In the Matter of George Rizzo,
Appellant,
v.
New York State Division of
Housing and Community Renewal,
Respondent.
2005 NY Int. 157
In this article 78 proceeding, we hold that after the
New York State Division of Housing and Community Renewal (DHCR)
has issued a final determination, concerning an application for a
certificate of eviction pursuant to New York City Administrative
I.
Rachel Crespin owns 323 East 53rd Street, a four-story apartment building in Manhattan. Petitioner George Rizzo resides in a rent-controlled unit comprising the third floor of the building. He lives alone in an apartment of some 1200 square feet which, as of the original certificate of occupancy, contained six rooms. Crespin resides in a unit comprising the second story; she and her husband had been the building's first rent-controlled tenants. The fourth-floor apartment was rent- controlled until its occupant, Elaine Bloedow, died in early January 2002, an event of significance in this litigation. The remaining unit is unregulated.
Crespin bought the building in 1981. In 1996, she
filed applications for certificates of partial eviction of Rizzo
and Bloedow, explaining that she had been losing money on the
property for years. In her application, she relied on New York
City Rent and Eviction Regulations (9 NYCRR) § 2204.7, which
prescribes when the Rent Administrator may authorize subdivision
of an under-occupied, rent-controlled apartment and order partial
eviction of its tenant. Crespin sought to evict Rizzo and
The New York City Rent and Rehabilitation Law and its implementing regulations require the City's rent agency to issue an order granting a certificate of eviction or partial eviction when "[t]he landlord seeks in good faith to recover possession of a housing accommodation for the immediate purpose of substantially altering or remodeling it" (NY City Administrative Code § 26-408 [b] [3]; NY City Rent and Eviction Regulations [9 NYCRR] § 2204.7). Such a certificate, however, may be granted only if two conditions are met: the agency must determine, first, that the housing accommodation in question is under-occupied and contains six or more rooms, excluding bathrooms and kitchen (NY City Rent and Eviction Regulations [9 NYCRR] § 2204.7 [a]), and, second, that, without recourse to eviction, "there is no reasonable possibility that the landlord can make a net annual return of eight and one-half per centum of the assessed value of the subject property" (NY City Administrative Code § 26-408 [b] [5] [a]; see also NY City Rent and Eviction Regulations [9 NYCRR] § 2204.4 [g] [1]).
Following an audit of Crespin's income and expenses for
the "test year" 1996, an inspection of Rizzo's apartment, a fact-
finding hearing in 1999 and a detailed, May 26, 2000 report by an
Administrative Law Judge, DHCR granted Crespin's application, on
Rizzo and Bloedow filed Petitions for Administrative Review. On January 2, 2002, the DHCR Deputy Commissioner denied them. Then, apparently the very next day, Bloedow died, and her apartment became deregulated.
In March 2002, Rizzo commenced this article 78
proceeding, seeking reversal and remittal to DHCR.[2]
Supreme
DHCR appealed and, by a divided court, the Appellate Division reversed, concluding that the trial court's consideration of evidence not contained in the administrative record exceeded the scope of permissible judicial review. Rizzo appeals as of right (CPLR 5601 [a]), and we now affirm.
II.
In reviewing orders of the DHCR, courts are limited to
the factual record before the agency when its determination was
rendered. As a rule, the court may not consider evidence
concerning events that took place after the agency made its
determination. This follows from a fundamental principle of
Rizzo relies on New York City Administrative Code § 26- 411 (a) (2), which carves out a narrow exception to the general rule: "If application is made to the court by either party for leave to introduce additional evidence which was either offered and not admitted or which could not reasonably have been offered or included in such proceedings before the city rent agency, and the court determines that such evidence should be admitted, the court shall order the evidence to be presented to the city rent agency."
