FILED: NEW YORK COUNTY CLERK 06/09/2022 09:51 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 154878/2022
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`RECEIVED NYSCEF: 06/09/2022
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`SUPREME COURT OF THE STATE OF NEW YORK
`COUNTY OF NEW YORK:
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`In the Matter of the Hybrid Application of
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`CONCERNED TENANTS OF KNICKERBOCKER
`VILLAGE,
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`Petitioner/Plaintiff,
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`for Judgment under Article 78 of the Civil Practice Law and
`Rules,
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`- against -
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`NEW YORK STATE DIVISION OF HOUSING AND
`COMMUNITY RENEWAL, L+M DEVELOPMENT
`PARTNERS, LLC, KV OWNER, LLC and
`the
`KNICKERBOCKER VILLAGE TENANTS ASSOCIATION,
`Respondents/Defendants.
`
`X
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`X
`
`Index No.: _________
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`COMBINED VERIFIED
`PETITION AND COMPLAINT
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`Petitioner/Plaintiff CONCERNED TENANTS OF KNICKERBOCKER VILLAGE,
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`(“Petitioner,” or “Concerned Tenants”), by their attorneys, COLLINS, DOBKIN & MILLER LLP,
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`alleges the following as and for their Combined Verified Petition and Complaint:
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`SUMMARY OF THE PETITION
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`1.
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`This is a hybrid Article 78 proceeding and declaratory judgment action, filed by a group
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`of tenants of Knickerbocker Village, a 1934 housing development that is the only remaining Limited
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`Dividend Housing Company governed by Article 4 of the Private Housing Finance Law, and one of the
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`oldest intact affordable housing developments in the United States. Article 4 has, for over eighty seven
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`years, set the rents to be charged at Knickerbocker Village at uniform, affordable levels, on a per-room
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`basis applied the same way to every one of its 1,590 apartments, limited the dividends to be paid to the
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`owners, and applied a single standard of admission to become a tenant: that the tenant’s income not
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`exceed seven times the rent.
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`FILED: NEW YORK COUNTY CLERK 06/09/2022 09:51 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 154878/2022
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`2.
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`This proceeding/action challenges the plan developed by Respondent New York State
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`Division of Housing and Community Renewal (“DHCR”) and the putative incoming managers and
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`owners of Knickerbocker Village, KV Owner LLC, an affiliate of L+M Development Partners LLC
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`(collectively, “L+M”), as memorialized in a February 9, 2022 Memorandum of Understanding (the
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`“MOU”, annexed as Exhibit A) between DHCR, L+M and the Knickerbocker Village Tenants
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`Association (“KVTA”), that would transform Knickerbocker Village into something else entirely: a
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`project in which there will be at least five classifications of tenants, paying five different levels of rent,
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`at various income levels and under the supervision of multiple new government agencies. Forty percent
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`of vacant units will be rented to tenants making up to 130% of the Area Median Income (see,
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`www1.nyc.gov/site/hpd/services-and-information/area-median-income.page, accessed June 9, 2022).
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`That amount is currently equal to $173,470.00 for a family of four. Forty percent will be rented to
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`tenants making up to 100% of AMI (currently $133,400 for a family of four). Only twenty percent will
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`be rented to lower-income tenants. These new tenants will be subject to a separate, higher rent: $574
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`per room, as compared with the $264.34 to be charged existing non-voucher tenants. Another category
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`will be (at present) 397 households receiving Project-Based Section 8 vouchers, under which the Owner
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`will receive $574 per room, as compared with the $264.34 to be charged existing non-voucher tenants,
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`and whose units will be subject to additional layers of supervision, by the New York City Housing
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`Authority (“NYCHA”) and the federal Department of Housing and Urban Development (“HUD”).
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`Existing tenants’ rents will be frozen for two years, and then capped at increases of no more than 2.5%
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`per year.
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`3.
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`The MOU contemplates a system of vacancy decontrol, under which, as existing tenants
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`vacate, they are replaced largely by wealthier tenants whose tenancies will largely be regulated under
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`an entirely new framework. The plain language of Article 4 prohibits this, as set forth below.
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`FILED: NEW YORK COUNTY CLERK 06/09/2022 09:51 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 154878/2022
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`FACTS AND PRIOR PROCEEDINGS
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`4.
