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Owners want changes in administrative hearings.

A number of owners and a Brooklyn Assemblyman would like to change a legal doctrine in order to make winning an appeal of an administrative hearing easier.

Currently, the Civil Procedure Laws and Rules (CPLR), requires an appeal of an administrative hearing under Article 78 procedures to meet the standard of being arbitrary and capricious. Case law has shaped that standard so a court justice must decide only if a rational man would have made this same agency determination.

Assemblyman Joseph Lentol intends to introduce legislation that would change the CPLR requirement so the appeal of an administrative hearing could be based on "a preponderance of the evidence," thereby negating the current case law interpretations.

"It's a small one sentence change," explained owner Richard Albert, who has lost many Division of Housing and Community Renewal (DHCR) cases where he felt the evidence was on his side.

This short rewording, however, would be a major change in New York State law. Because all local state government hearings in an administrative setting are subject to the Article 78 review, such an adjustment in the law would affect determinations involving local zoning, environmental reviews and even signage on the local deli.

"This could open a legal Pandora's Box," said one attorney, who asked not to be identified. "The municipalities will never go for it."

Assemblyman Lentol is aware that the change could cause problems for jurisdictions who count on this law to add finality to administrative reviews. "My staff is looking into it," explained Lentol. "It might be very dangerous to tamper with it and we would never introduce it willy-nilly." The Assemblyman said he will introduce the bill, however, to generate discussion.

Since administrative hearing officers are hired by the very agencies they review, real estate owners have long complained they are not truly independent or fair. "Every time they have a hearing, the hearing officer works for DHCR and the prosecuting attorney works for DHCR and they are not objective," complained Albert.

Assemblyman Lentol, a Brooklyn Democrat, became frustrated when his bills to create a separate agency for hearing officers were approved by the legislature and then vetoed at least three years in a row by Governor Cuomo, who noted the aggrieved party could always turn to the courts.

"If the governor feels court review is there, let's make it meaningful," urged Dan Margulies, executive director of the Community Housing Improvement Program (CHIP), a New York City owners group.

According to property owners and attorneys, appealing a ruling obtained at city and state agencies such as the DHCR is very difficult because of the current legal bulwark. While a judge might find the evidence to be in favor of the appealing party, if the ruling was not made either arbitrarily or capriciously and if a rational man would not have made the same decision, the hearing officer's determination must stand, no matter what the evidence shows.

"All they need is 5 percent rationality. The Supreme Court gives you such a high hurdle that no one can jump over it," complained Albert.

"I have lost many times on this issue," agreed owner Gerald Pindus, president of TedPin Realty and U.S. Energy Controls.

Attorney William E. Rosen, for the past ten years a sole practitioner in Kew Gardens, Queens, who is the former Chief litigation attorney for the old Conciliation and Appeals Board, explained the determination must be merely made on a rational basis. It doesn't matter if the judges as reasonable men would have made this decision, but only if a reasonable man could have decided this. "That is the test," Rosen added.

The rational basis further alters the arbitrary and capricious standard, agrees Niles C. Welikson, a partner with Horing & Welikson, who represents owners in landlord tenant litigation. Welikson said, "When you go in front of an agency you have one hand tied behind your back because of arbitrary and capriciousness and agency leaning. I've never understood why this should be a standard and why it remains."

Welikson said there have been arguments made that it would be costly for the court to review the hearing records. He noted, however, that the courts currently examine the record anyway to see if the ruling was arbitrary or capricious. "Even if they find factual errors were committed it is not germane to the scope of review," added Lentol.

A Westchester County Court decision Pindus received earlier this month after appealing a DHCR ruling is typical of the court's dilemma. This decision states: "It is not the function of this Court to weigh the evidence presented or substitute the Court's judgement for that of the agency. The challenged determination finds a rational basis in the record and this Court is...without authority to change it." Under a preponderance of the evidence standard, the court would be able to look at the evidence itself.

"The stakes on an administrative level are as high or higher than that in Supreme Court," Welikson observed. For instance, an owner could get hit with a building wide reduction in rent amounting to tens of thousand of dollars. If tenants had to pursue a lawsuit and the current rule was changed, they would have to win by preponderance of the evidence. This is a tougher standard for the agency to meet; noted Welikson. "I don't think litigants' rights ought to be shortcut just because they are trying to conserve judicial resources," he said.

Rosen believes it would be easier to change the standard within housing statutes alone and have it apply only for rent control and rent stabilization hearings, rather than have it affect all agencies. "It's a much greater battle to change the CPLR than to limit it to the two rent regulatory statutes," he noted.

He agreed the standard now is hard to meet. "All the agency has to do is trot out the rational basis," he explained. But he has also heard many complaints from owners about other agencies, such as the Environmental Control Board, that handles sanitation violations and other housing issues.

Margulies said, "Our position is that there is a bias, and that judicial review is meaningless because [the Article 78 hearing] is not based on law. We feel that very often the preponderance of the evidence is on the owner's side but the courts are forced to let a decision stand because there might be one strained but rational argument on the tenant's side."

Chip had endorsed the administrative hearing officers bill and Margulies said they would support the notion of expanding judicial review. "We don't feel owners are getting a fair shake before administrative hearings. People have this problem with virtually every regulatory hearing."

Pindus said the change would work for the tenant, too. "I'm happy to have a fair shake and a level playing field," Albert added.

Assemblyman Lentol would like to generate as much discussion as possible in order to see the pros and cons of such a change. "I expect we will hear a great deal of complaints about the present system because there are a lot of people who contend they got an unfair result at the administrative level and did not get their day in court because of the scope of review at the judicial level. I also expect to get letters from those expert in administrative law, criticizing the bill or outlining a way of working it. I'm sure the bar associations will render an opinion about it even without being asked."

Owners and other interested parties can write a letter to Assemblyman Lentol at Room 632 Legislative Office Building, Albany, NY 12248. Send a copy to your own legislators as well.

"It means that the idea is out in the market," said Albert. "Nothing but good can come from the discussions. The current situation is very wrong and the state agencies are very contemptuous because they know they can't be reversed. A tenant has no cost and I have to pay thousands of dollars to go up David against Goliath. You can't keep housing this way."
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Title Annotation:building owners support intention of Brooklyn, New York, New York Assemblyman Joseph Lentol to introduce legislation affecting Civil Procedure Laws and Rules of New York state
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Oct 27, 1993
Previous Article:The art of the unconventional.
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