Complaint,Petition: 101-01 One Group, Llc v. New York City Department Of Housing Preservation And Development, New York City Department Of Finance

On April 12, 2023 a Complaint,Petition was filed involving a dispute between 101-01 One Group, Llc, and New York City Department Of Finance, New York City Department Of Housing Preservation And Development, for Special Proceedings - CPLR Article 78 in the District Court of New York County.

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FILED: NEW YORK COUNTY CLERK 04/12/2023 04:36 PM INDEX NO. 153346/2023
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK

In the Matter of the Application of 101-01 ONE
GROUP, LLC,

Petitioner,
Index No. ________/23
For a Judgment Pursuant to Article 78 of the Civil
Practice Law and Rules,
VERIFIED
-against- PETITION

NEW YORK CITY DEPARTMENT OF HOUSING
PRESERVATION AND DEVELOPMENT and NEW
YORK CITY DEPARTMENT OF FINANCE,

Respondents.

Petitioner, 101-01 ONE GROUP, LLC (“Petitioner”), by its attorneys,

Englander PLLC, alleges as follows:

THE PARTIES

1. Petitioner is the owner of the building known as and located at 101-

01 39th Avenue, Queens, New York (the “Building”) pursuant to a deed dated August 9,

2007.

2. Respondent, the New York City Department of Housing

Preservation and Development ("HPD”), is the New York City administrative agency

responsible for the administration of 421-a tax benefits as set forth under Section 421-a

of the Real Property Tax Law (“RPTL”).

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3. Respondent, the New York City Department of Finance (“DOF”), is

the revenue service, taxation agency and recorder of deeds of the government of New

York City.

4. Venue in New York County is proper pursuant to CPLR § 506(b),

because New York County is the county where the principal offices of the respondents,

HPD and DOF, are located.

PRELIMINARY STATEMENT

5. On December 14, 2022, Petitioner learned, when its lender emailed

Petitioner asking that Petitioner wire funds to cover an “escrow deficit,” that $358,752.24

in taxes were due pertaining to the Building as of January 1, 2023,

6. Petitioner subsequently learned, after a conversation with its lender

and its own affirmative outreach to HPD, that the 421-a tax benefits issued to the

Building had been revoked retroactively to January 1, 2017. However, Petitioner never

received any notice, including any Initial Notice, of HPD’s intention to revoke the 421-a

tax benefits, nor did Petitioner receive a copy of any Determination Notice revoking the

tax benefits, as such terms are defined under Title 28 of the Rules of the City of New

York (“RCNY”) § 39-01.

7. Title 28 RCNY §§ 39-01 and 39-02 state that an Initial Notice

pertaining to the revocation of 421-a tax benefits will provide for a comment period

during which time the affected property owner may submit “a proposed cure for the

alleged Cause for Revocation[,]” and “[i]f HPD determines that the alleged Cause for

Revocation of the Tax Benefit is curable and that the Taxpayer has proposed a

practicable cure, HPD may enter into a Cure Agreement with such Taxpayer.”
2

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8. Here, because Petitioner did not receive any notice, including any

Initial Notice or Determination Notice, of HPD’s intention to revoke the 421-a tax

benefits issued to the Building, it was deprived of the opportunity to propose a cure for

the alleged Cause for Revocation. As such, the Determination Notice revoking the tax

benefits was arbitrary, capricious, contrary to law, and deprived the Petitioner of its due

process rights.

9. As is further set forth below, the Building is currently in compliance

with the requirements of the RPTL, Rent Stabilization Law (“RSL”) and Rent

Stabilization Code (“RSC”) pertaining to the regulation of the units therein. For this

reason too, the revocation of the 421-a tax benefits on or about July 27, 2022 must be

annulled, and the $358,752.24 in property taxes billed back to the Building must be

reversed and removed from the Building’s property tax account maintained by DOF.