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`Petitioner/Plaintiff is an unincorporated association of long-term residents of
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`Knickerbocker Village.
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`5.
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`Knickerbocker Village is a complex of twelve buildings, six surrounding the East
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`courtyard and six surrounding the West courtyard, encompassing one whole city block in the Two
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`Bridges area of lower Manhattan near the Manhattan Bridge. It contains 1,590 apartments and was built
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`in 1934, under the regulation of the 1926 law that is now (largely unchanged) Article 4 of the Private
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`Housing Finance Law.
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`6.
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`L+M, through its affiliates is, according to the MOU, in contract to purchase a
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`controlling interest in Cherry Green Property Corp., the sole shareholder of Knickerbocker Village, Inc.,
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`the owner of Knickerbocker Village. One such affiliate, KV Owner, LLC, is a signatory to the MOU.
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`Knickerbocker Village, Inc., the owner of Knickerbocker Village, is, inexplicably, not a party to the
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`MOU.
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`7.
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`The KVTA is an unincorporated association of tenants at Knickerbocker Village.
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`Although DHCR regulations require elections of a tenants association, the role of tenants’ association
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`is one of consultation and advocacy. See, 9 NYCRR §1927-6.3. The regulations do not make the KVTA
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`into the agent for the tenants at large, and do not empower the KVTA to make binding agreements on
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`behalf of the tenants at large.
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`8.
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`The MOU is only the most recent of numerous attempts, over the years, to deregulate
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`and/or restructure Knickerbocker Village.
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`9.
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`In 2002, the current owner requested and received DHCR approval for a voluntary
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`dissolution of Knickerbocker Village, Inc. The Supreme Court, New York County, held that the Owner
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`cannot be dissolved voluntarily, citing the plain language of Article 4. Knickerbocker Vil. Tenants Assn.
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`FILED: NEW YORK COUNTY CLERK 06/09/2022 09:51 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 154878/2022
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`RECEIVED NYSCEF: 06/09/2022
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`v Calogero, 13 Misc 3d 755 (Sup Ct, NY County, 2006), aff’d, 44 AD3d 566 (1st Dept, 2007).
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`10.
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`In 2017 the current owner held a series of unauthorized meetings with individual tenants
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`to assess whether tenants would be receptive to a cooperative conversion of Knickerbocker Village.
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`DHCR directed that it cease and desist, and stated: “DHCR is unwilling to consider a conversion of more
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`than 1,000 units of affordable rental housing in lower Manhattan to private cooperative ownership.” A
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`copy of DHCR’s letter is Exhibit B.
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`11.
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`DHCR and L+M then, on an unknown date, formulated their current plan to permit
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`affiliates of L+M to purchase a controlling interest in Knickerbocker Village, and to subject all newly
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`rented units at Knickerbocker Village, and 397 existing units, to rents of more than double the rent to
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`be charged to the rest of the existing tenants, and to begin admitting far wealthier tenants than were
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`permitted to be admitted before.
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`12.
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`L+M, purporting to represent the Owner, applied for a rent increase in October, 2021,
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`limited only to the 397 units to which it proposed to make Project Based Section 8 Vouchers available.
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`By Order dated November 30, 2021, DHCR granted the application, more than doubling the rents for
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`the voucher-subsidized units, from $264.34 per room to $574.00 per room. (Exhibit C).
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`13.
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`On information and belief it was the first time in the more than eighty-five year history
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`of Knickerbocker Village that the owner was permitted to charge some units more rent, in fact more than
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`twice as much rent, as could be charged for other units.
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`14.
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`The motivation was to secure federal funding at a higher level than would be available
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`if rents were limited to the same per-room amount across all apartments. In other words, the idea was
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`to charge the federal government rent in excess of what would otherwise be the legal rent. This is illegal
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`under 24 CFR §983.305, which limits the amount of rent payable to the owner, to the amount established
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`by “rent control or other limits under local, state, or federal law.” Compare, 24 CFR §982.509 (applying
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`FILED: NEW YORK COUNTY CLERK 06/09/2022 09:51 PM
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`INDEX NO. 154878/2022
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`the same rule to Housing Choice Vouchers); Flosar v. NYCHA, 127 A.D.3d 147 (2015) (recognizing that
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`rent regulation places a ceiling on the amount of rent an owner can collect under a voucher). The fact
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`that DHCR raised the rents for voucher units, presumably to an amount that matches the amount of rent
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`covered by the voucher plus the tenant’s contribution, is a pretext designed to evade this rule.