This language, however, should not be interpreted as
permitting a court to engage in, or order, a de novo review based
on events that took place after the agency made its
determination. As the Appellate Division noted, "the admission
of subsequent events which occurred after the final agency order
would defeat finality and could subject an otherwise final order
We therefore hold that in judicial review of a rent agency decision made pursuant to New York City Administrative Code § 26-408 (b) (3) or New York City Rent and Eviction Regulations (9 NYCRR) § 2204.7, the "additional evidence" that may be admitted under § 26-411 (a) (2) is limited to facts that arose before the agency made its determination. When, as here, DHCR determines that a landlord's application for a certificate of eviction should be granted because, at the time of the application, there was no reasonable possibility that the landlord could make an 8.5% net annual return, a reviewing court may admit additional evidence only if the evidence is relevant to that time-specific determination.
DHCR's inquiry was whether Crespin could make an 8.5% net annual return in the test year 1996. Bloedow's death in 2002 was irrelevant to the DHCR's determination and should not have been considered by Supreme Court. By ordering that the evidence of Bloedow's death be presented to the DHCR, the court exceeded the permissible scope of its review.
III.
Petitioner and our dissenting colleague cite McMurray v New York State Div. of Housing & Community Renewal, , 72 NY2d 1022 (1988) in support of the claim that Supreme Court correctly remitted the matter to the agency for de novo review. McMurray is not on point. It concerned a different provision of the Rent and Rehabilitation Law (NY City Administrative Code § 26-408 [b] [1]), the legislative history of which distinguishes it from New York City Administrative Code § 26-408 (b) (5) (a), the provision that is crucial here.
New York City Administrative Code § 26-408 (b) (1), the subject of McMurray, makes tenancy for less than 20 years a condition precedent of evicting the tenant of a rent-controlled apartment that the landlord requires for personal use and occupancy. This Court held that "a tenant in possession who accumulates the requisite 20 years of occupancy before the validity of a certificate of eviction is finally determined by the courts is protected from eviction," even when the tenant reaches the 20-year milestone after the certificate of eviction is issued (72 2 1022, 1024).
The provision in McMurray was construed in the tenant's
favor because the legislative history of that provision, a 1984
amendment, shows a clear intent to protect elderly, long-term and
disabled tenants from eviction merely for the sake of an owner's
personal use and occupancy, irrespective of the timing of the
IV.
We further agree with the Appellate Division that DHCR's determination was supported by substantial evidence and was not arbitrary or capricious.
Accordingly, the order of the Appellate Division should
be affirmed, with costs.
Because the Sound Housing Act of 1974 and City Rent Control Laws bestow the New York State Division of Housing and Community Renewal ("DHCR"), as well as the courts, with discretion to effectuate its goal of avoiding unwarranted evictions and preserving affordable housing, I respectfully dissent.
This case involves the interplay of the Sound Housing Act and the introduction of new evidence under NY City Administrative Code § 26-411 (a)(2). "It is fundamental that a court, in interpreting a statute, should attempt to effectuate the intent of the Legislature" ( Patrolmen's Benevolent Assn. of the City of New York v City of New York, , 41 NY2d 205, 208 [1976]). The starting point is always to look to the language itself and "[w]here the language of a statute is clear and unambiguous, courts must give effect to its plain meaning" ( Matter of Tall Trees Constr. Corp. v Zoning Bd. of Appeals of the Town of Huntington, , 97 NY2d 86, 91 [2001]).
Looking at the plain language of the statutes, I
conclude that Supreme Court did not exceed the permissible scope
of its review (majority op at 7) but acted reasonably in
Clearly, the new evidence of the death of the only
other rent controlled tenant, Elaine Bloedow, was unavailable
earlier, as she died on or about the day the DHCR Commissioner
Regardless, the majority wishes to narrow the breadth of the statute by limiting for consideration evidence of only events that occurred prior to DHCR's final order (majority op at 7). However, nothing in the language of the statute or its legislative history limits the introduction of evidence based on when it arose. Instead, it explicitly contemplates the late introduction of evidence -- after the agency has acted -- by requiring the court, during its review, to refer any new relevant evidence to the agency. Thus, under the plain language of the statute, Supreme Court acted properly and within its discretion by ordering the new evidence to be presented to DHCR.