RELIEF REQUESTED

10. Petitioner seeks an Order in the nature of certiorari pursuant to

Article 78 of the Civil Practice Law and Rules (“CPLR”), as follows:

(a) Annulling the determination of Respondent New York
City Department of Housing Preservation and Development
to revoke the 421-a tax benefits issued to the Building;

(b) Reversing the property taxes charged back to the
Building’s property tax account in the amount of
$358,752.24; and

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RELEVANT STATUTORY FRAMEWORK

Requirements of the RPTL, RSL and RSC

11. Tax benefits under RPTL § 421-a were implemented to incentivize

property developers to build new residential buildings on underutilized or

underdeveloped land by offering reduced property taxes for a set period of time,

typically between ten (10) to twenty-five (25) years.

12. RPTL § 421-a(f) provides as follows, in pertinent part, with respect

to the regulation of residential units in buildings receiving tax benefits thereunder:

(f) Notwithstanding the provisions of any local law for the
stabilization of rents in multiple dwellings or the emergency
tenant protection act of nineteen seventy-four, the rents of a
unit shall be fully subject to control under such local law or
such act … for the entire period during which the property is
receiving tax benefits pursuant to this section for the period
any such applicable law or act is in effect, whichever is
shorter.

13. The RSL and RSC impose certain obligations on owners of rent

stabilized apartments, including limitations on the rents that may be charged and the

requirement that apartments are registered annually with the New York State Division of

Housing and Community Renewal (“DHCR”). See RSC §§ 2522.5, 2522.8, 2523.5 and

2528.3.

14. RSC § 2521.1(g) provides as follows:

(g) The initial legal regulated rent for a housing
accommodation constructed pursuant to section 421-a of the
Real Property Tax Law shall be the initial adjusted monthly
rent charged and paid but not higher than the rent approved
by HPD pursuant to such section for the housing
accommodation or the lawful rent charged and paid on April
1, 1984, whichever is later.

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15. RSC § 2528.4 sets forth a penalty, in the form of a rent freeze, for

the failure to timely register a unit annually as required under RSC § 2528.3. Such

penalty is curable, however, as set forth under RSC § 2528.4(a), which provides, in

pertinent part, as follows:

The late filing of a registration shall result in the elimination,
prospectively, of such penalty, and for proceedings
commenced on or after July 1, 1991, provided that increases
in the legal regulated rent were lawful except for the failure
to file a timely registration, an owner, upon the service and
filing of a late registration, shall not be found to have
collected a rent in excess of the legal regulated rent at any
time prior to the filing of the late registration

Requirements of the RCNY

16. Title 28 RCNY Chapter 39 is titled “Revocation of Tax Benefits.”

17. “Cause” is defined under 28 RCNY § 39-01 as “any Violation,

Misrepresentation, Omission, Failure, or Discrimination, without regard to the date upon

which HPD discovers such Violation, Misrepresentation, Omission, Failure, or

Discrimination.” “Violation” is further defined, under the same section, as “any non-

compliance with applicable Law.”

18. Title 28 RCNY § 39-02 is titled “Revocation of Tax Benefits for

Cause,” and provides as follows, in pertinent part:

(a) HPD may Revoke a Tax Benefit for Cause at any time
through the procedure set forth in this section.

(b) HPD shall deliver an Initial Notice to the Taxpayer by
the method provided herein for delivery of notices.

(c) The Taxpayer may submit Comments to HPD during
the Comment Period. HPD may thereafter meet with such
Taxpayer if such Comments contain either (i) credible
evidence that a Factual Issue exists, or (ii) a proposed cure

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for the alleged Cause for Revocation which HPD determines
may be reasonably practicable.

(d) [Reserved.]

(e) If HPD determines that the alleged Cause for
Revocation of the Tax Benefit is curable and that the
Taxpayer has proposed a practicable cure, HPD may enter
into a Cure Agreement with such Taxpayer. HPD may
require the Taxpayer to record any such Cure Agreement
against the Property receiving such Tax Benefit.

(f) If HPD does not enter into a Cure Agreement with the
Taxpayer and either receives no Comments during the
Comment Period or determines after reviewing such
Comments that there is no Factual Issue concerning the
Cause for Revocation, HPD shall deliver a Determination
Notice to the Taxpayer by the method provided herein for
delivery of notices stating that the Tax Benefit has been
Revoked as of the Revocation Date set forth therein.

