M E M O R A N D U M

SUPREME COURT: QUEENS COUNTY
IA PART: 7
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MATTER OF DOLORES HOROWITZ, etc.,        INDEX NO. 3765/99
et al.
                                                                                  BY: DYE, J.
         - against -

                                                                               DATED: SEPTEMBER 27, 1999
STATE OF NEW YORK - DIVISION OF
HOUSING AND COMMUNITY RENEWAL,
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In this Article 78 proceeding petitioners seek a judgment reversing the decision and order of respondent State of New York Division of Housing and Community Renewal ("DHCR") dated December 16, 1998, and granting injunctive and declaratory relief prohibiting respondent from using the form allegedly used to notify petitioners of the major capital improvement proceeding, and further enjoin respondent from using said form throughout the state, and enjoin any such proceedings presently pending in which form was utilized to give notice to the tenants. WHP LeHavre Inc. cross-moves for leave to intervene.

Petitioner Dolores Horowitz resides in building #27 in the LeHavre apartment complex located at 166-25 12th Avenue, Whitestone, New York. Petitioner seeks to challenge the manner in which the DHCR served the major capital improvement notice and application on her, and upon all effected rent stabilized tenants, and to challenge the DHCR's order of December 16, 1998 which granted the landlord's application for a major capital rent improvement (MCI) rent increase. Petitioner Robert A. Katz is the attorney for the LeHavre Tenants Association and was the designated petitioner in the petition for administrative review in the administrative proceeding. While the LeHavre is a 35 building complex, the MCI application only concerned building #27 which has only three rent stabilized tenants. The remaining tenants are co-operative shareholders. Of the three rent stabilized tenants residing in building #27, only Ms. Horowitz and another tenant are members of the LeHavre Tenants Association.

On July 18, 1997, LeHavre Owners Corp. filed an application with the DHCR for a rent increase based upon the installation of a new roof in May 1995. The DHCR mailed notices to the three rent stabilized tenants of building #27 on July 23, 1997. This notice stated that it was a summary of the facts for an application filed by the building's owner for a rent increase based on an MCI, and stated that if the tenant wished to comment he or she could write a signed, dated response on the back of the notice and return it within 30 days or request an extension. The notice stated that the owner was seeking a rent increase of $4.31 per room, per month. None of the three tenants responded to this notice. The DHCR sent the owner notices dated August 26, 1997 and September 24, 1997 requesting further information, and following an extension of time to respond, the owner submitted the requested documents on December 31, 1997. On January 7, 1998, the Rent Administrator issued an order granting the owner's application of an MCI rent increase for a new roof in the amount of $3.10 per room, per month.

Robert Katz, thereafter, filed a petition for administrative review ("PAR") on behalf of the LeHavre Tenants Assocation, Inc., alleging that the owner was not a proper MCI applicant, that the DHCR failed to consider that a roof had been previously installed in 1985, and that, upon information and belief, not all of the rent stabilized tenants were served with notice of the MCI application. The owner submitted a response to the tenants' PAR on March 13, 1998, asserting that the tenants failed to respond to the proceeding before the Rent Administrator and that their PAR lacked merit.

The Deputy Commissioner, in a decision and order dated December 16, 1998, denied the PAR on the grounds that "all of the rent stabilized tenants were properly served with the instant MCI application, but failed to submit any responses or objections thereto." The Deputy Commissioner, thus, found as the tenants could have raised the same issues before the Rent Administrator, but failed to do so, these issues could not be raised on appeal.

Petitioners now seek a judgment vacating the DHCR's decision and order of December 16, 1998 as arbitrary and capricious in that the DHCR's notice of the MCI application was insufficient, violative of due process and contrary to the provisions of the Rent Stabilization Code.

Respondent DHCR, in opposition, asserts that petitioners have failed to demonstrte that the issues raised by the tenants could not have been raised before the Rent Administrator. Respondent, therefore, asserts that the Commissioner's determination has a rational basis in the law and the record, and should be affirmed.

WHP LeHavre, Inc., the owner of the majority of the rent stabilized units in the cooperatively owned subject building cross-moves to intervene in this proceeding, on the grounds that it is a party affected by the agency's decision and order. The DHCR does not oppose the cross motion to intervene, while petitioners oppose the motion on the grounds that it is not the real party in interest.

At the outset, the cross motion by WHP LeHarve, Inc. to intervene in this proceeding is denied. An affidavit in support of the cross motion has been submitted by Edwin K. Zarkin, a partner in Realty Program Consultants, LLC, the company responsible for preparing the MCI application on behalf of LeHavre Owner's Corp. Mr. Zarkin does not state whether he is an officer or shareholder of LeHavre Owners Corp. Therefore, the court is unable to determine who the real party in interest is, and finds that intervention is unnecessary as Mr. Zarkin only seeks to advance the arguments made by the DHCR.

It is well settled that the court's power to review an administrative action is limited to establishing whether the determination was warranted in the record, has a reasonable basis in law, and was neither arbitrary nor capricious. (Matter of Colton v Berman, 21 NY2d 322; Matter of McKinnon v Aponte, 196 AD2d 655.) The court finds that the DHCR's order of December 16, 1998 is not supported by the record, and is contrary to law and, therefore, must be vacated.

It is undisputed that the notices sent by the DHCR to the three rent stabiized tenants on July 23, 1997, comported with the agency's mailing practices and is suported by affidavits from the agency's employees. These notices, however, were clearly insufficient as they did not comply with the provisions of 9 NYCRR 2527.3(a) which requires the agency to serve all adversely affected parties with a copy of the application. The DHCR's notice merely summarized the owner's MCI application and informed the tenant that the MCI application and supporting documentation could be examined at the DHCR's offices or at the owner's rental office. The DHCR, thus, did not properly serve the tenants with the MCI application and said notices cannot be relied upon by the agency in order to deny the tenant's petition for administrative review.

Petitioners' request to vacate the DHCR's order of December 16, 1998 is granted and the matter is remanded to the agency for further proceedings. Petitioners' request for injunctive relief is denied. The cross motion to intervene is denied.

Settle judgment.

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J. S. C.