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`15.
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`On or around February 9, 2022 Respondents/Defendants entered into the MOU, outlining
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`the latest scheme to loosen regulations governing Knickerbocker Village. (Exhibit A).
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`16.
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`In the MOU, the KVTA purports to have agreed not to challenge future rent
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`determinations at Knickerbocker Village. It had no power to make such an agreement. DHCR
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`regulations give tenants the specific right to challenge rent determinations.
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`17.
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`In the many decades before the MOU, rents were determined by granting the owner only
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`the amount of money strictly necessary to maintain the premises and undertake necessary capital
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`projects. DHCR would approve a budget covering every expense, and the owner was required to adhere
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`to that budget. The budget included a per-room amount for rent. A sample of the budget portion of a
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`prior budget and rent determination (“BRD”), this one from the years 2015 and 2016, is Exhibit D. The
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`statutory scheme is set forth in Article 4 of the PHFL, and in DHCR’s regulations at 9 NYCRR Parts
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`1727 and 1728. 9 NYCRR §1728-1.2(b) specifies that any proposed budget or rent increase may be
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`challenged, either by a tenants’ association or by an individual tenant. This is not a right that is subject
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`to advance waiver, since that would nullify the entire role of the tenants’ association.
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`18.
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`In the MOU, DHCR agreed to the establishment of three different income tiers for
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`incoming tenants, to subsidize 397 (at present) units using Section 8 vouchers, to establish a rent for
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`voucher tenants and incoming tenants that is more than double the rent for existing tenants, and to create
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`separate budget determinations for use in determining rents for the separate classes of tenants that will
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`now be permitted at Knickerbocker Village. DHCR agreed that these provisions will take effect upon
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`INDEX NO. 154878/2022
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`the drafting and execution of a regulatory agreement incorporating its terms.1
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`19.
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`This proceeding, having been commenced within four months after the effective date of
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`the MOU, is timely in all respects.
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`20.
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`On April 8, 2022 DHCR issued a rent order incorporating the terms of the MOU, setting
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`rents for existing tenants at $264.34 per room, and the rents of incoming tenants and voucher-subsidized
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`tenants at $574.00 per room. (Exhibit E).
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`21.
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`On May 2, 2022, Petitioner filed a Freedom of Information Law request with DHCR,
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`seeking all of the correspondence, documentation and findings under which DHCR approved the
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`relaxation of Article 4 regulation at Knickerbocker Village as set fort in the MOU. (Exhibit F).2
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`22.
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`That same day, Petitioner sent DHCR a letter requesting that it abandon the MOU, and
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`notifying the agency of the legal infirmities set forth herein. (Exhibit G). There was no response.
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`23.
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`This proceeding follows.
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`THE MOU IS ILLEGAL AND SHOULD BE ANNULLED
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`24.
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`Nothing in PHFC Article 4 permits the creation of varying tiers of apartments, to pay
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`different rents, and to be admitted to a development based on different income criteria. Rather, the
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`language makes it clear that there is to be a single budget, a single standard per room rent, and a single
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`criteria for admission, for the whole development. That is how the language has been interpreted for
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`more than eighty five years.
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`25.
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`Specifically, PHFL §85, governing the determination of rents, reads as follows:
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`1
`Petitioner reserves the right to seek to amend this Petition/Complaint to challenge any such regulatory
`agreement as invalid, for substantially the same reasons set forth herein.
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`2
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`Petitioner reserves the right to seek to amend this Petition/Complaint upon receipt of the requested documents.
