NOTICE OF PETITION. PLEASE TAKE NOTICE that upon the annexed petition of Mercedes Casado, Paul Hertgen and

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK--IAS PART X In the Matter of the Application of Mercedes Casado, Paul Hertgen, and New State Tenants and Neighbors Coalition, Inc., Petitioners, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules, -against- INDEX NO. NOTICE OF PETITION Marvin Markus, as Chair of the New York City Rent Guidelines Board Respondents, X PLEASE TAKE NOTICE that upon the annexed petition of Mercedes Casado, Paul Hertgen and Maggie Russell-Ciardi, verified on the 8th, 11th and 8th days of September 2008, an application will be made at the Motion Support Office Courtroom, Room 130, of the Supreme Court of the State of New York, County of New York, located at 60 Centre Street, New York, New York, on the 6th day of October, 2008, at 9:30 a.m., or as soon thereafter as counsel can be heard, for a judgment pursuant to Article 78 of the Civil Practice Law and Rules ( CPLR ): 1. Annulling and vacating Respondent New York City Rent Guidelines Board Order #40; and 2. Awarding petitioner costs and disbursements incurred in prosecuting this proceeding, in an amount to be determined by this Court; and 3. Granting such other and further relief as this Court deems just and proper.

2 PLEASE TAKE FURTHER NOTICE that pursuant to C.P.L.R you are required to serve the undersigned, at least five (5) days before the return date of this petition, with a verified answer. Dated: New York, New York September 15, 2008 Respectfully submitted, By: Afua Atta-Mensah STEVEN BANKS, ESQ. Attorney in Chief Scott Rosenberg, Esq. Director of Litigation-Civil Judith Goldiner, Supervising Attorney Law Reform-Civil Afua Atta-Mensah, Of Counsel Ellen Davidson, Of Counsel THE LEGAL AID SOCIETY 199 Water Street New York, NY Attorney(s) for Petitioner(s) (212) JOHN C. GRAY, ESQ. Edward Josephson, Of Counsel Rachel Hannaford, Of Counsel SOUTH BROOKLYN LEGAL SERVICES, INC. 105 Court Street Brooklyn, NY Attorneys for Petitioners (718) To: Marvin Markus Chair New York City Rent Guidelines Board 51 Chambers Street, Suite 202 New York, NY Corporation Counsel 100 Church Street

3 New York, NY 10007

4 SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK X In the Matter of the Application of Mercedes Casado, Paul Hertgen and New State Tenants and Neighbors Index No. Coalition, Inc., Petitioner, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules, VERIFIED PETITION -against- Marvin Markus, as Chair of the New York City Rent Guidelines Board Respondent X PRELIMINARY STATEMENT 1. Respondent, New York City Rent Guidelines Board (hereinafter referred to as RGB or Board ) has exceeded its statutory authority by adopting in the 2008 Apartment and Loft Law #40 (hereinafter referred to as Order #40 ) a supplemental adjustment for a new subclass of housing accommodations (persons who have lived in a apartment for more than six years and pay less than $1,000 per month in rent). Respondent in its haste to summarily pass a supplemental increase, before it could be debated and considered by its members, contravened the provisions of the Emergency Tenant Protection Act which delegate to the legislature of each locality the power to determine which classes of housing accommodations may be subject to different rent guideline adjustments. 2. Moreover, Respondents Order #40 is preempted by the New York State Rent Stabilization Law which prohibits the examination of events more than four (4) years in the past when determining the legal regulated rent for a rent-stabilized housing unit. The Rent Guidelines

