Florell Equities, Inc. v. Weaver , 2 A.D.2d 542 ( 1956 )

Per Curiam.

The commission has adopted a regulation (Part II, Amendment No. 50, to State Rent and Eviction Regulations, § 33, subd. 5) reading as follows: ‘‘ No landlord shall be eligible to file an application under this paragraph on and after February 1, 1956 unless he has been the landlord of such property for at least one year.”

The regulation was adopted to implement the statute providing for hardship increases (State Residential Rent Law, § 4, subd. 4, par. [a]; L. 1946, ch. 274, as amd. by L. 1955, ch. 685) which reads as follows: ‘‘ Provision shall be made pursuant to regulations prescribed by the commission, for individual adjustment of maximum rents where (1) the rental income from a property yields a net annual return of less than six per centum of the valuation of the property.”

It will be noted from the statute that the prescribed adjustment is related to the rental income earned by the property, rather than by an individual landlord. No words of limitation or distinction confining the right to such an adjustment to a particular owner are used.

The commission is undertaking to hamstring itself by this regulation. It will perforce be required to deny even the most meritorious application based upon authenticated proof verified by its own staff of accountants and experts by the mandatory condition precedent of ownership for at least one year. Contrary to the statutory intent, the challenged regulation attempts to impose an arbitrary standard that would preclude both bona fide and suspect applications for adjustments. Conversely, the regulation may well defeat the purpose of the statute which seeks to prevent speculative or manipulative practices, by encouraging owners of newly acquired property, who are precluded from seeking a hardship increase for an entire year to engage in inefficient management during that period for the purpose of obtaining rent adjustments.

The commission has the power, absent the regulation under attack, to satisfy itself as to the bona fides of the application by its requirements for the submission of proof of a full year’s operation, whether it be upon the experience of the applicant or of a prior owner.

It was argued that the regulation merely postpones the owner’s right to a rent adjustment. Since the adjustment cannot be retroactive prior to the date of the order, that argument is specious. (Levy v. 1165 Park Ave. Corp., 280 App. Div. 912, affd. 305 N. Y. 607; Matter of Gostin v. Weaver, 2 A D 2d 837.) When, in addition, there is taken into consideration the delay occasioned by the processing of an application for a rent adjustment, the owner entitled to an increase would be prevented from receiving it, under the regulation, for a period varying from one year and four months to as long as two years.

We have held heretofore that the use of the operating-expenses incurred during the test year by a former landlord was consistent with the statute (Matter of De Varco v. Temporary State Housing Rent Comm., 281 App. Div. 955). We must therefore hold that the regulation exceeds the power given to the commission and is an attempt to usurp the functions of the Legislature.

The order at Special Term should be affirmed.