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Court Finds Building Not Subject to Rent Stabilization Based on Photographic Evidence Showing Substantial Renovations Had Been Performed

by Scott E. Mollen

Landlord-Tenant—Holdover Proceeding—Vacant Building Was in Hazardous Condition—“Substantial” Renovation Done on or After Jan. 1, 1974—Gut Renovation Was Documented—Building Not Subject to Stabilization—Sanctions Motion for Using Perjured Affidavits and Scheme to Allegedly Impair Administration of Justice Denied

A petitioner commenced a “‘no grounds’ holdover proceeding,” alleging that the parties’ lease had expired and was not renewed. The petition asserted that the premises were “not subject to rent stabilization or the ETPA of 1974, because the building has been substantially rehabilitated as family units on or after Jan. 1, 1974.” The respondent asserted “the petition incorrectly states the rent regulatory status of the apartment, rent overcharge, and breach of the warranty of habitability.” A subtenant appeared by counsel, but did not file an answer. She submitted an affidavit stating that she was not “a resident, lessee, or occupant of the subject apartment.” She alleged that “she has spent evenings in the apartment with the tenant, and she resides at another apartment…” She claims that “she is not responsible for rent or use and occupancy” for the subject apartment.

The petitioner moved for summary judgment and for sanctions against the respondent tenants “for suborning and using perjured affidavits together with a scheme designed to impair the administration of justice.” One respondent cross-moved for “an order dismissing the petition for failure to adequately describe the premises.”

The petitioner argued that it was undisputed that the parties’ lease had expired on May 31, 2017, and had not been renewed. A respondent challenged “the building’s exemption from rent regulation by reason of its having been substantially rehabilitated after 1974.”

The petitioner submitted an affidavit of its employee (employee), which stated that the building was “more than dilapidated prior to the renovations.” The employee attached “‘before’ photographs taken prior to the renovation.” He asserted that the building had been “in a hazardous condition and was 100 percent vacant.” He further stated that “the building systems: furnace, boilers, plumbing, wiring, water and sewage lines, and basement slab were obsolete and useless” and that “the building was on the edge of collapse,” “[a]ll the steel rusted beyond repair, and the floors were tilting between 3-5 degrees out of plumb due to rotting wood.”

The employee further stated that “100 percent” of all the building systems had been “completely replaced including plumbing, heating, gas, electrical wiring, intercoms, windows, roof, interior stairways, kitchens, bathrooms, floors, ceilings and wall surfaces” and “doors…including replacing non-fire rated items with fire rated ones. The fire escapes were 100 percent repaired, and the pointing was done as needed, but everything else was 100 percent replaced.” Additionally, “all ceilings, flooring and plasterboard or wall surfaces in the common areas, as well as the ceiling, wall and floor surfaces in the apartments were 100 percent replaced.” He submitted photographs “depicting the apartment gutted down to the brick walls and cement flooring.” There were “no interior walls, ceilings, or flooring in the apartment.” Another photograph showed workers “framing new interior walls, and…the new flooring…being installed.”

The petitioner submitted, inter alia, copies of numerous building permits issued for “the gut renovation…, the contract for the general contractor [GC],” and “the bills and proof of payment” showing costs of $678,976.13, which had been paid to the GC. That number did not include the cost of “masonry, steelwork subs, or materials.”

The petitioner cited RSC 2520.11(e), which provides that “if a specified percentage of 75 percent of listed building wide and individual housing accommodation systems have been replaced and this work commenced in a building that was in a substandard or seriously deteriorated conditions, the requirements are met,” in support of its argument that the premises are not stabilized. Although the code requires 75 percent of the building systems be replaced for “substantial rehabilitation,” here, “the petitioner replaced 100 percent of the systems.”

The opposition did not submit an affidavit from anyone with personal knowledge or from an expert witness. Although DHCR can opine as to whether a contemplated project would “qualify for substantial rehabilitation,…application to the DHCR is not mandatory and the civil court can adjudicate these issues.”

The respondents countered that there were material issues of fact as to whether the alleged work constituted substantial rehabilitation and that the “affirmative defenses of breach of the warranty of habitability and harassment,” bar a finding of summary judgment for the petitioner. The respondent also questioned whether the petitioner had appropriate permits for the alleged gut rehabilitation.

A respondent cited a description of the building, which advertised the building for sale in April 2012. The advertisement stated that the building had been renovated within the last two years. The petitioner countered that “any marketing materials from the prior owner which ‘puffed’ the condition of the building in order to sell it,” did “not create an issue of fact that the building was not substandard.”

The court found that it was undisputed that the building was 100 percent vacant and 100 percent of the systems had been replaced. Thus, the court held that the petitioner established by “a preponderance of the credible evidence that a substantial rehabilitation of the entire building was performed after 1974.” Since the respondent failed to raise any issues of fact, the court granted the petitioner’s motion for summary judgment and awarded the petitioner a final judgment of possession. The court severed a respondent’s counterclaim for harassment.

With respect to the sanctions motion, the petitioner had attached photographs showing a respondent on vacation in various locations around the world between July 30, 2016 and Sept. 22, 2017. The petitioner alleged, inter alia, that the respondent did not qualify for free legal services, based on his vacation history and that the respondents fraudulently represented to HPD and the Housing Part that the building was an SRO, and that a respondent was responsible only for the rent of one room, rather than the entire apartment. The respondent’s counsel stated that his office had examined the respondent’s information and determined that he is, in fact, eligible for free legal services. The court, inter alia, denied the motion for sanctions, but awarded the petitioner a final judgment of possession.

Comment: Adam Leitman Bailey of Adam Leitman Bailey, P.C., attorney for the petitioners, noted that it is often difficult for a new owner to establish the condition of a building on a past date. Here, he “embedded photographic evidence directly into his written argument, making the pictures say a thousand words.” The pictures showed “the ‘dilapidated’ condition of the building” and demonstrated the significant renovations done by his client.

Michael Watson, of Brooklyn Legal Services, counsel for a respondent, preferred not to comment beyond noting that the case is being appealed.

884 Madison Street LLC v. Aurello and Tsivicos, Civ. Ct., Kings Co., Housing Pt., L&T Index No. 70844/2017, Sikowitz, J.

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