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`FILED: NEW YORK COUNTY CLERK 06/09/2022 09:51 PM
`NYSCEF DOC. NO. 1
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`INDEX NO. 154878/2022
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`RECEIVED NYSCEF: 06/09/2022
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`1. The commissioner shall fix the maximum rental per room to be
`charged the tenants of the dwellings furnished by a housing company,
`the average of such rentals for the dwellings in any project not to exceed
`the maximum average rental prescribed by law, except as provided in
`section eighty-seven. Such maximum average rental rate shall be
`determined upon the basis of the actual final cost of the project
`containing such rooms so as to secure, together with all other income of
`the housing company, a sufficient income to meet all necessary
`payments to be made by said housing company, as hereinafter
`prescribed, and such room rental rates shall be subject to revision by the
`commissioner from time to time. The payments to be made by a housing
`company shall be
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`(a) All fixed charges, and all operating and maintenance charges
`and expenses which shall include a charge to be fixed by the
`commissioner to reimburse him in whole or in part for the expenses of
`inspection, supervision and auditing, taxes, assessments, insurance,
`amortization charges in amounts approved by the commissioner to
`amortize the mortgage indebtedness in whole or in part, improvements
`and additions to the projects to the extent and in the amount approved
`by the commissioner; depreciation charges if, when and to the extent
`deemed necessary by the commissioner; reserves, sinking funds and
`expenses essential to operation and management of the project in
`amounts approved by the commissioner.
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`This language plainly sets a single average per room rental rate for “the project.” It refers to the rental
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`rate in the singular: “the maximum rental per room.” It requires an average to be computed: the average
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`is “the average of such rentals for the dwellings in any project.” The maximum is therefore a single
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`number set based on the consideration of all of the apartments in the development. This language simply
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`does not permit DHCR to approve alternative rental rates that are more than twice as much, if paid by
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`federal vouchers, or by newcomers to the development, as they would be if they are not.
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`26.
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`Because this language is plain and unequivocal, it must be applied as written.
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`
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`‘Absent ambiguity the courts may not resort to rules of construction to
`[alter] the scope and application of a statute’ because no such rule
`‘gives the court discretion to declare the intent of the law when the
`words are unequivocal’ (Bender v Jamaica Hosp., 40 NY2d 560, 562,
`356 NE2d 1228, 388 NYS2d 269 [1976]; see also McKinney's Cons
`Laws of NY, Statutes § 94, Comment HN8 [‘(t)he (l)egislature is
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`presumed to mean what it says’]).
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`Kuzmich v. 50 Murray St. Acquisition LLC, 34 N.Y.3d 84, 91-92 (2019). There is simply no room in
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`PHFL §85 for DHCR to approve a multi-tiered rent structure at Knickerbocker Village.
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`27.
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`Moreover, agencies are required to adhere to their precedents and longstanding practices,
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`and cannot simply disregard them out of convenience. An administrative agency is required to adhere
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`to its interpretation of the statutes and regulations it administers, and can depart from or change those
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`policies only when its decisional law or promulgated regulations provide clear notice that it is doing so
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`and of the reasons for the change. Richardson v. New York City Department of Social Services, 88
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`N.Y.2d 35, 643 N.Y.S.2d 19 (1996); Matter of Lafayette Storage & Moving Corp., 77 N.Y.2d 823, 566
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`N.Y.S.2d 198 (1991); Matter of Martin, 70 N.Y.2d 679, 518 N.Y.S.2d 789 (1987); Matter of Charles
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`A. Field Delivery Service, 66 N.Y.2d 516, 498 N.Y.S.2d 111 (1985).
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`28.
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`Here, DHCR has never provided the public with a sustainable reason for disregarding
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`more than eighty-five years of precedent interpreting PHFL §85 as setting a single per-room rent for
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`Knickerbocker Village. Its failure to adhere to that precedent is inherently arbitrary and capricious.
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`29.
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`PHFL §85-a restricts admission to Knickerbocker Village to tenants whose expected
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`income will be seven times the monthly rent, or 100% of the area median income, except that families
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`with two or more dependents may be admitted if their income is 125% of AMI. The MOU illegally
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`undermines these statutory criteria, by allowing tenants with no dependents at all, making up to 130%
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`of AMI, to be admitted. Moreover, nothing in PHFL §85-a permits a certain percentage of units to beset
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`aside for higher-income tenants: there is but one admission criterion.
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`30.
