NEW RULES AND NEW WAY TO AVOID SOME PROBATE

Courtesy of Abstracts Incorporated:

"The New York State Real Property Law has been amended by adding Section 424. This new section approves the use of a Transfer on Death Deed (TOD) and this new statute took effect on 7/19/24.  

The main benefit of the TOD deed is to transfer the real property of the owner without having to probate the owner’s Last Will and Testament or administer the estate of the owner who dies intestate. The owner maintains full ownership and control of the property during his lifetime and can change the grantees on the TOD at any time. The transfer of title by a TOD deed only becomes effective upon the death of the owner.  

One of the requirements is that the TOD deed be witnessed by 2 people who were present when the owner signed the TOD deed.

If the owner wants to revoke the TOD deed, the owner can simply record a new deed to replace the earlier deed. Please note that the TOD deed cannot be revoked by the owner’s Last Will & Testament and a new deed is therefore required to revoke the earlier deed. Since the owner can revoke the transfer at any time, the owner has not completed a gift to the grantee and there is no gift tax.

While all other deeds require delivery by the grantor with the intention to convey title and acceptance by the grantee, the TOD deed does not require acceptance by the grantee.  The grantee has the right to renounce all or part of their interest in the TOD deed in the same manner as if the interest was included in the owner’s Last Will & Testament.

If the grantee in a TOD deed dies before the owner, then the transfer lapses and title remains in the owner’s estate.   The grantee’s interest is contingent on surviving the transferring owner.  The owner may want to designate an alternate grantee to avoid probate or administration if the original grantee predeceases the owner.

The owner retains full control over the property and can sell or mortgage the property during his lifetime without the consent of the grantee since the transfer only takes effect upon the death of the owner. The grantee’s creditors cannot enforce their judgment or lien against the property since the grantee has no interest in the property until the owner dies. This differs from a life estate deed where the remainderman has a vested interest that will allow creditors to collect their judgment or lien against their vested interest in the property.

Upon the owner’s death, the grantee takes title subject to all liens and encumbrances.

The TOD deed may be signed and witnessed prior to the 7/19/24 effective date of the statute. However, if the owner died prior to 7/19/24, then no transfer occurred and title remains in the owner’s estate.  The TOD deed must be recorded prior to the death of the owner to be effective.

If the owner designates multiple grantees, then all of the grantees will become the new owners of the property and they may disagree on whether to sell or retain the property which may result in a partition action that is more expensive than probate.   There is no fiduciary to sell the property with a TOD deed as there is with probate, estate administration or trusts.

If multiple owners sign a TOD deed, then the last one surviving can revoke the deed or change the grantees against the wishes of the other deceased owners.  If there are multiple owners as tenants in common, all owners should sign the TOD deed and the transfer will take effect upon the death of the last tenant in common.  If the TOD deed is only signed by one owner and that owner predeceased the other tenants in common, then no transfer takes place upon the death of the grantor since there are other surviving owners.   The transfer will only be effective if the grantor is the last of the tenants in common to die."

CHILD CUSTODY AND RELOCATION

JOHN N. v. MELISSA A., 2024 NY Slip Op 50923 - NY: Co. Supreme Court 2024:

"In herein post-judgment matrimonial action, both parties moved and cross-moved regarding Mother's plan to relocate with the parties' child too far away for the truly daily parenting time schedule that the parties themselves (each with counsel) stipulated was in the best interest of their son. The parties' young son (the "Child") has been diagnosed with special needs and attends a private school in New York City that meets his special needs. The Mother's move with the Child is also in direct violation of the parties' stipulated provisions regarding no such move, which stipulation restricted either parents' ability to move out of Manhattan with the Child.

Unfortunately, here, Mother first put her "move" plan in action, and then filed her motion, allegedly for "permission," when she had already started the purchase of her home far outside of Manhattan. There were numerous court appearances on these motions, and extensive briefing, as well as numerous related motions (all addressed herein). Although the Court was clear with all that Mother's ability to move with the Child was absolutely not certain, and that parties should make every effort to discuss and to maintain what they had already stipulated was in the child's best interests (for both parents to live in close proximity to each other in Manhattan and for the Child to have daily or almost daily contact with each parent), Mother nevertheless cancelled her Manhattan apartment lease one year early, paid a penalty to do so, completed the purchase of a house in Katonah, and moved there, while telling the Court that she "had to be" out of her Manhattan apartment by a certain date, but not telling the Court that she did so voluntarily, let alone that she paid a penalty for her early move-out date.

