Sendowski v. New York State Division of Housing & Community Renewal

Citations: 227 A.D.2d 55; 651 N.Y.S.2d 448; 1996 N.Y. App. Div. LEXIS 12510

Court: Appellate Division of the Supreme Court of the State of New York; December 16, 1996; New York; State Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The court is tasked with determining if the building owner's failure to register a vacant rent-stabilized apartment in 1985 and subsequent collection of rent increases constituted a willful overcharge, justifying treble damages under the Rent Stabilization Code. Petitioner Janusz Sendowski owns a building at 33 Carmine Street, where tenants Russell Stein and Rachel WoodneyStein filed a rent overcharge complaint with the DHCR on December 26, 1989, claiming potential overcharges and asking for treble damages. After notifying the petitioner on January 11, 1990, to provide a four-year rental history, the petitioner submitted documentation of rent increases and $19,000 in renovation costs. The DHCR later informed the petitioner of the failure to register the apartment for 1985, stating that penalties could apply. The petitioner contended that the lack of registration was due to confusion over registering a vacant unit, asserting that all other occupied apartments were registered correctly. Tenants maintained their overcharge claim despite vacating the apartment. On February 27, 1992, the DHCR issued a notice indicating that the rent charged exceeded the legal rate due to the registration failure, proposing treble damages unless the petitioner could rebut the presumption of willfulness. In response, the petitioner denied any willful overcharge, cited substantial renovations, acknowledged a previous inadvertent overcharge refund, and asserted good faith throughout the process.

On April 20, 1992, the DHCR issued a final notice indicating that the petitioner had not registered the Premises for 1985 and requested proof of registration. In a response dated May 7, 1992, the petitioner claimed the Premises was vacant in 1985 and provided a complete rental history to demonstrate that lawful rents were charged. The petitioner expressed willingness to correct any registration issues as instructed by the DHCR. Subsequently, on November 13, 1992, the DHCR Rent Administrator froze the rent at $279.11, allowed certain improvement costs, imposed a rent increase of $465.63, and applied treble damages, awarding tenants a total of $88,140.69 for overcharges. The petitioner was ordered to file the 1985 registration and subsequently filed a petition for administrative review (PAR). 

On July 29, 1994, the DHCR Deputy Commissioner granted the PAR in part, permitting the guideline increase tied to the prior tenant but upheld the rent freeze and treble damages due to the lack of registration. The petitioner initiated a CPLR article 78 proceeding, arguing the DHCR's determination was arbitrary, reiterating arguments made in the PAR, and contending that the Rent Regulation Reform Act of 1993 (RRRA) eliminated treble penalties for late registrations and should apply retroactively. The IAS Court dismissed the proceeding on August 1, 1995, finding that the petitioner did not prove the overcharge was unintentional and determined that the RRRA could not be applied retroactively since the complaint was filed before the statute’s effective date. The appeal primarily contested the appropriateness of the treble damages imposed. The court noted that a rational basis for administrative decisions should be maintained and rejected the petitioner's argument regarding the RRRA's applicability to vacate the treble damages, confirming the statute's limitations to proceedings initiated after July 1, 1991.

On April 14, 1995, the DHCR issued a memorandum eliminating the imposition of treble damages for cases filed before July 1, 1991, specifically when overcharges result solely from the owner's failure to register the initial or annual registration forms. Instead of treble damages, rent will be frozen, and interest will apply to the overcharges. However, treble damages may still apply if the overcharge is due to additional reasons beyond registration failure, or if the owner has a history of non-compliance or tenant harassment. The DHCR acknowledged the severity of treble damages in such cases. In the specific case at hand, the DHCR did not assert that the rental calculations were unlawful or that the petitioner had harassed tenants; the only violation noted was the failure to file registration for a vacant apartment, while other apartments were properly registered. The petitioner had made efforts to comply and had even refunded an inadvertent overcharge. Given the DHCR’s memorandum, the lack of evidence for willful overcharges, and the absence of a pattern of non-compliance, the imposition of treble damages was deemed arbitrary and an abuse of discretion. Consequently, the Supreme Court's judgment from August 1, 1995, denying the petition and dismissing the proceeding, was modified to vacate the award of treble damages while affirming the remainder of the decision, with no costs awarded.