Assuming arguendo that the plain language was not so
clear, the remedial nature of the statute and the legislative
history of the Sound Housing Act require DHCR to consider this
change in circumstances. When faced with the application of a
remedial statute, we must give it liberal construction to carry
"It is fundamental that in construing the words of a statute the legislative intent is the great and controlling principle" ( >,74 NY2d at 207 [internal quotations omitted]). The purpose of the Sound Housing Act as proffered by its sponsors is to "prohibit[] the eviction of tenants from rent controlled housing for demolition or alteration unless there is no reasonable possibility of the landlord making a fair return without eviction for the purposes of demolition or alteration" (Sponsor's Mem, Bill Jacket, L 1974, ch 1022). In explaining the need for the Sound Housing Act, the sponsors made reference to the fact that "[h]ousing of the type being lost can no longer be built in this city" and "[e]ven subsidized housing comes in at rentals far beyond the means of working people of moderate means" (Sponsor's Mem, Bill Jacket, L 1974, ch 1022). The memorandum further noted that "[t]he housing being destroyed also houses many of the City's elderly people whose only income is a social security check" ( id. at 2). The Office of the Mayor of New York in support of this bill stated that:
"Indiscriminate demolition has had a debilitating affect on entire
neighborhoods in the City. Long term residents are displaced and the stability of communities are threatened. The underlying assumption in this bill is that tenants shall not be evicted if the building is physically sound or economically viable" (Letter from The City of New York Office of the Mayor, May 3, 1974, Bill Jacket, L 1974, ch 1022).
The legislative history and the underlying rationale
behind New York City's rent regulatory framework are forthright
in their intent to prevent unwarranted evictions and to preserve
affordable housing yet the majority's decision subjects the
tenant to eviction from most of his apartment despite the
appearance that the building is now economically sound. In fact,
petitioner's situation is illustrative of exactly what the rent
regulatory laws aim to protect. Rizzo is 84 years old and has
lived in the apartment for 45 years. The record reflects that he
uses the apartment both to live and to work as an artist, and
there is no indication that he is anything but a good tenant. To
partially evict Rizzo, leaves him with under 500 square feet of
space for living and working and deprives him of more than half
the apartment.
Now while I concede that it is likely that NY City
Administrative Code § 26-408 (b)(3) and (5) using the 1996 test
year would permit the alteration of the apartment by the landlord
for an increase in its net annual return, it is undisputed that
Bloedow lived on the fourth floor. Upon her death, the
apartment she had occupied was deregulated and the landlord
became free to charge the substantially higher market rent.[7]
If
this scenario increases the landlord's return beyond 8 1/2 %,
which it likely will, there would be no need or legal basis to
resort to the drastic measure of evicting Rizzo. There is
nothing in the statute or our precedent that mandates eviction of
a rent controlled tenant based on an obsolete snapshot
computation of the building's finances. Instead, the statute
calls for eviction only when there is "no reasonable possibility"
that the landlord could not obtain the 8 1/2% return. Under the
circumstances, the proper action is to do exactly what Supreme
"Statutes are ordinarily interpreted so as to avoid objectionable consequences and to prevent hardship or injustice" ( Braschi, 74 NY2d at 208). Thus the Sound Housing Act should be liberally construed to prevent unsubstantiated evictions. To effectuate this goal, DHCR has the power to revisit the issue of economic viability when the circumstances drastically change under NY City Administrative Code § 26-411 (a)(2). Despite the clear legislative goals and the inherent power of both DHCR and the courts to revisit the issue of whether the eviction is justified economically, the majority chooses to disregard the equitable and remedial nature of the statute and read into the statute a bright-line rule setting an arbitrary time frame when new evidence may be considered post final agency determination.
