regulated rent for the unit -- $2,095.00 - - and of her right to bring a proceeding challenging the amount of rent. Gilman exercised that right by commencing a Fair Market Rent Appeal (FMRA). DHCR notified the building owner of Gilman's filing in 1992, and the owner's managing agent, also appearing pro se, then requested an FMRA answering package. DHCR failed to respond to the owner's request.[5]
Having not received a decision from DHCR, in March 1994
Gilman commenced a CPLR article 78 mandamus proceeding to compel
the agency to rule on her FMRA, and the parties resolved the
proceeding by stipulation. The agency immediately sent an FMRA
In July 1994, DHCR's Rent Administrator (RA) issued an
order setting the initial legal regulated rent at $1,011.12 --
approximately $1000 per month less than the amount initially
charged by the owner -- and directing the owner to refund or
credit Gilman with about $49,000 for excess rent paid. In the
absence of comparability data from the owner, the RA based the
calculations on the rent guidelines formula applicable in cases
without such data. The owner timely challenged this
determination by filing a petition for administrative review
While the owner's PAR was pending, the Legislature passed the Rent Regulation Reform Act of 1997 (RRRA) (L 1997, ch 116). The Act consisted of a comprehensive package of reforms (Mem of Senate Rules Comm, Bill Jacket, L 1997, ch 116, at 36) designed to simplify the administration of rent regulation. According to one commentator, the Act was the most sweeping revision of rent regulation laws in over two decades, enacted after a long political battle between property owners and tenant groups (see Parella, 1996-97 Survey of New York Law: Real Property, 48 Syracuse L Rev 821, 826 [1998]).
In particular, the Act amended New York City Rent
Stabilization Law § 26-516 (a) to clarify and reinforce the four-
year statute of limitations in rent overcharge claims (see
Governor's Mem approving L 1997, ch 116, 1997 McKinney's Session
Laws of NY, at 1923). That section precludes examination of the
rental history of the housing accommodation prior to the four-
year period preceding the filing of a complaint (New York City
Rent Stabilization Law § 26-516 [a][2]). The Act, which became
effective immediately upon enactment, stated that the amendments
were to apply to any application, complaint or proceeding before
an administrative agency on the effective date of this act, as
well as any action or proceeding commenced thereafter (L 1997,
DHCR interpreted the Act's four-year rule as applicable to all pending rent and overcharge challenges, including FMRAs (see Estis & Turkel, Real Estate Update, Four-Year Rule: DHCR Issues Broad Interpretation of Limitation Provisions, NYLJ, Nov. 4, 1998, at 5, col 2). Accordingly, the agency initiated State Administrative Procedure Act procedures to conform its regulations to the new statute, with the intended purpose of easing the proof requirements which had previously governed the submission of comparability data (see NY Reg, April 5, 2000, at 17-19; compare 9 NYCRR 2522.3[e], with former 9 NYCRR 2522.3[e]).
Consistent with this policy, in June 1999, DHCR sent the owner notification entitled, Request for Comparability Data Pursuant to the Rent Regulation Reform Act of 1997, stating:
[a]s a result of changes in the processing of Fair Market Rent Appeals mandated by the Rent Regulation Reform Act of 1997 and recent court decisions, you are hereby afforded a final opportunity to submit comparability data.
The owner responded by delivering comparability data. DHCR then mailed Gilman a Notice of Opportunity to Submit Evidence, explaining that she was being provided an opportunity to comment on the comparability data submitted by the owner. Gilman replied that the new data should be ignored by DHCR because it was new evidence that could not be offered at the PAR stage.