19. “Initial Notice” is defined under 28 RCNY § 39-01 as follows:

"Initial Notice" shall mean a written notice from HPD to the
Taxpayer stating the intention to Revoke a Tax Benefit for
Cause and the proposed Revocation Date, identifying the
Property and Tax Benefit affected, briefly describing the
alleged Cause for Revocation of such Tax Benefit, stating
the Comment Period, and providing an address for the
submission of Comments during the Comment Period.

20. “Determination Notice” is defined under 28 RCNY § 39-01 as

follows:

"Determination Notice" shall mean a written notice from HPD
to the Taxpayer delivered after the Hearing or, if there is no
Hearing, after the Comment Period stating the determination
of the Assistant Commissioner regarding whether a Tax
Benefit will be Revoked or will remain in effect. Any
Determination Notice stating that a Tax Benefit will be
Revoked shall specify the Revocation Date.

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21. Title 28 RCNY § 39-05 sets forth the method by which notices,

including Initial Notices and Determination Notices, must be sent pertaining to the

revocation of tax benefits, as follows:

HPD shall deliver all Initial Notices, Pre-Hearing Notices,
Hearing Notices, and Determination Notices to the Taxpayer
by mail to (i) the address to which DOF delivers real property
tax bills for the Noticed Property, (ii) the last address
indicated in documents recorded in the office of the City
Register for any Taxpayer holding fee title to the Noticed
Property, (iii) the last address indicated in documents
recorded in the office of the City Register for any Taxpayer
holding a mortgage on the Noticed Property, (iv) the address
of any owner registered for the Noticed Property in
accordance with Article two of subchapter four of Chapter
two of Title twenty-seven of the Administrative Code, and (v)
the address of any agent registered for the Noticed Property
in accordance with Article two of subchapter four of Chapter
two of Title twenty-seven of the Administrative Code. Any
such notice shall be deemed to have been given upon the
third day after such notice has been deposited in the United
States mail. (Emphasis supplied.)

22. Title 27 of the New York City Administrative Code, referenced in 28

RCNY § 39-05, is the provision of law requiring property owners to register multiple

dwellings with HPD. See NYC Administrative Code § 27-2097 et seq.

RELEVANT FACTUAL BACKGROUND

The Building’s Receipt of 421-a Tax Benefits

23. Records maintained by the New York City Department of Buildings

(“DOB”) reflect that the Building was newly constructed starting in or about October of

2007. Petitioner applied for and was issued a partial tax exemption under RPTL § 421-

a(1-15) in connection with the construction of the Building. A final certificate of

occupancy issued to the Building dated January 13, 2014, listing the Building as

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comprised of five (5) dwelling units. A copy of the January 13, 2014 certificate of

occupancy is annexed hereto as Exhibit A.

Statutory Notice Requirements

24. Title 28 RCNY § 39-05 requires that, in connection with its intended

revocation of 421-a tax benefits, HPD must provide both an Initial Notice and a

Determination Notice to the affected property owner by mailing such Notice to five (5)

different addresses.

25. The chart below lists the addresses identified under 28 RCNY § 39-

05 for mailing of Initial Notices and Determination Notices, and Petitioner’s

corresponding addresses. Notably, 28 RCNY § 39-05 uses “and” instead of “or”

between the fourth and fifth addresses, supporting that HPD must send the Notices to

all five (5) of the addresses listed.

Notice Required per RCNY Petitioner’s Corresponding Address

(i) the address to which DOF delivers 101-01 One Group, LLC
real property tax bills for the Noticed 4056 Junction Blvd.
Property Corona, NY 11368-5837

A copy of the most recent DOF property tax
bill for the Building is annexed hereto as
Exhibit B.

(ii) the last address indicated in “Return to” Address:
documents recorded in the office of the 101-01 One Group, LLC
City Register for any Taxpayer holding 95-42 41st Avenue
fee title to the Noticed Property Corona, NY 11368

“Grantee/Buyer” Address:
101-01 One Group, LLC
101-01 39th Avenue
Corona, NY 11368

A copy of the cover page of the August 9,

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2007 deed recorded against the Building is
annexed hereto as Exhibit C.

(iii) the last address indicated in Mortgagor/Borrower Address:
documents recorded in the office of the Joseph Giahn
City Register for any Taxpayer holding a 40-56 Junction Boulevard
mortgage on the Noticed Property Corona, NY 11368

A copy of the cover page of the April 6,
2016 mortgage recorded against the
Building is annexed hereto as Exhibit D.

