Viohl v. Chelsea W26 LLC

2024 NY Slip Op 34528(U)

• Court: New York Supreme Court, New York County
• Decided: December 27, 2024
• Docket: Index No. 158722/2022
• Status: Unpublished

Opinion

Viohl v Chelsea W26 LLC 2024 NY Slip Op 34528(U) December 27, 2024 Supreme Court, New York County Docket Number: Index No. 158722/2022 Judge: Suzanne J. Adams Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 158722/2022 NYSCEF DOC. NO. 59 RECEIVED NYSCEF: 12/30/2024

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY

PRESENT: HON.SUZANNEJ.ADAM S PART 39 ., Justice -------------------X INDEX NO. 158722/2022 S. B. VIOHL MOTION DATE N/A Plaintiff, MOTION SEQ. NO. 002 -v- CHELSEA W26 LLC, DECISION + ORDER ON MOTION Defendant.

-------------------X

The following e-filed documents, listed by NYSCEF document number (Motion 002) 27, 28, 29, 30, 31, 32,33, 34, 35, 36, 37, 38, 39,40, 41,42,43,44,45,46,47,48, 49, 50, 51. 52, 53, 54, 55, 56, 57 were read on this motion to/for JUDGMENT - SUMMARY

Upon the foregoing documents, it is ordered that defendant Chelsea W26 LLC's (Chelsea

W26) motion is denied. This matter was c·ommenced in October 2022 as a class action brought

on behalf of S.B. Viohl (Viohl) and other similarly situated rent stabilized tenants in the building

located at 260 West 26th Street in Manhattan, of which Chelsea W26 is the fee owner. By decision ·

and order of this court dated February I 7, 2023, the court granted plaintiffs' motion to certify a

class and a sub-class to the extent set forth in the parties' stipulations resolving the parameters of

membership in the class and sub-class. Chelsea W26 now moves pursuant to CPLR 3212 to

dismiss the complaint. Plaintiff opposes the motion. The court notes that the only documents

annexed to the parties' papers relate to Viohl's apartment and that there is currently no evidence

before the court concerning the rest of the. building's rent stabilized units.

A party moving for summary judgment bears the burden of proof, by competent, admissible

evidence, that no material and triable issues of fact exist. See e.g. ; Wine grad v New York Univ.

Med. Ctr., 64 NY2? 851, 853 (1985); Sokolow, Dunaud, Mercadier & Carreras v Lacher, 299

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AD2d 64, 70 (I st Dept 2002). Once that showing has been made, the burden shifts to the party

opposing the motion to produce evidentiary proof, in admissible form, sufficient to establish the

existence of material issues of fact which require a trial of the action. See e.g., Zuckerman v City

a/New York, 49 NY2d 557, 562 (1980); Pemberton v New York City Tr. Auth., 304 AD2d 340,

342 (1 st Dept 2003). However, pursuant to CPLR 3212 (f), "should it appear from affidavits

submitted in opposition to the motion that facts essential to justify opposition may exist but cannot

then be stated, the court may deny the motion or may order a continuance to permit affidavits to

be obtained or disclosure to be had and may make such other order as may be just."

Viohl is the tenant of record of apartment 5D, a rent stabilized unit in the subject building,

which is itself enrolled in the most recently enacted amended version of the Real Property Tax

Law (RPTL) 421-a real estate tax abatement program. Id., , 2. Viohl first took possession of

apartment 5D pursuant to a rent stabilized lease for the period October 1, 2020 through September