DHCR's Deputy Commissioner partially granted the
owner's PAR to reflect consideration of the comparability data
A court may not disturb an administrative determination
unless it lacks any rational basis (see Matter of Nehorayoff v
Mills, , 95 NY2d 671, 675 [2001]; Matter of County of Monroe v
Kaladjian, , 83 NY2d 185, 189 [1994]; Matter of Pell v Board of
Educ., , 34 NY2d 222, 231 [1974]). In light of the enactment of
the RRRA of 1997, the issue distills to whether DHCR acted
irrationally when it notified the owner of the new legislation
and accepted comparability data during the administrative appeal
process. Relying on a DHCR regulation which permits PAR review
of new evidence only upon a showing that the evidence could not
reasonably have been included before the rent administrator (see
The majority reads this regulation as requiring the owner to demonstrate that, in 1994, the documentation proving that the comparability data was legally sufficient under the old requirements did not exist. This view of the regulation unduly restricts DHCR's authority. First, the regulation itself merely requires an owner to establish that the evidence could not reasonably have been offered or included at the RA level (see 9 NYCRR 2529.6). There are various conceivable explanations that DHCR might accept as satisfactory under the PAR new evidence regulation, including, perhaps, the reasons proffered in the owner's April 1994 extension request. Second, by limiting the manner in which the owner could satisfy the regulation to a showing that the owner was not in possession of the proof formerly required, the majority effectively deprives the owner of the benefit of the new legislation which the majority concedes was intended to reduce those strict proof requirements. Because the RRRA was applicable to all pending proceedings, including this PAR proceeding, it was not arbitrary or capricious for the agency to determine that the regulation did not prevent the owner from attempting to meet the new proof requirements.
Most importantly, the majority fails to grant the
agency the appropriate deference in fashioning procedures to
DHCR solicited the admission of comparability data
precisely because of the modification in proof requirements and
was aware that the owner's new evidence would have been rejected
as inadequate had it been tendered prior to the enactment of the
RRRA.[7]
Viewed in this light, the agency's decision to consider
the data without requiring the owner to separately establish that
it could not reasonably have been included earlier in the
proceeding was not an irrational implementation of the new
statute. Put another way, having determined that the legislation
applied to all pending proceedings and required alteration of the
nature of proof the agency could consider in calculating fair
To be sure, the RRRA did change the rules midstream. DHCR was obligated to give effect to the legislative mandate that the Act be applied to all pending proceedings. The majority suggests an alternative procedure that DHCR might have followed in this case. Even if we were to agree that the administrative process the majority has devised would have been preferable, we would reach a contrary result because our power in the context of a CPLR article 78 proceeding is limited to assessing whether the procedure DHCR employed was rational under the circumstances presented -- not whether a better course of action was available to the agency.
Accordingly, we would affirm the order of the Appellate Division.
Footnotes
1 The parties resolved that proceeding by stipulating that DHCR would issue a determination within 90 days.
2 In 1983, the Legislature overhauled the rent regulatory system; the changes became effective April 1, 1984 (see L 1983, ch 403). The owner of an apartment subject to rent stabilization was required under the new system to complete and file a rent registration with DHCR that listed the rental rate (see § 26- 517[a],[g]). For an owner to use rental units stabilized prior to April 1, 1984 as legal comparables, it had to prove that the registration had been provided to the tenant. For units stabilized after that date, proof of service of notice of the "initial legal regulated rent" was required (see Rent Stabilization Code § 2523.1). This proceeding involves only post April 1, 1984 comparables.
3 If the tenant had timely challenged the notice or registration, the owner was also required to establish that the challenge had been resolved with an Order and Determination from the Division.
4 To be precise, DHCR states in its brief that it is probable that the Owner did not have the documentation needed to prove the legality of the comparable rents" (Respondent's Brief at 49, n. 26 [emphasis added]).
5 During this period, DHCR had a substantial backlog of pending cases. In the overcharge unit alone, DHCR claims it had over 26,000 cases pending in 1992, approximately 24,000 cases in 1993 and more than 26,000 cases in 1994. DHCR states that by May 2002, it had reduced this backlog to about 2,000 pending overcharge proceedings.
6 Specifically, DHCR previously required owners to establish the legality of the rents charged for the proposed comparable units by submitting proof that the first rent-stabilized tenant had received notice of the right to challenge the rent and that any such challenge had been finally resolved by the agency or that the time to challenge had expired.
7 At oral argument, the attorney for DHCR stated that the agency would have rejected the owner's data had it been proffered under the former statute and guidelines.