Brynhildur Thorgeirsdottir v. New York City Loft Board

Order and judgment (one paper) of the Supreme Court, New York County (Herman Cahn, J.), entered August 15, 1989, which, inter alia, dismissed petitioner’s application pursuant to CPLR article 78 to annul the determination of respondent New York City Loft Board (Board) dated March 3, 1988, modified, on the law, to the extent of (i) granting petitions of the intervening respondent landlords in consolidated actions Nos. 2, 3 and 4; (ii) reversing the order and judgment insofar as it contains findings of any rent overcharge and a direction for any cash refund to the tenants; (iii) declaring ultra vires and void those portions of New York City Loft Board Rules and Regulations (Relating to Loft Board Procedures [Loft Board Regulations]) § VII (A) and § III (E) which provide as a penalty for landlord’s delayed filing with the Board reregulation of rentals until such filing is made; and otherwise affirmed, without costs. Each of the three landlord-tenant transactions at the core of this appeal involves the situation contemplated by Multiple Dwelling Law § 286 (6) (the Loft Law) that when a departing residential tenant in a building covered by the Loft Law offers landlord, on a first refusal basis, the opportunity to purchase the fixtures and improvements installed by the tenant, and landlord accepts the offer followed by payment in full. The statutory incentive for landlord to make this purchase is his ensuing ability to lease the now-vacant unit at arm’s length for a fair market value rent, unhindered by any controlling regulation. The statute provides in pertinent part as follows: "Upon purchase of such improvements by the owner, any unit subject to rent regulation solely by reason of this article and not receiving any benefits of real estate tax exemption or tax abatement, shall be exempted from the provisions of this article requiring rent regulation” (Multiple Dwelling Law § 286 [6]). Thus, under the plain terms of the statute, deregulation of a residential unit occurs '[u]pon purchase of such improvements by the owner” and the unit "shall be exempted from the provisions of this article requiring rent regulation”. (Emphasis added.) In our view, since purchase is the definitive event for deregulation, it was beyond the power of respondent Board to defer the effective impact of the decontrolling statute to such time as landlord filed a report of the sales transaction with the Board. We would further hold that the above-cited regula [339] tions promulgated by the Board, which operate to extinguish the landlord’s right to receive market rent prior to filing of a transactional report, constitute an illegal addendum to the statute which departs from its clear legislative intent. Specifically, section VII (A) of the Loft Board Regulations states: "within 30 days of the sale of improvements * * * the owner * * * shall file a Loft Board-approved Sale Record, which provides the following information: address of IMD and location of unit; name and telephone number of incoming tenant; description of improvements conveyed; purchase price and purchaser; and rent. No rights under Article 7-C, enforceable by the Loft Board, shall be effective until such filing has been made”. (Emphasis added.) Loft Board Regulations § III (E) contains further reference to the filing requirement as a condition precedent to decontrol. We conclude that the emphasized portions of this regulation and the tracking reference in section III (E) constitute an impermissible contraction of the statutory command that deregulation shall occur at purchase. It is well settled that an administrative agency may only promulgate rules to implement a law as enacted; it has no authority to fashion any rule out of harmony or in conflict with the statute (Matter of Jones v Berman, 37 NY2d 42, 53). The Loft Board has no authority to add additional conditions or to impose further qualifications to an entitlement or status declared by the statute (Matter of Schenkman v Dole, 148 AD2d 116, 120-121). Wittlin v Rent Control Div. (89 AD2d 603, affd for reasons stated at App Div 58 NY2d 723) indicates the proper outcome of the case before us. In Wittlin a residential apartment had become eligible for decontrol when it was occupied by the owner, but the latter had failed to file a report of such decontrol with the appropriate administrative agency. At issue was whether such failure to file had the effect of reverting the apartment to controlled status. The Second Department ruled that the owner’s act of taking occupancy itself effectuated decontrol, so that the failure to file a report in a timely fashion did not affect that status. (See also, Matter of Wood v Metropolitan Hotel Indus. Stabilization Assn., 95 AD2d 560, where we held that a landlord’s late enrollment in a rent stabilization association did not countenance, as an enforcement remedy, the reversion of the rent-stabilized housing units to rent control.) All of the foregoing is not to say that the Loft Board cannot require the filing of a report of the improvements sale, and [340] the Board may even impose a reasonable monetary sanction for delay in filing or nonfiling, but what is interdicted is the imposition of a forfeiture on the landlord’s right to collect the market rental at the time fixed in the statute, and not at a later time. The statute leaves no room for the Loft Board to enact a confiscation upon the landlord by inflicting the loss of the statutory benefit of his purchase from the outgoing tenant until he files, and providing a windfall for the incoming tenant as a means of enforcing the filing requirement. Indeed, we are all in agreement that the tenants are in no event entitled to such a windfall for the entire term of their respective leases; our only difference with the dissent concerns the period elapsing between the time of purchase and the time of landlord’s filing. We conclude by noting that the Board’s filing requirement may well have a laudable data-gathering objective, but that it cannot be logically directed at eradicating the evil posited by the dissent of preventing more than one sales transaction. The landlord and his successors will never be induced to buy again what has already been purchased, and the tenant and his successors will have no title to the improvements to convey. Concur—Kupferman, J. P., Kassal and Wallach, JJ.