30, 2021. See NYSCEF documents 1,, 4; 32. Viohl subsequently executed two rent stabilized

renewalleases. Id., NYSCEF documents 33, 34. Viohl's first lease allowed him to pay a lower

monthly rent pursuant to a "rent concession agreement" that was annexed to and made a' part of

that lease. Id., NYSCEF document 32. Both ofViohl's renewal leases also contained "temporary

rent concession riders" that continued the parties' reduced rent payment agreement, albeit at

increased monthly amounts. Id., NYSCEF documents 33, 34. Viohl asserts that the monthly rent

increase which Chelsea W26 sought in his second renewal lease exceeded the amount of such an

increase permitted by law. Id., NYSCEF document 1, ,, 11-13. Chelsea W26 disputes this and

asserts that the increase was proper. Chelsea W26 asserts that the lower monthly rent payments

that it collected from Viohl were "temporary rent concessions" rather than a "preferential

rent." See NYSCEF document 38 at 1-4 (defendant's mem of law). Chelsea W26 argues that

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"rent concessions" are not subject to the increase limitations applicable to "preferential rents" that

are contained in the Housing Stability and Tenant Protection Act of 2019 (HSTP A) and the Rent

Stabilization Law and Code (RSL and RSC). Id. Instead, Chelsea W26 argues that the increase

which it sought to collect in Viohl's second renewal lease was a permissible discretionary act that

accorded with the Appellate Division, First Department's, holding in Burrows v 75-25 153rd St.,

LLC (2t':5 AD3d 105 [151 Dept 2023]). Id., NYSCEF document 38, at 5-14. Chelsea W26 is

mistaken on both counts.

First, it is clear that Viohl's monthly rent is a "preferential rent." Article 3 of his first lease

("Rent") plainly states that "[y ]our monthly rent for the Apartment is $3,000.00 (three thousand

dollars) until adjusted pursuant to Article 4 below." 1 See NYSCEF document 32. The "Rent

Stabilization Rider" set forth on pages 21-14 of that lease further plainly provides that apartment

5D's "New Legal Regulated Rent" at the commencement of Viohl's tenancy is $8.012.01 per

month, but that the unit's "Preferential Rent* (if charged)" is $3,000.00 per month. Id. "' [O]n a

m_otion for summaryjudgment, the construction of an unambiguous contract is a question of law :;i;

for the court to pass on, and ... circumstances extrinsic to the agreement or varying interpretations

of the contract provisions will not be considered, where ... the intention of the parties can be

gathered from the instrument itself." Maysek & Moran v SG. Warburg & Co, 284 AD2d 203,

204 (1 st Dept 2001), quoting Lake Constr. & Dev. Corp. v City ofNew York, 211 AD2d 514, 515

(1 st Dept 1995). Here, Article 3 of Viohl 's first lease charged rent of $3,000.00 per month and the

lease's Rent Stabilization Rider provided that a $3,000.00 charge would constitute a "preferential

rent." Thus the only reasonable interpretation of this unambiguous language is that Chelsea W26

permitted Viohl to pay a preferential rent for apartment 5D. The "Rent Concession Agreement"

set forth on page 84 of that lease does not affect this finding. It merely stated that Chelsea W26

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agreed to give Viohl a rent concession totaling $4,500.00 of which $1,500.00 would be deducted

from his second month's rent bill and $3,000.00 would be deducted from his eleventh month's

rent bill. The agreement's text does not contain any mention or discussion of the terms "legal

regulated rent" or "preferential tent" and therefore it is of no moment. Consequently, Chelsea

W26's "temporary rent concession" assertion is factually unsupported.

Second, Chelsea W26's legal argument based on the Burrows holding is untenable. On

March 1, 2024, Governor Hochul signed into law Senate Bill 8011/Assembly Bill 8506 (the

"Chapter Amendments"), which amended Section 2 of Part B of Chapter 760 of the Laws of

2023 . The relevant portion of the Chapter Amendments states as follows:

"2-a. When a colorable claim that an owner has engaged in a fraudulent scheme to deregulate a unit is properly raised as part of a proceeding before a court of competent jurisdiction or the state division of housing and community renewal [DHCR], a court 'of . competent jurisdiction or the [DHCR] shall issue a determination as to whether the owner knowingly engaged in such fraudulent scheme after a consideration of the totality of the circumstances . .