5 Board also violated the Rent Stabilization Law by failing to publish adequate findings to support Order #40. II. PARTIES 3. Petitioner, Mercedes Casado is a rent stabilized tenant who has lived in her apartment since 1992 and whose monthly rent is $ Ms. Casado s renewal lease will commence January 1, Petitioner, Paul Hertgen is a rent stabilized tenant who has lived in his apartment since Mr. Hertgen s monthly rent is currently $685.00, his renewal lease will commence on October 1, Petitioner, New York State Tenants and Neighbors Coalition, Inc., a not-forprofit corporation and a statewide membership organization, advocates and lobbies for tenants rights and affordable housing programs. 6. Respondent, Marvin Markus is chair of the NYC Rent Guidelines Board (RGB), a quasi-legislative entity empowered to establish rent adjustments for the approximately one million dwelling units subject to the Rent Stabilization Law in New York City. The Board holds an annual series of public meetings and hearings to consider research from staff, and testimony from owners, tenants, advocacy groups and industry experts. III. STATUTORY and REGULATORY FRAMEWORK New York City Rent Guidelines Board (RGB) 7. The existence of a public emergency requiring the regulation of residential rents for all or any class or classes of housing accommodations shall be a matter for local determination within each city, town or village. Emergency Tenant Protection Act 3(a).

6 8. Section 4(b) of the Emergency Tenant Protection Act (hereinafter referred to as ETPA ) empowers a county rent guidelines board to establish annually guidelines for rent adjustments. 9. Specifically Section (b) of the New York City Rent Stabilization Law (hereinafter referred to as RSL ) authorizes the rent guidelines boards to promulgate guidelines for rent adjustments for housing accommodations subject to the emergency tenant protection act of 1974 or the rent stabilization law. 10. Determinations as to whether a class or classes of housing accommodations are subject to local rent regulation shall be made by the local legislative body of such city, town or village. ETPA 3(a). In adopting the Rent Stabilization Law, the City Council did not establish any classes of apartment based on the longevity of their occupants or the amount of rent charged. 11. In determining whether rents will be adjusted the Rent Guidelines Board (hereinafter referred to as RGB ) must consider several factors such, the economic conditions of the real estate industry, and data on the current and projected cost of living for the affected area. RSL (b). 12. On or before July 1 of each year, the RGB shall file with the city clerk its findings for the preceding calendar year, and shall accompany such findings with a statement of the maximum rate or rates or rent adjustment commencing on the next succeeding October first or within twelve months thereafter. Such findings and statement shall be published in the City record. RSL (b). 13. On June 19, 2008 members of the RGB adopted final order 2008 Apartment and Loft Law #40, which provided for renewal increases of 4.5 and 8.5 percent for one- and

7 two-year renewal increases respectively. 14. An agency may not promulgate rules or regulations that contravene the will of the legislature, accordingly; no City agency may contravene a provision of a state statute. 15. The State Division of Housing and Community Renewal, (hereinafter referred to as DHCR ) Office of Rent Administration is the state entity charged with enforcing rent adjustments/rent regulation for dwelling units throughout New York which are subject to rent stabilization or rent control. 16. Pursuant to Section (a) of the Rent Stabilization Law examinations of rental history by DHCR or New York Courts to determine the lawful rent of a rent regulated apartment may not go back more than four (4) years. 17. Similarly DHCR has promulgated regulations which require that the rental history of housing accommodations prior to the four (4) year period preceding the filing of a complaint shall not be examined. RSC Section (2)(ii). FACTS 18. The Rent Guidelines Board ( the Board ) began its public meeting process for 2008 on March 25, At that first meeting, the Board s staff presented a report and the Deputy Commissioner of the New York City Department of Housing Preservation and Development testified. At the next meeting on April 15, 2008, the Board s staff presented another report and the Commissioner of the New York City Department of Finance testified. On April 29, 2008, the Board presented a third report. On May 2, 2008, testimony was given by six representatives from the Apartment Owners, eight representatives from the Apartment Tenants and three representatives from the Hotel tenants. 19. On May 5, 2008, the Board adopted proposed rent guidelines for apartments,