(iv) the address of any owner registered 101-01 One Group LLC
for the Noticed Property in accordance 101-01 39th Avenue
with Article two of subchapter four of Corona, NY 11366
Chapter two of Title twenty-seven of the
Administrative Code A copy of the Multiple Dwelling Registration
is annexed hereto as Exhibit E.

(v) the address of any agent registered Rising Real Estate Group LLC
for the Noticed Property in accordance 95-42 41st Avenue, 2FL
with Article two of subchapter four of Elmhurst, NY 11373
Chapter two of Title twenty-seven of the
Administrative Code See Exhibit E.

26. Annexed hereto is an affidavit of Jonathan Giahn (the “Giahn

Affidavit”), Petitioner’s Managing Member and the registered managing agent for the

Building. The Giahn Affidavit states that he checks and receives mail at all of the above

addresses regularly, however, he did not receive any Notice from HPD pertaining to the

revocation of the 421-a tax benefits issued to the Building.

Petitioner’s Actual Notice of the Revoked Benefits

27. As stated above, on December 14, 2022, Petitioner’s lender wrote

to Mr. Giahn stating that the lender was “in the process of paying the New York City 2.2

property taxes, which is creating an escrow deficit.” The email attached a table showing

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$358,752.24 in “taxes due” for the Building by January 1, 2023. By way of the

December 14, 2022 email, the lender further asked that Petitioner wire funds to cover

the “escrow deficit” within five (5) calendar days. Copies of the December 14, 2022

email from Petitioner’s lender and the table showing the “taxes due” are annexed

hereto, collectively, as Exhibit F. On December 16, 2022, Mr. Giahn had a conversation

with a representative from the lender’s office, and deciphered that the 421-a tax benefits

issued to the Building had been revoked retroactive to 2017.

28. On December 19, 2022, Mr. Giahn went to HPD’s offices at 100

Gold Street to inquire about the charges but was not permitted past security since he

did not have an appointment. Therefore, Mr. Giahn wrote by email to HPD from the

lobby of 100 Gold Street describing the “shock” and “distress” he experienced stemming

from the over $358,000.00 in property taxes due and based on the revocation of the

421-a tax benefits. In his December 19, 2022 email to HPD, Mr. Giahn stated, “There is

absolutely no way I could pay this. I will lose the property if there isn’t a way to rectify

this.”

29. Emily Veale, a Senior Attorney, Compliance & Enforcement at

HPD, exchanged emails with Mr. Giahn on December 19, 2022. By email that day, Ms.

Veale notified Mr. Giahn that the 421-a tax benefits issued to the Building were revoked

on July 27, 2022 “for failure to submit annual rent registrations to DHCR from 2017-

2021,” further summarizing certain notices of the revocation that were allegedly sent to

Petitioner and relaying a settlement proposal that would require, inter alia, that

Petitioner pay “a 25% penalty of the total amount of the 421-a tax benefit received since

coming out of compliance (January 1, 2017),” and the extension of the period of rent

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stabilization for fifteen (15) years from the date of the settlement. Copies of the

December 19, 2022 emails exchanged between Mr. Giahn and Ms. Veale are annexed

hereto, collectively, as Exhibit G.

30. As stated in his Affidavit, Mr. Giahn was always aware of the DHCR

registration requirements applicable to the Building and had delegated the task of filing

the annual registrations to an assistant property manager employed by the Building’s

registered managing agent. Upon learning of the revocation of the tax benefits, Mr.

Giahn logged on to DHCR’s Annual Rent Registration Online system and discovered

that registration information had been inputted for prior years. However, the assistant

property manager who had been tasked with the assignment of registering the

apartments annually had, apparently, failed to hit “submit,” as required in order to

finalize the annual filings. Therefore, On December 22, 2022, Mr. Giahn registered the

apartments in the Building for the years 2017, 2018, 2019, 2020, 2021 and 2022. A

complete DHCR registration print-out for the Building showing that the units in the

Building were registered for the above years on December 22, 2022 is annexed hereto

as Exhibit H.