"In making such determination, the court or the [DHCR] shall consider all of the relevant facts and all applicable statutory and regulatory law and controlling authorities, provided that there need not be a finding that all of the elements of common law fraud, including evidence of a misrepresentation of material fact, falsity, scienter, reliance and injury, were satisfied in order to make a determination that a fraudulent scheme to deregulate a unit was committed if the totality of the circumstances nonetheless indicate that such fraudulent scheme to deregulate a unit was committed.

"[The Chapter Amendments] shall take effect immediately and shall apply . to any action or proceeding in any court or any application, complaint or proceeding before an administrative · agency on the effective date of this act."

L 2023ch 760, Part B, § 2 (b), as amended by L 2024, ch 95, §§ 4, 5 (emphases added).

In Burrows, the First Department had held that a tenant prosecuting a rent overcharge claim

was required to establish all of the elements of a common-law fraud claim at the pleading stages

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of his/her case in order to disregard the RSL's four-year statute of limitations and four-year

"lookback rule" and seek older evidence in a building's rent registration history which might

demonstrate that the landlord had engaged in a "fraudulent scheme to deregulate" his or her

apartment. Burrows v 75-25 153rd St., LLC, 215 AD3d at 113-116. However, the Chapter

Amendments manifested the Legislature's intent to overrule and vacate the Burrows holding and

to return to the "totality of the circumstances" standard that had been enunciated in copious prior

Court of Appeals jurisprudence including Thornton v Baron (5 NY3d 175 [2005]), Matter of

Grimm v State of NY Div. of Hous. & Community Renrwal Off. of Rent Admin. (15 NY3d 358

[2010]) and Conason v Megan Holding, LLC (25 NY3d 1 [2015]). Trial courts are only now

beginning to apply the Charter Amendments. See e.g., St Nicholas 24 LLC v Chavez-Lujan, 83

Misc 3d 128(A), 2024 NY Slip Op 50755(0), * 1 (App Term, 1st Dept) ("subsequent legislation

[i.e., the Chapter AmendmentsJ clarif[ied] that 'there need not be a finding that all of the elements

of common law fraud ... were satisfied in order to make a determination that a fraudulent scheme

to deregulate a unit was committed."'); 208 Evergreen LLC v Gomez, 216 NYS3d 871, n3 (Civ

Ct, Kings County 2024) ("We now follow in the footsteps of the Legislature, which passed the

Rent Regulation Reform Act of 1997 and clarified the law on overcharges. These [Chapter]

Amendments make clear that [Burrows ... ] is no longer good law, and are returned to the Thorton

[sic], Grimm, Connison [sic] line of cases."). Having been commenced on October 14, 2022, this

matter was still pending before this court when the Chapter Amendments took effect on March 1,

2024. Applying the relevant provisions of the Chapter Amendments to this case requires the court

to reject all of Chelsea W26's arguments drawn from the now overruled Burrows holding.

One of those arguments was the Burrows court's approval of the proposition that a rent

concession should not be applied as part of a preferential rent. Burrows v 75-25 153rd St., LLC,

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215 AD3d at 115-116. The court accepted this contention on the basis that the DHCR had issued

a document ("Fact Sheet 40") setting forth the agency's policy of authorizing landlords to apply

rent concessions to specified months of a tenant's lease term without consequence, and only to

treat rent concessions that were applied in a pro-rated manner over a lease's entire term as granting

permanent reductions to an apartment's legal regulated rent (which the landlord would be required

to register). Id. Chelsea W26 argues that the rent concession riders on Viohl's original and

renewal leases cannot be factored into his preferential rent because they applied the reductions

only in specified months of each lease's term. See NYSCEF document 3.8 at 10-12. Chelsea

W26's argument is disingenuous.