8 lofts and hotels. On May 6, 2008, the Board issued a public notice announcing that the proposed rent guidelines would be published in accordance with the City Administrative Procedure Act and that the public would have a minimum of 30 days to review and consider the proposals prior to the public hearings. In the public notice, the Board provided the schedule for the public hearings and final vote. Further, the Board declared that written comments on the proposed deadlines had to be received by June 16, In their proposed guidelines, the Board proposed that the annual adjustment for renewal leases for apartments shall be for a one year lease 3.5% to 7.0% and for a two year lease 5.5% to 9.5%. See, N.Y.C. Rent Guidelines Board Notice of Opportunity to Comment Proposed 2008 Apartment Order #40, dated May 6, Additionally the proposed order ruled out additional increases stating: PROPOSED SUPPLEMENTAL ADJUSTMENT There shall be no supplemental adjustment for apartments renting below any specified amount for renewal leases. and also stating: PROPOSED EQUALIZATION ALLOWANCE There shall be no equalization allowance for apartments continuously occupied for a specified period of time for renewal leases. See, N.Y.C. Rent Guidelines Board Notice of Opportunity to Comment Proposed 2008 Apartment Order #40, dated May 6, Included in the proposed guidelines was an additional request for comment in which the Board sought comments on two issues. The first was whether there should be a supplemental equalization allowance for apartments continuously occupied for some specified period of time and the second issue was whether there should be an additional adjustment for

9 apartments renting below a specified amount of rent. This request noted that the Board had not proposed a supplemental equalization allowance nor a supplemental adjustment and that in fact such a proposal had been debated and/or included in motions that were not passed by the Board. 22. On June 3, 2008, a public meeting was held and at that time representatives from the New York State Division of Housing and Community Renewal testified. 23. The first public hearing was held on June 11, 2008 in Brooklyn. At that hearing, several landlords testified and proposed a minimum rent increase of $60 a month. 24. The second public hearing was held on June 16, On June 19, 2008, the Board s staff released a twenty two page memo to Board members analyzing the impact of a minimum dollar amount of rent adjustment on long term tenants. The vote on the final rule was scheduled for 5:30 pm that evening. 26. Two Board Members proposed adjourning the meeting to consider the new guideline proposal and the information provided by the Board staff earlier that day. The Board rejected this proposal, voting seven to two against it. 27. The Board adopted the a final order 2008 Apartment and Loft Law #40, which provided for renewal increases of 4.5 and 8.5 percent for one- and two-year renewal increases respectively. Order #40 further provided for a supplemental increase applicable to tenants who have resided in their apartments for more than six years and whose rents are less than $1,000 per month: such tenants are to pay increases of no less than $45 or $85 for one- and two-year renewals. Hence a tenant with a rent of $ would pay a 14% increase, rather than 8.5%. PLAINTIFF(S) FACTS 28. Mercedes Casado lives at 509 W. 212th Street, Apt. 4H, New York, New York.

10 She is fifty years old and lives alone. 29. Ms. Casado commenced her tenancy in February Her rent is $ Her renewal lease will commence on January 1, 2009 at which time pursuant to Order #40, she will be subject to the supplemental increase and her rent will increase $85 to $ Ms. Casado is a home attendant and is employed by Union Settlement Home Care. She earns $ a month. Currently she pays 48% of her income towards her rent. Under Order #40, she would have to pay 53% of her income towards her rent. 31. Ms. Casado s apartment is in need of repair. She has four broken windows, a light in her kitchen does not work, there is a hole in her bathroom floor and the bathroom sink is clogged. She has reported these problems to her landlord and asked for repairs. Her landlord has not made repairs. 32. Paying this increase would be a hardship on Ms. Casado. Ms. Casado would have trouble paying her utility bills. It will be harder to pay for food and to pay for using washing machines and dryers to wash her clothes. 33. Paul Hertgen lives at 30 Ebbitts Street, apartment 2J, Staten Island, New York. 34. Mr. Hertgen and his wife moved into the apartment seventeen (17) years ago. Sadly, Mrs. Hertgen died from cancer in January Mr. Hertgen now lives alone in the apartment they shared for more than a decade. 35. Mr. Hertgen works full time as a truck driver employed with Scaramella Trucking, Inc. In 2007, Mr. Hertgen acted as the primary caregiver to his then ailing wife while still working as a truck driver, that year Paul made about $27, and his wife received about $10,000 in social security benefits. 36. Mr. Hertgen s rent is $ and as of October 1, 2008 will be increased to