ARGUMENT

31. Pursuant to CPLR § 7803(3), a party who has been aggrieved by

an administrative determination may commence an Article 78 proceeding to determine

“whether (the) determination was made in violation of lawful procedure, was affected by

an error of law or was arbitrary and capricious or an abuse of discretion.”

32. “[A] court’s review of a determination by an agency consists of

whether the determination was made in violation of lawful procedure, was affected by

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an error of law, or was arbitrary and capricious or an abuse of discretion ….”

Montefusco v. DHCR, 22 Misc. 3d 1131(A) (Sup. Ct., NY County 2009), citing CPLR §

7803. An action is arbitrary and capricious, or an abuse of discretion, when it is taken

“without sound basis in reason” and “without regard to the facts.’” Pell v. Board of

Education, 34 NY2d 222, 231 (1974); Matter of Peckham v. Calogero, 12 N.Y.3d 424,

431, 911 N.E.2d 813 (2009).

33. Predicated on the above standards, the Court must issue a

determination reversing the Determination Notice revoking the 421-a tax benefits issued

to the Building, since the Determination issued in violation of both lawful procedure and

Petitioner’s due process rights.

1. HPD’s Failure to Provide Notices to Petitioner
as Required under the RCNY Violated
Petitioner’s Due Process Rights

34. Presumably, 28 RCNY § 39-05 includes five (5) addresses for

mailing of Notices required in connection with the revocation of 421-a tax benefits so

that the Notices are likely to be received by the affected property owner, and so that the

affected property owner will have actual notice of same and be afforded an opportunity

to cure any violation.

35. In this instance, however, Petitioner did not receive any Notice at

any of its addresses corresponding to the statutory Notice requirements. As stated in

the Giahn Affidavit, Mr. Giahn checks for mail at those three (3) addresses regularly and

regularly receives mail at all of the addresses that correspond to the statutory Notice

requirements.

36. As stated in the Giahn Affidavit:

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If [Mr. Giahn] had been notified that HPD intended to revoke
the 421-a tax benefits and/or that the Petitioner had the
ability to propose a cure for any alleged violation of the 421-
a tax benefit program, I would have promptly responded to
any Notice received in an effort to prevent the revocation of
the benefits.

37. HPD’s failure to comply with the Notice requirements set forth

under 28 RCNY § 39-05 deprived Petitioner of the opportunity to propose a cure for the

alleged noncompliance, in violation of Petitioner’s due process rights. This resulted in

DOF’s imposition of a charge of over $358,000.00 in retroactively imposed property

taxes to the Building.

38. In Matter of McCann v. Scaduto, 71 N.Y.2d 164, 172 (1987), the

New York State Court of Appeals reiterated the longstanding requirements of

procedural due process as follows:

The central meaning of procedural due process has long
been clear. “Parties whose rights are to be affected are
entitled to be heard; and in order that they may enjoy that
right they must first be notified” at a reasonable time and in a
reasonable manner. [Citing Baldwin v Hale, 68 U.S. 223,
233, quoted in Fuentes v Shevin, 407 U.S. 67, 80.)

See also Cnty. of Chemung v. Shah, 28 N.Y.3d 244, 264 (2016) (“It is well established

that procedural due process guarantees notice and an opportunity to be heard before a

claimant is deprived of liberty or a recognized property interest.”); Prue v. Hunt, 78

N.Y.2d 364, 369 (1991) (“[D]ue process requires only notice and some opportunity to

respond.”)

39. It is well settled that the due process clauses of the U.S. Const.

Amend. XIV and N.Y. Const. Art. I, § 6, in the context of an agency determination,

require that the agency provide an opportunity to be heard in a meaningful manner at a

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meaningful time prior to the deprivation of a protected interest. See Matter of Kaur v.

New York State Urban Dev. Corp., 15 N.Y.3d 235, 260 (2010).

40. Here, 28 RCNY § 39-05 requires that Initial and Determination

Notices be sent to no fewer than five (5) mailing addresses before Petitioner’s

significant property interest in the ongoing receipt of 421-a tax benefits may be revoked.

Since the Petitioner did not receive an Initial Notice of HPD’s intention to revoke the

421-a tax benefits issued to the Building, Petitioner was deprived of the opportunity to

propose a cure for any alleged Cause set forth in such Notice, in violation of its

constitutional right to due process of law.

