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How to Navigate HPDʼs Alternative Enforcement Program


November 1, 2017

The New York City Department of Housing Preservation and Development (“HPD”), touts its Alternative Enforcement Program (“AEP”), which was established in 2007, as one of the City’s “most effective enforcement tools for addressing distressed properties.”

In theory, AEP’s fundamental purpose is to combat the City’s urban blight by forcing building owners to take swift corrective rehabilitation action to remediate Housing Maintenance Code (the “Code”) violations under threat of stiff civil penalties, which if unpaid, may result in foreclosure.

Thus, with the possibility of losing their valuable investment, owners are strongly incentivized to take immediate remedial measures to repair their buildings in order to get out of the program’s clutches and save their buildings from forfeiture.

On or about January 31st of each year, HPD selects certain severely distressed buildings into AEP. HPD has broad discretionary power to target and select buildings for admission into the Program.

The main criterion that HPD considers in selecting buildings into AEP is the ratio of open hazardous and immediately hazardous Code violations that were issued within the preceding five-year period which equals, in the aggregate, five or more violations for each apartment in the subject building.

Owners and managers of buildings selected for AEP are subsequently notified of their selection, and informed on how to be discharged from the program.

If the owner does not correct the cited conditions within the first four months, HPD will issue an AEP Order to Correct that lists the underlying conditions that require remediation. After selection, HPD performs frequent inspections to monitor the correction of violations, and may issue subsequent orders to correct for entirely new conditions which were not previously cited, requiring additional repair work by owner.

The AEP Order to Correct is then mailed to the owner, posted at the building, and also filed with the County Clerk.

Buildings not discharged within the first four months of the initial notice are subject to considerable daily penalties for each apartment cited, as well as fines for each re-inspection. These fines can be especially steep for owners with large developments or building complexes. An owner’s failure to pay the bill may result in a tax lien being placed against the property, and thereafter, foreclosure.

In 620 West 182nd Street Heights Associates, LLC v. The City of New York Department of Housing Preservation and Development, the First Department Appellate Division recently overturned a lower court decision that had held that an AEP Order to Correct was arbitrary and capricious.

The subject building had 93 outstanding class “B” and “C” violations when it was originally picked for AEP. The owner made several requests for an inspection to be removed from the program, but HPD refused to discharge owner because the violations were allegedly not corrected.

Although multiple re-inspections were held, HPD again denied the building discharge due to open violations. Subsequent HPD inspections resulted in the lodging of additional violations in newly cited units that were not originally contained in the underlying Order to Correct.

HPD’s expert, who was not a licensed engineer, opined that the flooring in the six newly cited units was so poor that he believed all of the floor joists needed to be replaced to address a defective infrastructure problem. Additionally, HPD’s expert testified that based upon his visual observations, the building’s historic repeated violations for leaks and water damage, were caused by defects in the building’s water supply and waste lines, requiring major renovations to fix the infrastructure.

That testimony was controverted by the owner’s expert, a licensed New York engineer who opined that he did not observe any excessive sloping or sagging in the floor, any evidence of chronic leaks, or any structural defects. Thus, the lower court found that HPD’s subsequent Alternative Enforcement Order was arbitrary and capricious with respect to the newly cited violations in the six new units because no violations were previously issued for those apartments.

However, the Appellate Division recently reversed the lower court, finding that the Alternative Enforcement Order had a rational basis. The court reached this result even though HPD didn’t have a licensed expert. Also, in ignoring the owner’s expert’s findings, the Court stated that “even if different conclusions could be reached as a result of conflicting evidence, a court may not substitute its judgment for that of the agency.”

The Court went even further ruling that HPD “has broad discretion in evaluating pertinent factual data and inferences to be drawn.”

This is significant since it means that courts will not disturb HPD’s cited violations based upon its own fact-finding, even where those facts would appear to be controverted by experts, further expanding HPD’s already broad discretionary powers. In sum, HPD’s carte blanche in selecting buildings for participation, and its assessment of penalties are now unequivocally legally ironclad.

Unless subsequent statutory authority or case law changes the playing field, owners who become enmeshed in AEP are left in a formidable quagmire.

If an owner is selected, it should immediately engage counsel, along with a team of architects or engineers and contractors to commence repairs to the cited conditions on an extremely expedited basis, and to obtain emergency court-ordered access from any recalcitrant tenants who refuse to grant access to units where defective conditions have been cited. Also, the owner’s engineer or architect should inspect the conditions to determine their cause and origin.

If the expert finds that the defective conditions were caused by negligence or abuse of some other third-party, it may show that it is not responsible to correct, thereby insulating it from penalties.

The owner should also make all possible efforts to keep all communication with HPD in writing to document its corrective actions and have its experts self-certify repairs for purposes of demonstrating that it corrected the violations within the timeframe specified in HPD’s order, which may also deflect liability.

It will be interesting to see if the Legislature changes the law to diminish HPD’s immense discretionary authority under AEP in the future, but presently, HPD’s power of selection and enforcement under this program remains unbounded.

Original Article

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