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`Lastly, as noted above, the MOU illegally purports to curtail the rights of future tenants
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`to challenge Budget and Rent Determinations. 9 NYCRR §1728-1.2(b) specifically permits individual
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`tenants to challenge such determinations. That right cannot be waived. See, Estro Chemical Co. v. Falk,
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`303 N.Y. 83, 86-87 (tenant cannot waive right to challenge the rent: “[k]nowledge on the part of a
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`landlord that he [gendered in original] cannot escape liability for excess payments of rent under any
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`circumstances, tends to insure compliance with the statute.”); Riverside Syndicate v. Munroe, 10 N.Y.3d
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`18, 22 (2008) (agreement to waive rent limits void, even in exchange for landlord agreeing not to evict);
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`Jazilek v. Abart Holdings LLC, 10 N.Y.3d 943 (2008) (principle of nonwaiver renders court-ordered
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`agreement void); Extell Belnord LLC v. Uppman, 113 A.D.3d 1, 10 (1st Dept., 2013) (principle of
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`nonwaiver renders DHCR-approved consent order void); Drucker v. Mauro, 30 A.D.3d 37, 41 (1st Dept.,
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`2006) (agreement to waive rent limits void, even in exchange for agreement not to subject tenant to high
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`income deregulation proceedings).
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`31.
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`Therefore, the MOU should be annulled.
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`AS AND FOR A FIRST CAUSE OF ACTION, AGAINST DHCR
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`32.
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`Pursuant to CPLR Article 78, the MOU was made in violation of lawful procedure, was
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`affected by numerous errors of law, and were arbitrary and capricious and an abuse of discretion.
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`33.
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`Pursuant to Article 78 of the CPLR, the MOU was approved in excess of the jurisdiction
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`granted to the DHCR.
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`34.
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`Pursuant to Article 78 of the CPLR, DHCR, in approving the MOU, failed to perform
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`its duty of determining whether the premises may be subjected to a multi-tier rent scheme, and
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`differential admission criteria, and its duty to preserve Knickerbocker Village as PHFL Article 4
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`affordable housing.
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`35.
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`The MOU must therefore be vacated, annulled and reversed.
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`AS AND FOR A SECOND CAUSE OF ACTION, AGAINST DHCR
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`The agency's position is not substantially justified.
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`Therefore, pursuant to CPLR Article 86, Petitioner is entitled to recover its attorneys'
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`58.
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`59.
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`fees.
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`AS AND FOR A THIRD CAUSE OF ACTION, AGAINST ALL RESPONDENTS
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`36.
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`Respondents maintain that the MOU is lawful and intend to use it as a blueprint for the
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`future governance of Knickerbocker Village.
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`37.
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`Petitioner has no adequate remedy at law that would establish that the MOU is not lawful
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`in all respects.
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`38.
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`A justiciable controversy exists between the parties concerning whether the MOU is
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`lawful.
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`39.
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`Accordingly, Petitioner seeks a declaration that the MOU is not lawful and may not be
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`implemented.
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`WHEREFORE, Petitioner demands judgment:
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`(a)
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`(b)
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`(c)
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`(d)
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`Invalidating and annulling the MOU;
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`Awarding attorneys’ fees against DHCR;
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`Declaring that the MOU is unlawful and may not be implemented; and
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`Awarding the costs of this action and such other relief as the Court finds proper.
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`Dated: New York, New York
`June 9, 2022
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`
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`COLLINS, DOBKIN & MILLER, LLP
`Attorneys for Petitioner
`277 Broadway - 14th Floor
`New York, New York 10007
`Tel. (212) 587-2400
`Fax. (212) 587-2410
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`
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`_____________________________
`By: Seth A. Miller
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`VERIFICATION
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`SETH A. MILLER, an attorney duly admitted to practice law before the Courts of the State of
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`New York, hereby affirms the truth of the following pursuant to CPLR 2106:
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`I am one of the attorneys for Petitioner CONCERNED TENANTS OF KNICKERBOCKER
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`VILLAGE (“Petitioner”) and I have read the annexed Verified Petition & Complaint, and know the
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`contents thereof. The information stated in the annexed Verified Petition & Complaint is from the
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`documents in the Administrative Record, which I know to be authentic. This verification is therefore
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`made with the requisite degree of personal knowledge required by CPLR 3020.
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`Dated: New York, New York
`June 9, 2022
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`_______________________________
`Seth A. Miller
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