Judge reverses rent decision.

An appellate court has reversed a Bronx judge's ruling that awarded rent rollbacks and treble damages to tenants because of the owner's alleged failure to timely pay apartment registration fees.

This decision clarifies the confusion created by the judge's ruling, said Rent Stabilization Association President, John J. Gilbert III. "It prevents owners from being penalized for non-payment until they are given proper notice," he said. "This is a big win for us."

The case, argued at the Appellate level by Sherwin Belkin, a partner in Belkin, Burden, Wenig & Goldman, revolved around a lower court ruling made by Justice Howard Trussel that found a Department of Housing Preservation & Development (DHCR) notice provision unconstitutional.

A non-payment of rent proceeding was brought by owner Michael Laub against tenants at 2454 Tiebout Avenue, and the tenants agreed to pay arrears. Later, on its own, the court determined that the former owner's had failed to pay $10 annual registration fees for each apartment and hauled everyone back into court.

The judge then determined there had been a rent overcharged by both Laub and his predecessor because the statute did not permit rent increases in the absence of payment of the annual fees. Laub was deemed guilty of willful overcharges of rent and the tenant was awarded treble damages. The rent was also rolled back to 1985 levels. After the hearing, Trussel even had the parties return to court for a formal trial with the same result.

In his ruling, Judge Trussel invalidated a DHCR policy statement, which provided that penalties shall not be imposed on an owner who fails to pay annual registration fees until 60 days after DHCR sends notice of non-payment accompanied by a copy of the billed fee.

The RSA intervened and helped with the appeal that was handled by Belkin.

The law firm of Rudd, Rosenberg, Mitofsky & Hollender, as counsel to CHIP, had prepared a memorandum to assist in a motion made by Judge Trussel to reargue his decision. Joel A. Mitofsky, sid, "He then saw a different light and the Appellate Term noted the Judge Trussel erred in summarily finding an overcharge and set it down for trial."

"We were interested in the outcome of the appeal because of its importance to all of our clients," Mitofsky said. "It was difficult for all landlands who were appearing in front of Judge Trussel. This is truly an example of a judge being carried away."

The Appellate Division First Department, in its unanimous decision, said DHCR's rule was "neither irrational nor inconsistent" with the governing statutes and reversed Judge Trussel's decision directing him to follow the policy.

Normally, Belkin noted, the court would follow what the state agency says. What was unusual, said Belkin, was this Civil Court judge overturning a policy statement of the Division of Housing that was ultimately upheld.

"I felt very strongly that the appeal would have a lot of merit and we would prevail," Belkin added.

While the decision technically only applies to the First Department made up of the Bronx and Manhattan, Belkin said, "It is a fairly strong precedent which I would hope and expect would be followed by other departments."

The other city boroughs are located in the Second Department.

While notice to the owner is supposed to come from the DHCR, and is to allow an owner a 60-day grace period to pay the fee, Belkin said there is a chance that a tenant could bring up the issue.

"Frankly the owner is still under a grace period, but if he wants to be extremely cautious, once they pay the fees, they can eliminate the problem altogether."

If the issue is raised in court that the fees have not been paid to the Department of Finance, Belkin suggests verifying the outstanding charges and then paying them. Have proof of payment, he stressed.

"If they are brought up to speed, it should eliminate any possible claim of overcharge or treble damages," he said. Even without a formal bill from DHCR, Belkin said, "If the owner opts to be conservative, then pay it."

"Certainly if an owner wants to take it literally and say they never received any notice that there are any arrearages on fees, there should no finding [in court] of an overcharge based on fees," Belkin added.

Owner Michael Laub, president of Michael Laub Realty, called it a major victory for the industry. "Arbitrarily a judge took his own feelings out on the industry and there was such a detrimental affect on so many people," he said.

Laub, who is on the RSA Legal Committee, said there were hundreds of cases where the judge rolled the rent back to 1983 and 1984 levels.

"One was a $60,000 case," Laub said. "How can a property owner keep a building under those circumstances?"

What bothers Laub the most, he said, is that the judge did not take into consideration all the good tenants in the building who would be affected by the owner's financial condition.

"What owner can lose $60,000 per tenant?," Laub asked. "Don't judges have a responsibility to society? Our plight is to maintain good housing."

While Laub said he has been diligent in paying his fees and was unaware that the fees were not paid on this building as it was purchased out of bankruptcy, he observed there are many "negligent landlords" that have not paid the fees.