Mother's alleged reasoning for this move is not that she is trying to limit Father's access to the Child, but rather that she has migraines in Manhattan that will be alleviated if she lives in Katonah. She acknowledges that her information is "self reported" to her doctors, and therefore, she assumes that Father will doubt what she says. (NYSCEF doc. 4, Def. aff.).

As Attorney for the Child pointed out in clear detail, Mother has presented no medical proof on her moving papers of this condition or this theory (see NYSCEF doc. 102, Attorney for the Child Affirmation, detailing her meeting with her young client, information from his school and doctors, lack of any supporting documentation on Mother's motions, as well as importance to the Child of both of his parents).

Then, after that affirmation from Attorney for the Child, then, Mother finally did present a letter from a doctor on a May 2024 reply on motion sequence 007 (NYSCEF doc. 118), which letter does not address her alleged need to move, let alone as far away as she did. Even if the Court were to accept the alleged medical "proof" submitted here, it does not meet, let alone require, the solution Mother chose. Even if the Court were to accept Mother's theory that she would medically feel better in a house with a backyard, there is no basis for a house so far away from her most recent apartment, when there are backyard houses throughout New York City, from Queens, Bronx, Brooklyn, and Staten Island, not to mention cities and towns immediately outside New York City that are not nearly as far away as Katonah. Nor was there any information about the extent of the alleged improvement that could be obtained from a move to a backyard-house, nor was there any medical information about what other treatments or remedies could be considered, and the comparative effects and migraine reductions of one method versus another. And even if, with truly no medical evidence submitted for it, the Court were to somehow accept Mother's theory that a move to a backyard-house will be a cure, there is no evidence that either Mother or her doctor explored any closer location, before selecting a house in Katonah. Nor does Mother or her doctor address, at all, whether Mother can live in the backyard-house in Katonah with its alleged (although not demonstrated) medical benefits, but still travel with the Child into Manhattan for his parenting-time exchanges with Father, doctor appointments, and all the other necessary reasons to come with the Child to Manhattan, and further, in that case, neither Mother nor her doctor address the medical necessity, benefit or appropriateness of the move to Katonah from Manhattan with those continuous visits into Manhattan with the Child.

There is also no evidence that Mother meaningfully considered the effect that this Katonah move would have on the Child, whether on his relationship with his Father, whom he has consistently seen either every day, or almost every day for truly years now, or on the Child's schooling. Mother has apparently proposed the Katonah public schools as a new school option for the Child, but did not present any evidence in her moving papers that she has explored the extent to which that school would be able to meet the Child's special needs, let alone whether it would do so as well as (or even comparably) to the services provided by the private school where the Child has been enrolled by both parents for several years. In this case, both parents have affirmed in their (successful) lawsuits against the New York City Department of Education for reimbursement of the Child's tuition that the New York City public schools are not able to meet the Child's needs and that his Manhattan private school [redacted] does. Mother does not present any evidence that the Katonah public school would be able to meet the Child's needs that both parents have stated the New York City public schools could not, and that his private school does.

The Court was also concerned when Mother, in direct contravention of the order appointing the Child's attorney, nevertheless refused to grant permission for the Child's attorney to speak with the Katonah schools, thus preventing the Attorney for the Child from speaking with Mother's proposed new school. This was eventually remedied, after the court appearance on the record, when all that the Child's attorney could report about the Katonah school was that they could not speak with her because of this lack of authorization from Mother. And in the meantime, Mother gave up her Manhattan apartment (early), moved to Katonah, and presented her move as done and completed. Her original motion also lacked the proposed address, although admitting that she was already "in contract" for the home at the time of her motion "for permission," nor the name of the proposed school (Father's opposition stated that there are three elementary schools in Katonah, but that Mother would not tell him which one she is proposing for the Child; his March 2024 affidavit stated Mother still had not told him the address).

Mother's gamesmanship and orchestrated timing choices created an extraordinary problem for her son, his school, his Father, and this Court. Mother created the timing, and then accelerated it, even as the motions were pending, all in direct contravention of what both parents here stipulated for, in great detail, each advised by counsel. As the Court stated on the record at the June [redacted] 2024 appearance, Mother's request to relocate to Katonah with the Child is denied, for the detailed reasons stated on the record, with written decision to follow. See NYSCEF docs. 130-33, Decision and Order on Motions sequence 005-008. That written decision is filed herein, which incorporates (without necessarily repeating) the reasons already stated on the record (see Tr).