As background, the enactment of the HSTPA on June 14, 2019, amended RSL § 26-511

(c) (14) and RSC § 2521.1 (g) to provide that the "legal regulated rent" for an apartment in a

building enrolled in the RPTL 421-a tax abatement program would be the monthly amount of"rent

charged and paid" at that time. See e.g. West Side Marquis LLCv Maldonado, 81 Misc 3d 143(A),

2024 NY Slip Op 50169(U) (App Term.,, 151 Dept 2024). In Viohl's case, that amount was

$3,000.00 per month. The fact that that amount is also listed on the lease as a "preferential rent"

is of no moment. 2

Under the Burrows holding, the fact that the rent concessions agreed to in Viohl's initial

and renewal leases were to be applied in certain specified months would have been sufficient to

immunize them against an argument that they conferred additional permanent reductions to

apartment 5B's legal regulated rent. However, since Burrows was abrogated, courts have resumed

considering tenants' arguments that facially discrete rent concessions actually constitute

permanent reductions which the HSTP A requires to be carried forward in renewal leases. In

Bascom v 1875 Atl. Ave Dev., LLC (227 AD3d 767 [2d Dept 2024]), which was decided after the

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Chapter Amendments were enacted, the Second Department affirmed that "prorated discounts are

actually preferential rents, which must be the rent registered" with the DHCR, and held that where

there is "evidence in the record that the apartments in [a] building were being advertised at

prorated, 'net effective' rates that took ... [a rent] concession into consideration," a tenant's claim

was sufficiently supported to survive a dismissal motion. Bascom, 227 AD3d at 768. See also

Wise v 1614 Madison Partners, LLC, 214 AD3d 550,550 (1 st Dept 2023), citing Chernett v Spruce

1209, LLC, 200 AD3d 596, 597 (1 st Dept 2021); Tomlex Realty LLC v Jeffrey S. Moore, 218

NYS3d 918 (Civ Ct_. Kings County 2024).

It appears that such evidence is present in the record. Annexed to plaintiffs' prior motion

is a collection of "Streeteasy Omnibus Listings" for a quantity of the building's apartments. See

NYSCEF document 15. A number of those listings state that "[T]he advertised rent is net effective

reflecting one month free on a 12 months lease." Id. In Bascom v 1875 At!. Ave Dev., LLC, the

Second Department held that, since "there is ... evidence in the record that the apartments in the

building were being advertised at prorated, 'net effective' rates that took the one-month concession

into consideration, ... the allegation in the complaint that the defendant improperly manipulated

the initial legal regulated rent is suf~cient to survive the defendant's motion to dismiss," because

"the lease rider 'must be read 'in the light of the circumstances existing at its making." 227 AD3d

at 768, quoting Flynn v Red Apple 670 Pac. St., LLC, 200 AD3d 607, 609 (1 st Dept 2021), quoting

Matter of Century Operating Corp. v Popolizio, 60 NY2d 483, 488 (1983). Chelsea W26's

arguments herein ignored this fact, disregarded the appellate precedent that recognized its

significance_. and do not take into consideration that Burrows has been abrogated by the Charter

Amendments. Older precedent further holds that, where there is a directive to "review ... any

available record of rental history necessary to set [an apartment's] ... proper base date rent" (i.e.,

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a "totality of the circumstances" mandate, a landlord's motion for summary judgment should be

deemed premature if discovery has not been completed. See 72A Realty Assoc. v Lucas, 49 Misc3d

137(A), 2015 NY Slip Op 5154l(U), *l (App Term, pt Dept 2015) citing 72A Realty Assoc. v.

Lucas, 101 AD3d 401,402 (I5 1 Dept 2012). As noted above, no discovery has been taken in this ·

action. Consequently, .ChelseaW26's motion should be denied and discovery should proceed in

this action.

Accordingly, it is hereby

ORDERED that defendant Chelsea W26 LLC's motion is denied.

This constitutes the decision and order of the court.

12/27/2024 DATE SUZANNE-J. ADAMS, J.S.C.

~ CHECK ONE: CASE DISPOSED NON-FINAi-. DISPOSITION GRANTED 0 DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: . INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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