This case raises questions about when a court may dismiss an action in favor of administrative proceedings. The case arises in the context of New York’s rent regulation laws and asks whether Supreme Court properly dismissed plaintiffs’ rent overcharge claims on the ground that those claims should first be pursued in administrative proceedings before the New York State Division of Housing and Community Renewal (DHCR).
Two aspects of the rent regulation laws are pertinent. First, New York law allows the owner of a rent stabilized apartment to deregulate the apartment under certain circumstances, like where the apartment becomes vacant and its market rental value exceeds a threshold. This is called luxury deregulation. Second, rental property owners can take advantage of multi-year tax breaks if they perform eligible projects on their property, like gut renovations and major capital improvements. In New York City, these tax breaks are called J51 benefits, and receiving them makes the apartment subject to rent stabilization. In Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d 270 (2009), the Court of Appeals held that an owner who is claiming J51 benefits cannot also benefit from luxury deregulation.
In this case, plaintiffs are tenants who claim that their landlord improperly deregulated their rent-stabilized apartments while receiving J51 benefits. They filed an action in Supreme Court, New York County, asserting rent overcharge claims and claims that their landlord engaged in deceptive practices under GBL § 349.
Supreme Court dismissed the action. The court held that plaintiffs should pursue their overcharge claims before DHCR in the first instance based on the doctrine of primary jurisdiction. Applying Appellate Division precedent, the court stated that it could retain jurisdiction if there was a “specific reason” to do so, and found no such specific reason in this case. The court also held that plaintiffs failed to state a claim under GBL § 349 because the landlord’s actions challenged in the complaint were not “consumer-oriented conducted aimed at the public at large.”
The First Department affirmed, stating that Supreme Court did not abuse its discretion in deferring to DHCR and correctly dismissed plaintiffs’ GBL § 349 claims. The Court of Appeals granted leave.
Return to the case page for Collazo v. Netherland Property Assets LLC.