In this nonpayment proceeding the Court is asked to determine whether the petitioner can obtain a possessory money judgment to collect as "rent" monies that were "undercharged" and returned to the Department of Housing and Urban Development (HUD) by the petitioner as a result of the respondent's failure to properly report her income upon recertification.

The respondent's apartment, located at 580 Sutter Avenue, #4L, Brooklyn, New York 11207, is subsidized by HUD Section 8. On or about November 28, 2006, the petitioner commenced this nonpayment proceeding seeking to collect $4,406.55 in rent and additional rent. Prior to service of the Petition and Notice of Petition, the respondent was served with a 10 day notice of her indebtedness accompanied by a detailed explanation and breakdown for the monies sought. In a letter dated October 19, 2006, the respondent was informed that the IRS determined the "a difference exists between the income you reported and the actual income that you earned of calendar year 2003, 2004 and 2005." In addition to showing how the difference for each of those years was calculated it went on to state, inter alia, "you are responsible for the difference of the income that was not reported for the calendar year 2003, 2004 and 2005. As the head of household, it is your responsibility to ensure that all income earned or received by members of [*2]the household is accurately reported based on established policies." The letter further requested that the respondent meet with the petitioner to make arrangements to pay off the amount due, and that if she did not sign her recertification documents by October 26, 2006 she will lose her subsidy and she will be required to pay base rent.

The respondent now moves for an order dismissing the petition on several grounds, the first of which is that the petitioner has failed to follow the HUD regulations in commencing this nonpayment proceeding.

Paragraph 7 of the petition reads as follows:

Premises are not subject to rent control, rent stabilization or Omnibus Housing Act of 1983 as amended. Premises are a subsidized multifamily housing project regulated by the U.S. Dept. Of Housing Urban Development which pre-empted local rent laws. The tenant receives site based section 8 subsidy administered by HUD in its oversite capacity.

As a HUD unit, the petitioner is mandated to adhere to and follow the specific regulations regarding the termination of a tenancy. "Chapter 8. Termination" in the HUD Occupancy Handbook consists of 27 pages of detailed explanation of the grounds upon which a tenancy may be terminated and the procedure to be utilized in order to do so. (See, Resp. Ex. D)^[FN1] [*3]

The regulations state that if a tenant becomes ineligible for assistance because he or she mistakenly provided incorrect information on their recertification documents then he or she must reimburse the owner for the difference between the rent paid and the actual rent the tenant was charged. This situation is deemed a "tenant error" and is not a basis for termination.

Based upon the lengthy arguments of both counsel on the record, on August 7, 2007, and [*4]a careful scrutiny of the parties' submission of papers to the Court, which includes the termination procedures in the HUD Occupancy Handbook, the Court concludes that the petitioner cannot proceed to collect the reimbursement amount that the respondent is required to pay via the instant nonpayment proceeding.

At the outset, it should be noted that the respondent acknowledges owing the $4,092.00 that was undercharged based on her "erroneous" recertifications and is prepared to enter into a repayment schedule. However, notwithstanding the Court's extensive efforts to assist the parties in reaching a resolution of this matter, the petitioner balked and insisted on a written determination by the Court. The petitioner believes that because it opted to be magnanimous in seeking to pursue collection of the monies owed by way of a nonpayment proceeding in lieu of terminating the tenancy by commencing a holdover proceeding that dismissal of this action is not warranted. As the petitioner's attorney states in footnote 1 of his Affirmation in Opposition: "It is important to note that although the Petitioner has ample basis to terminate the Respondent's tenancy based on her repeated false certifications, Petitioner is instead, quite charitably, simply seeking to recover the rent that is rightfully due and owing to the Petitioner."

The Court is aware that the petitioner was required to reimburse HUD for the difference in the amount of rent that should have been charged to the respondent and the amount actually charged the respondent, and, thus, is legally entitled to recoup said monies. However, there is a set protocol in the HUD regulations for collecting the undercharged monies, which does not provide for the commencement of a nonpayment proceeding, and the petitioner cannot circumvent these regulations despite its admirable intentions.

The petitioner has not provided the Court with any case law that supports its position. In fact, annexed to the petitioner's Affirmation in Opposition is a copy of the Section 8 Apartment Lease (Pet. Ex. A) between the parties which makes it abundantly clear that the petitioner's only recourse if the respondent does not repay the undercharged rent is to commence a holdover proceeding.

Paragraph 18 [Tenant Obligation to Repay provides:

If the Tenant submits false information on any application, certification or request for interim adjustment or does not report interim changes in family income or other factors as required by paragraph 16 of this Agreement, and as a result, is charged a rent less than the amount required by HUD's rent formulas, the Tenant agrees to reimburse the Landlord for the difference between the rent he/she should have paid and the rent he/she was charged.

Paragraph 23 Termination of Tenancy provides in relevant part:

b. Any termination of this Agreement by the Landlord must be carried out in accordance with HUD regulations, State and local law, and the terms of this Agreement. the [sic] Landlord may terminate this agreement only for:

* the Tenant's material noncompliance with the terms of this Agreement;

* the Tenant's material failure to carry out obligations under State Landlord and Tenant Act;

***

Material noncompliance includes, but is not limited to, nonpayment of rent beyond any grace period available under State law; ... repeated late payment of [*5]rent; ... failure to repay unauthorized assistance payments; and giving the Landlord false information regarding income or other factors considered in determining the Tenant's rent.

Merging the language of the HUD regulations and the key provisions of the parties' lease agreement, the Court can find no reasonable interpretation that a nonpayment proceeding is the proper vehicle by which the petitioner may recoup the "repayment" monies that the respondent is required to pay to the petitioner.

In the event that the respondent refuses to enter into a repayment agreement, or defaults on such agreement if entered into between the parties, then the petitioner may commence a holdover proceeding on the ground of noncompliance. In the alternative, the petitioner may seek to terminate the lease agreement if it can establish that the respondent's failure to properly recertify was "fraudulent" as opposed to "tenant error".

In a case similar to the instant matter, the court held that the petitioner could not commence a nonpayment proceeding under these circumstances and was relegated to a non-possessory money judgment only. "The Court found nothing to indicate that this under reporting requires the tenant to repay this amount on penalty of lease forfeiture." Inwood Associates v. Sample, 2001 NY Slip Op 50108(U)(Dist. Ct., Nass. Co.) (Emphasis in original).

Here, as previously noted, the petitioner chose not to treat the incorrect recertifications as "fraudulent" and, thus, they are minor violations. Individually, none would permit an eviction; cumulatively the repeated violations constitute cause for eviction. The regulations provide no middle ground, i.e.: possessory money judgments which are the result of nonpayment proceedings, in order to recoup the undercharged rent which is not considered "rent" or "additional rent" under the HUD regulations.

Accordingly, based on the foregoing, the respondent's motion to dismiss on the ground that petitioner failed to follow the HUD regulations, by commencing a nonpayment proceeding to recoup "repayment" for undercharged rent, is granted and the petition is dismissed. The remaining branches seeking dismissal are denied as moot.

This constitutes the decision and order of the Court.

Dated: August 31, 2007_________________________________

GEORGE M. HEYMANN, J.H.C.