What the majority misconstrues is that remedial laws do
not always fit squarely into a bright-line rule. By the
majority's own account, had the rent controlled tenant died one
day prior to the issuance of the DHCR order, rather than on or
about the day of its issuance, remittal would then be appropriate
and the agency would have been compelled to consider the new
evidence. This arbitrary cut off date does nothing to enforce
the rent control laws but instead undermines them by allowing
Indeed, our prior holdings also dictate a different result than that reached by the majority. In Matter of McMurray v New York Div. of Hous. & Community Renewal (72 2 1022 [1988]), DHCR issued a certificate of eviction against a rent control tenant after the landlord sought possession for its own use under NY City Administrative Code § 26-408 (b)(1). After the administrative proceedings and issuance of the certificate of eviction the tenant sought judicial review. During this time, the tenant became subject to the "20 year rule" which prohibits a rent controlled tenant's eviction by the landlord for its own personal use where the tenant has resided in the apartment for over 20 years ( see NY City Administrative Code § 26-408 [b][1]). The Court held that "a tenant in possession who accumulates the requisite 20 years of occupancy before the validity of a certificate of eviction is finally determined by the courts is protected from eviction" ( McMurray, 72 NY2d at 1024).
Despite the finality of DHCR's issuance of a
certificate of eviction, the McMurray Court found that the
significant change of circumstances should be considered.
While, of course, the need for finality in administrative determinations generally is a noble goal, drawing an arbitrary line does not serve a rational purpose here as it promotes the eviction of innocent long-term tenants from their homes. The need to preserve the affordable housing stock clearly outweighs DHCR's need for finality in this situation as finality merely alleviates the agency's workload but does nothing to effectuate the goals of the rent regulatory framework ( cf. Matter of Dworman v New York State Div. of Hous. and Community Renewal, , 94 NY2d 359 [1999] [holding that despite the statutory requirement that a tenant respond to an luxury deregulation income request within 60 days, failure to timely comply does not automatically result in vacancy decontrol if tenant has good cause for responding late]).
DHCR's insistence on finality is also contrary to
general rent regulatory eviction principles and its other
remedial statutes. Under RPAPL § 749 (3), for example, a court
In light of clear legislative intent and a plain
language provision obligating the court to refer newly discovered
relevant evidence to DHCR and further recognizing the agency's
discretion to revisit the need for the tenant's eviction, I
cannot reconcile the majority's narrow reading of this inherently
flexible remedial statute. As such, I would reverse the
Footnotes
1 The ALJ noted that an 8.5% return on the assessed 1996 valuation of the building ($140,000) would be $11,900, but that the net return from the building in 1996 was only $8,419.90. The difference between net return and an 8.5% return was therefore $3480.10 that year.
2 In his submissions, Rizzo informed the court of Bloedow's death but did not expressly give that as a reason for reversal and remittal or apply for leave to introduce evidence of the effect of Bloedow's death on Crespin's financial return from the building.
3 The trial court noted that the other unregulated unit in the building generated $34,020.00 in income in 1996. The court implicitly reasoned that the vacated apartment would generate similar income, which would exceed the difference between the building's net return and an 8.5% return ($3480.10 in 1996), and that Crespin would no longer fail to make a net annual return of 8.5% of the assessed value of her property.
4 NY City Administrative Code § 26-411 (a)(2) provides in
part that when
"application is made to the court by
either party for leave to introduce
additional evidence which was either
offered and not admitted or which could
not reasonably have been offered or
included in such proceedings before the
city rent agency, and the court determines
that such evidence should be admitted, the
court shall order the evidence to be
presented to the city rent agency."
6 Rizzo and Bloedow occupied two out of the four units and were the only rent controlled tenants in the building. The landlord initially sought to evict both of them from part of their apartments to create an unregulated duplex apartment.
7 The building is composed of 4 apartments, each occupying one floor. According to the DHCR Rent Administrator, in 1996 the unregulated ground floor apartment rented for $2,835 per month; the second floor apartment which is occupied by the owner was given a rental value of $1,850 per month; Rizzo's third floor apartment is subject to rent control and the income generated from that apartment was $626 per month; the fourth floor apartment was subject to rent control that year and brought in income of $613.87 per month. This left the landlord with a profit margin slightly over 6%. The landlord would have had to take in an additional $290 a month to exceed the statutory 8 1/2%. Now that the fourth floor apartment is deregulated, Rizzo argues that the profit margin should well exceed 8 1/2% of the assessed value.
8 The issue of whether RPAPL § 749 (3) should apply to petitioner is not before the Court as no warrant of eviction has been issued at this point.