2. Petitioner is in Compliance with the
Requirements of the RTPL, RSL and RSC

41. As noted above, Petitioner took immediate steps to come into

compliance with the registration requirements of the RSL and RSC upon learning of the

revocation of the 421-a tax benefits. Moreover, as stated in the Giahn Affidavit, Mr.

Giahn is “fully aware of the Petitioner’s obligations pertaining to rent regulation and the

receipt of the 421-a tax benefits, and always sought and intended to comply with those

requirements.”

42. For this reason, Mr. Giahn had delegated the task of registering the

units in the Building to an assistant property manager, and believed that the task had

been completed. Further, as stated in the Giahn Affidavit, renewal and vacancy

increases applied since the Building was first registered in 2013 were consistent with

those permitted by the Rent Guidelines Board, RSL and RSC.

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43. Again, RSC § 2528.4 provides that “[t]he late filing of a registration

shall result in the elimination, prospectively,” of the penalty of a rent freeze imposed by

virtue of an owner’s failure to register an apartment annually with DHCR, as required.

44. In short, the fact that the RSC provides a mechanism for the late

registration of units establishes that the failure to register an apartment annually with

DHCR is curable. As stated in the Giahn Affidavit, if Mr. Giahn had been notified of the

intended revocation of the 421-a tax benefits, he “would have promptly responded to

any Notice received in an effort to prevent the revocation of the benefits.”

45. For these reasons too, equity supports that the Determination

Notice revoking the 421-a tax benefits issued to the Building must be annulled, the

charges back-billed to the Building’s property tax account in the amount of $358,752.24

must be reversed, and Petitioner should be afforded the opportunity to cure (or establish

to HPD’s satisfaction that it has already cured) any alleged Violation of its obligations

stemming from the receipt of the 421-a tax benefits.

3. The Instant Proceeding is Timely

46. The appellate courts of the State of New York have consistently

held that the statute of limitations for Article 78 proceedings does not begin to run until

the aggrieved party receives notice of the agency’s determination.

47. Specifically, in Matter of Biondo v. New York State Board of Parole,

60 N.Y.2d 832 (N.Y. 1983), the Court of Appeals held:

We have previously held that for the purposes of the
commencement of the statutory period, the petitioner cannot
be said to be aggrieved by the mere issuance of a
determination when the agency itself has created an
ambiguity as to whether or not the determination was

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intended to be final (Mundy v Nassau County Civ. Serv.
Comm., 44 N.Y.2d 352). A similar principle should apply
when the petitioner has received no notice, ambiguous or
otherwise, of the determination by which he is said to be
aggrieved. Indeed, fundamental fairness would seem to
compel the conclusion that a petitioner should not be
held to have been dilatory in challenging a
determination of which he was not aware (cf. Matter of
Bianca v Frank, 43 N.Y.2d 168). (Emphasis supplied.)

48. Here, Petitioner never received any notice of the revocation of the

421-a tax benefits from Respondents HPD or DOF. Rather, it was only after Petitioner

was notified of an “escrow deficit” by its lender on December 14, 2022, that Mr. Giahn

affirmatively reached out to HPD in an effort to understand what accounted for the

$358,752.24 charge for taxes due a few weeks later, on January 1, 2023.

49. Courts have held that, “[b]ecause the Statute of Limitations is an

affirmative defense, the burden is upon respondent to establish the beginning date of

the running of the statute[.]” Owners Committee on Electric Rates, Inc. v. Public Service

Commission, 150 A.D.2d 45 (A.D. 3rd Dep’t 1989).

50. It is submitted that, in order to establish that notice had been

provided as required under the RCNY, HPD would have to provide copies of all five (5)

of the notices purportedly sent to all five (5) of the addresses identified under Title 28

RCNY § 39-05. In this instance, Petitioner did not receive any notice of the revocation

of the 421-a tax benefits, in violation of Petitioner’s due process rights, significantly

affecting its property rights and rendering Petitioner’s continued ownership of the

Building economically infeasible.

51. No prior application has been made for the relief requested herein.

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Complaint,Petition: 101-01 One Group, Llc v. New York City Department Of Housing Preservation And Development, New York City Department Of Finance

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