Specifically, the parties' 2020 Stipulation (NYSCEF doc. 16), which was So Ordered by the Court after a 2020 detailed allocution on the record, states, regarding joint custody:

The Mother and the Father shall have joint legal and physical/residential custody of [the Child]. The Mother shall be deemed the residential parent solely for purposes of child support and health insurance. . .

The Parties shall consult and confer with each other, in good faith, on major issues relating to [the Child's] health (including, but not limited to, medical, therapeutic, and psychiatric treatment, extended use of prescription drugs for an ongoing illness, and dental/orthodontic treatment exclusive of annual or routine check-ups or examinations and ordinary childhood illnesses, ailments, and usual and customary drug prescriptions for such ordinary childhood illnesses and ailments), education, child care, summer camp/program, extracurricular activities, and general welfare (the "major issues") and use his/her best efforts to come to an agreement on all major issues described above. . .

All major decisions affecting the physical and mental health, discipline, education and schooling (including change in current schools and selection of schools and colleges, the necessity for testing and tutors, participation in after school extracurricular activities and summer activities), and general welfare of the Child shall be discussed between the Parties before they discuss it with the Child. It is the Parties' specific intention that they shall attempt to resolve all questions relating to the Child by discussion and mutual consent taking into consideration the Child's aptitudes and wishes. . .

The Parties will jointly decide the Child's extracurricular activities including, but not limited to, enrichment classes, sports lessons, team participation, music lessons, art lessons, and camp. While the Parties shall take into consideration the aptitude and wishes of the Child, keeping in mind his age and level of maturity, the decision shall be based upon the Child's best interests. Each Party shall cooperate and enable the Child's regular participation in the agreed upon programs or activities.

Notwithstanding the foregoing, the Child shall not be enrolled in more than two (2) extracurricular activities per semester. . .

The parties stipulated to cooperate in the Child's best interest:

The Parents shall cooperate with each other to advance [the Child's] health, emotional and physical well-being.

The parties stipulated to detailed provisions of truly frequent and "unhampered" parenting time access:

Each Parent acknowledges that the Child deserves unhampered access to both the Mother and the Father, and that the Child shall benefit most in life by having both a Mother and a Father who play an important role in his life. Each Parent shall exert every possible effort to maintain access and contact between the Child and the other Parent, and to foster a feeling of affection between the Child and the other Parent. . .

Each Party shall be entitled to attend all of the Child's organized and special events that the Child attends or in which the Child participates, including without limitation, sport matches, lessons, competitions, practices, awards ceremonies, school events, activities/functions/concerts, presentations and comparable special or school events ("Children's Events") to which Parents are customarily invited to attend and/or participate in, whether or not such school/special events occur during his or her parentingtime as set forth in this Agreement. . .

In the event the Child is sick and confined to either Party's residence for twenty-four hours prompt notice shall be given to the other Party and the other Party shall have the right to visit with the Child at the other Party's residence at mutually convenient times. The Parties shall notify each other promptly in the event of any accident involving the Child or serious illness of the Child. . .

Each Parent will ensure that during his/her access time, the Child will attend school, doctor and dentist appointments, therapy sessions, regularly scheduled activities and lessons, and other events mutually agreed to by the Parents including, but not limited to, birthday parties or other social events. . .

The parties stipulated to a parenting-time schedule, detailed over 15 pages (pages 32-46), which provides, in relevant part, that during the school year, Father is to have parenting time with the Child on every Wednesday overnight to Thursday, alternate Thursday overnights to Fridays, alternate weekends Fridays to Sundays, plus Tuesday or Thursday dinner visits, plus bringing the Child to school, camp, therapy or other organized activities every Tuesday, Wednesday, and Thursday, and alternate Fridays. Parties also stipulated that either parent also had the right to accompany the Child and the other parent on the mornings that were not "that" parent's morning, although, while these motions were pending, the parties entered into a stipulation vacating that "accompaniment" portion. In the summer months, the parties stipulated that Father could extend his alternate weekends to Mondays. Parties also made a detailed holiday and vacations schedule.