11 $ per month. This increase of 12% is nearly double the increase that other rent stabilized New Yorkers who opt for a two year renewal lease. 37. Paying this increase will be present a serious hardship for Mr. Hertgen. As there is now only one source of income in his household since the untimely passing of his wife, Mr. Hertgen will be burdened with paying all of the household bills himself. 38. New York Tenants and Neighbors Coalition, Inc., a not-for-profit corporation and a statewide membership organization, advocates and lobbies for tenants rights and affordable housing programs. 39. Maggie Russell-Ciardi currently serves as the executive director of New York State Tenants and Neighbors Coalition, Inc.(hereinafter referred to as T&N ). The Executive Director is responsible for leading the agency s achievement of its mission and financial objectives. She has primary responsibility for development and fundraising, financial management, external relations, new program development, and advocacy. 40. Currently T&N has 2400 individual members in New York City and T&N advocates on behalf of New York City tenants living in the one million units of rent regulated housing. CLAIMS FIRST CAUSE OF ACTION 41. Petitioners, repeat and re-allege each and every allegation of 1-40 as set forth herein. 42. Respondent is prohibited by statute from creating classes of housing accommodation subject to different guideline adjustments, and no such classes have been created by the City Council. The adoption of a supplementary adjustment as codified in Order #40

12 violates ETPA Respondent s promulgation of Order #40 is arbitrary, capricious, an abuse of discretion, and contrary to law. SECOND CAUSE OF ACTION 44. Petitioners repeat and re-allege each and every allegation of 1-40 as set forth herein. 45. The Rent Guidelines Board Order #40 authorizes rent increases whose validity can only be determined by a review of the rental history of the subject apartments prior to the four (4) year limit established by the Rent Stabilization Law. 46. The New York City Rent Guideline Board s adoption of a supplementary adjustment as codified in Order#40 is in conflict with RSL (a). 47. Respondent s Order #40 is therefore arbitrary, capricious, an abuse of discretion, and contrary to law. THIRD CAUSE OF ACTION 48. Petitioners repeat and re-allege each and every allegation of 1-40 as set forth herein. 49. Section (b) of the Rent Stabilization Law requires Respondent to file with the City Clerk its findings for the preceding calendar year together with its final guidelines Order. 50. The New York City Rent Guideline Board s failed to file adequate findings to support its adoption of the supplementary adjustment as codified in Order#40 and thus violated RSL (b). 51. Respondent s Order #40 is therefore arbitrary, capricious, an abuse of

13 discretion, and contrary to law. WHEREFORE, Petitioners requests that this court issue a Judgment: (a) Declaring that the New York City Rent Guidelines Board (RGB) does not have the authority to create a new class or classes of housing accommodations, and/or create rent adjustments for housing accommodations not specifically created by the legislature; and (b) Vacating Rent Guidelines Board Order #40 ; and (c) Awarding petitioner costs and disbursements incurred in prosecuting this proceeding, in an amount to be determined by this Court; and (d) Granting such other and further relief as this Court deems just and proper. Respectfully submitted, STEVEN BANKS, ESQ. Attorney in Chief Scott Rosenberg, Esq. Director of Litigation-Civil Judith Goldiner, Supervising Attorney Law Reform-Civil Afua Atta-Mensah, Of Counsel Ellen Davidson, Of Counsel THE LEGAL AID SOCIETY 199 Water Street New York, NY Attorney(s) for Petitioner(s) (212) JOHN C. GRAY, ESQ. Edward Josephson, Of Counsel Rachel Hannaford, Of Counsel SOUTH BROOKLYN LEGAL SERVICES, INC. 105 Court Street Brooklyn, NY Attorneys for Petitioners (718)

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