Quittner v. Herman

Per Curiam. The principal question on this appeal is whether the State Rent Administrator may use a recent sale price of an apartment building as a basis for fixing maximum rents or whether the current assessed valuation must be used. From the complex of facts and involved proceedings there emerges the one prominent fact that the landlord seller allowed an unusual number of vacancies to accumulate prior to the recent sale, thereby making the building especially suitable for a resale to a co-operative. It is virtually conceded that the sale [69] price was enhanced because of the number of vacancies. Decision of the principal question necessarily requires a determination whether the sale involved “ special circumstances ” which affected the price, within the meaning of section 4 (subd. 4, par. [a], cl. [1]) of the Emergency Housing Rent Control Law (L. 1946, ch. 274, as last amd. by L. 1961, ch. 337). Quite clearly, in accordance with this court’s holding in Matter of Payson v. Caputa (9 A D 2d 226), the Administrator was not required to treat the sale in question asa“ sale to co-operative ’ ’, or equivalently, as a sale to a “conduit” for a co-operative. Even if he had, however, he could have found that the special circumstances did not affect the price. Unless the purchaser’s interest in reselling the property to a co-operative could he shown to have distorted the price beyond the fair market value, the sale price may not be deemed “ affected ” (Matter of Payson v. Caputa, supra, p. 234). The fact that the seller designedly enhanced the value of the property and made it especially adaptable for conversion to the co-operative form of ownership by allowing the vacancies to remain unfilled does not mean that the increased value should not be recognized as proper market value. If, in fact, a vacant building is worth more than a full one, the greater value is nonetheless a proper market value. So long as the status of the building has not been achieved by unlawful means, the status is real, and the statute mandates use of a purchase price not infected by distortive circumstances. It is conceded that the seller did not violate any provision of the rent control laws in permitting vacancies to accumulate. Indeed, subdivision 4 of section 10 of the rent control law expressly provides that “ Nothing in this act shall be construed to require any person to offer any housing accommodations for rent” (Emergency Housing Bent Control Law, § 10, subd. 4; L. 1946, ch. 274, as last amd. by L. 1961, ch. 337). Nor, on this record, is .there any serious contention that the price paid for the property was appreciably higher than other potential buyers would have paid in an arm’s-length transaction. Consequently, as long as market value is reflected by the purchase price, and the seller has not unlawfully enhanced market value, there is no warrant for disregarding the sale price merely because the parties to the sale, past landlord and prospective landlord, have not been imbued with the spirit of rent control in managing the property. In light of the expressions in Matter of Realty Agency v. Weaver (7 N Y 2d 249, 254) and Matter of Ackerman v. Weaver (6 N Y 2d 283, 287), it may be that the Administrator is bound [70] to accept the sale involved, even if special circumstances are present, as a valuation base because it is not among the excepted transactions denominated in the statute. Whether the Administrator is so limited need not now be decided, however, since the record now before the court, and the Bent Administrator has so found, does not demonstrate that any special circumstances improperly inflated the sale price, i.e., “yielded a distorted reflection of value ” as noted by the Court of Appeals in the Realty Agency case (supra, p. 254). The Bent Administrator unquestionably violated a prior order of Special Term, by proceeding to compute the value of the property on the basis of the sale price. Although an administrative agency is generally free, in a proper case, to exercise its full discretion anew when proceedings are remanded to it, it may not do so to the extent that an order explicitly limits such discretion (1 N. Y. Jur., Administrative Law, § 209). It is recognized, however, that the Administrator misunderstood the effect of the order. Nevertheless, the tenants, having understandably declined to offer further proof to the Administrator on the very issue which Special Term had foreclosed, should now be given an opportunity to offer proof, if they can, to show that the sale price was affected by relevant special circumstances. Accordingly, the order appealed from should be modified, without costs, and the provisions in the order inconsistent herewith should be stricken and the proceeding should be remanded to the Administrator to take further proof, in accordance with the views of this court, on the issue of whether the pertinent sale involved “ special circumstances ” which affected the price, and, if necessary, to recompute the maximum rents on the basis eventually determined to be applicable. Settle order.