Parties specifically stipulated that this frequent schedule is in the Child's best interest:

The Regular Weekday/Weekend Schedule shall be exercised by the Parties with flexibility, good faith and cooperation in an ongoing effort to achieve their shared goal of nurturing the Child's meaningful access to, and relationships with, both Parents, as such is deemed to be in the Child's best interests. The Parties agree to be flexible and reasonable with respect to requests for changes in the Regular Weekday/Weekend Schedule to accommodate the needs of all concerned to meet any issues that may arise.

Parties also stipulated that the other would have the right of "first refusal" if the other one cannot pick up the Child, even if it were only for a pick up or drop off, truly regardless of the length of time.

Regarding any relocation with the Child (outside of Manhattan), the parties were very specific that neither parent may do so without the permission of the other parent or the Court, and it would be the affirmative obligation of the parent planning such a move to both provide advance notice to the other parent, and then, if there is no consent, to seek court permission:

The Parties agree that with the exception of the Mother's relocating with [the Child] within Manhattan, the Mother shall provide the Father with written notice (email sufficing) of her intention to relocate with [the Child] a minimum of three (3) months prior to the Mother and [the Child]'s proposed relocation outside of Manhattan. In the event the parties do not resolve the issue of the Mother's relocation with [the Child] within fourteen days of the Father's receipt of written notice of such proposed relocation, the Mother shall have an affirmative obligation to make a motion on notice to the Father requesting the Court's permission to relocate outside of Manhattan with [the Child]. Such motion shall be made before a justice of the Supreme Court of the State of New York, County of New York. The Mother and [the Child] shall not be permitted to relocate from the Mother's and [the Child's] current address, to wit: [redacted], New York, New York (or such other address within Manhattan) without written order of the Court which order shall be served immediately and personally on the Father.

The Parties agree that with the exception of the Father relocating within Manhattan, the Father shall provide the Mother with written notice (email sufficing) of his intention to relocate a minimum of three (3) months prior to the Father's proposed relocation outside of Manhattan. In the event the parties do not resolve the issue of the Father's relocation within fourteen days of the Mother's receipt of written notice of such proposed relocation, the Father shall have an affirmative obligation to make a motion on notice to the Mother requesting the Court's permission to relocate outside of Manhattan. Such motion shall be made before a justice of the Supreme Court of the State of NewYork, County of New York.

Nevertheless, here, Mother first set her relocation plan in motion, and then filed her motion "for permission" to do what she already started to do, and then, without receiving that mandatory Court order, relocated, allegedly "without" the Child but also, without having a home for him in Manhattan with her either.

To be clear, the Court cannot prevent either adult parent from relocating by themselves anywhere they wish in the world. The question is whether they may do so with the parties' child, in direct contravention of the long-negotiated, carefully allocuted, and So Ordered agreement, which was subsequently incorporated into but not merged with the parties' judgment of divorce. Here, Mother moved to Katonah. It is undisputed that there is no consent for her to do so with the Child from Father, nor is there a Court order permitting her to move with the Child.

Crucially on these motions, it undisputed that Father has been integrally involved in the Child's life, exercising his parenting time, taking the Child to school on his mornings, being with him on his overnights, dinners, weekends, holidays and vacations, joining him at school for field trips and special days, as well as pick ups and drop offs. On these motions, Mother suggests that Father's mornings before school, if counted as 15 minutes at a time, can just be combined into an hour later in the week, maybe combined with a previously scheduled overnight to Father, so that Father does not technically lose any counted minutes. Parenting time, however, cannot be counted purely as how many minutes total in a year. There is value to each walk to school, each bedtime, each dinner, each reading a book together after school, each time seeing a young child on the sidewalk right after school, whether they have had a good day or a hard day (or sometimes both all in one day), and then going home together and talking about that day. Adding one hour to a full-day weekend visit is simply not the same as also seeing the child four mornings throughout that week. Importantly, this is precisely what the parties already stipulated to — this level of frequent contact. It is undisputed that Katonah is approximately 40-plus miles away from Manhattan, which is a substantial commute, especially in the morning or during the afternoon rush hour for a child (whether that child does or does not, as here, have special needs), for this 40-plus miles between Katonah and Manhattan, that much more so if there are any traffic delays (and it would not be reasonable to say that there are no traffic delays on this route). It would not be feasible for the Child and Father to maintain their daily or near-daily contact, which Mother implicitly acknowledges by proposing this "clumping" of parenting time in lieu of father's frequent parenting time with the Child that parties stipulated to. For Mother to suggest that this is a change without consequence strains all logic and credulity. See, e.g., Lipari v. Lipari, 146 AD3d 870, 872 [2d Dept 2017] (denying relocation of 17 miles to Rye from New York City, where the other parent "had frequent contact with the children, including substantial time during the week. . . quality and quantity of the father's contact with the children during the week would be substantially impaired"); Schwartz v. Schwartz, 70 AD3d 923, 925 [2d Dept 2010] (denying relocation of 20 miles from Brooklyn Heights to Staten Island where "father had frequent contact with the children, including substantial time during the week. . . . the difficulties for both the father and the children in maintaining their current quality and quantity of contact while traveling between Brooklyn Heights and the southernmost point on Staten Island, during morning and evening rush hours in New York City traffic, is apparent. . . such onerous travel arrangements would likely affect the children's willingness to visit him as frequently as they currently do").

For the court to modify a custody agreement in the absence of an agreement between the parties to do so, it is well-established that a movant must make a sufficient showing of a material change of circumstances, and then carry the burden of proving that the change would be in the best interests of the child. Matter of McFarlane v Sapeg, 25 AD3d 766, 766-67 [2d Dept 2024] (citations omitted); Velin M. v Bermit T., 220 AD3d 521, 521 [1st Dept 2023] (citations omitted); Yvette F. v Corey J.G. Sr., 177 AD3d 549 [1st Dept 2019]. See also Brown v McGhee, 227 AD3d 983 [2d Dept 2024] (citations omitted); Alexis A.T. v Gary C.T., 204 AD3d 555 [1st Dept 2022]; Matter of Jose M.C. v Liliana C., 150 AD3d 514, 514 [1st Dept 2017]. "In order to modify an existing custody arrangement, there must be a showing of a subsequent change of circumstances so that modification is required to protect the best interests of the child. A parent seeking a change of custody is not automatically entitled to a hearing but must make some evidentiary showing of a change in circumstances sufficient to warrant a hearing." Gurewich v Gurewich, 58 AD3d 628, 629 [2d Dept 2009] (emphasis added). The court, therefore, must focus on the showing, if any, of a change of circumstances that is subsequent to the prior order. See Sergei P. v Sofia M., 44 AD3d 490, 490-91 [1st Dept 2007] ("A parent seeking a change of custody is not automatically entitled to a hearing. Where parents enter into a formal custody agreement, it will not be set aside without a showing of a sufficient change in circumstances since the time of the stipulation, and unless the proposed modification is shown to be in the best interests of the child. Furthermore, no court will modify such an order of custody granted on stipulation, absent such showings."); see also Tarpey v Tarpey, 77 AD3d 912, 913 [2d Dept 2010] ("Where a voluntary agreement of joint custody is entered into, it will not be set aside unless there is a sufficient change in circumstances since the time of the stipulation and unless the modification of the custody agreement is in the best interests of the children. Furthermore, a parent who seeks a change in custody is not automatically entitled to a hearing but must make some evidentiary showing sufficient to warrant one") (citations omitted). Indeed, where the moving parent does not meet their burden, their petition "should [be] summarily denied" (Patricia C. v. Bruce L., 46 AD3d 399 [1st Dept 2007] (a "parent who seeks change of custody must make some evidentiary showing to warrant a hearing; it is not automatically granted. In light of petitioner's failure to demonstrate any changed circumstances since the 2003 order granting custody to the father, or any evidence that he was an unfit parent, or, for that matter, any indication that continued custody with him was not in the best interests of the child, the application for modification should have been summarily denied.").

As the Court of Appeals stated in Obey v. Degling, 37 NY2d 768, 770 [1975]:

Custody of children should be established on a long-term basis, wherever possible; children should not be shuttled back and forth between divorced parents merely because of changes in marital status, economic circumstances or improvements in moral or psychological adjustment, at least so long as the custodial parent has not been shown to be unfit, or perhaps less fit, to continue as the proper custodian. The rearing of a child requires greater stability than a roller-coaster treatment of custody.

"Hearings [regarding a proposed change] have been denied and modification requests dismissed, where, as here, the allegations were conclusory and unsubstantiated." Matter of Newton v McFarlane, 174 AD3d 67, 77 [2d Dept 2019]; Matter of Feliciano v. King, 160 AD3d 854 [2d Dept 2018]. See also Werner v. Mazzenga, 174 AD3d 727 [2d Dept 2019]. Nothing in Mother's papers "tends to show" that the other parent "has since [the 2020 Stipulation] become unfit or even less fit to continue" as joint custodian of the child, and to continue their current residential parenting-time schedule with frequent and meaningful time for the child with each parent. See Zima v. Aguirre-Cotliar, 21 AD3d 828 [1st Dept 2005] (citing Obey).

Wherever possible, "[c]ustody of children should be established on a long-term basis." Obey v. Degling, 37 NY2d at 770. In this regard, the Appellate Division, First Department, has found continued stability in the child's life to be a primary factor. In Matter of Lawrence C. v. Anthea P., 79 AD3d 577 [1st Dept 2010], neither parent had a formal order of custody, although the mother became the de facto primary custodial parent for a period of years. The appellate court stated that "`[c]hanges in conditions which affect the relative desirability of custodians. . . are not to be accorded significance unless the advantages of changing custody outweigh the essential principle of continued and stable custody of children.'" Id. at 579, quoting Matter of Bennett v. Jeffreys, 40 NY2d 543, 550 [1976] (other citations omitted). Therefore, the Appellate Division continued, "`[p]riority, not as an absolute but as a weighty factor, should, in the absence of extraordinary circumstances, be accorded to the first custody awarded in litigation or by voluntary agreement.'" 79 AD3d at 579, quoting Matter of Nehra v. Uhlar, 43 N2d 242, 251 [1977]. "In short, the parent seeking the change in custody arrangements bears the burden of proof that the change is in the child's best interests". Id. at 579 (discussing changing de facto custody, not even custody after a final order or stipulation). See also Boris K. v. Marie E., 176 AD3d 504 [1st Dept 2019].

Thus, the first question is whether Mother, on her papers, has met this required standard to modify the parties' stipulation. Here, the parties specifically stipulated that it is in the Child's best interest for him to live in Manhattan near both parents, to have almost daily in-person parenting time with each parent, and to have each parent be able to participate in his pickups, drop-offs, school events, doctor visits, the minutiae of his weeks and weekends.

Mother has not met her burden even for a hearing, for the following reasons: (i) she has not presented sufficient medical basis for her alleged change of circumstances at all, filing a cursory medical letter on a reply, (ii) she did not present sufficient evidence that such a move, even if it were medically supported, requires a move as far as Katonah and nowhere closer than would be medically appropriate, (iii) she did not present any information on whether such a move to Katonah when coupled with bringing the Child to Manhattan from Katonah for parenting exchanges and other reasons would still be medically indicated for Mother (as opposed to not sufficiently medically advantageous or even contra-indicated due to increased driving for Mother, which driving she herself offered to do multiple times per week, either right before or right after the Child's school in Katonah if the Child were permitted to relocate, to Father's home in Manhattan, see NYSCEF doc. 4, Def. aff. at 11), in other words, Mother alleges that she has a medical need to live in Katonah and not in Manhattan, while separately saying that she will drive to the Child to his Father in Manhattan, but she does not say, nor does her doctor address, whether Mother driving back and forth to Manhattan is medically indicated for her, under her medical theory, or whether these drives would cancel any medical benefit she alleges she will have from the move, and thus, her proposed move and her proposal to drive the Child to maintain contact with his Father are either at odds with each other, not sincere, or there is no medical benefit, (iv) she presents no medical information about planned efficacy of this alleged medical remedy of a move as compared to other medical remedies that would not require a move, or such a distant move. Thus, as Mother has not sufficiently alleged a substantial change of circumstances (that she now has a medical reason that requires her to move to Katonah) other than in a conclusory manner, and without either medical proof, or addressing any of the above issues with her "reason", accordingly, there is no reason for the Court to even undertake an analysis whether a relocation and attendant change in parenting time for the Child if he were permitted to relocate would be in the Child's interest, as the Court may not undertake a renewed best interest analysis in the absence of a material change of circumstances. If, however, the Court were to do so, the parties themselves have already stipulated that the extremely frequent parental contact in the Stipulation is in the Child's best interest. Based on truly numerous appearances and papers in this action, both before and after the Stipulation, and numerous appearances and papers on herein motions, the Court does not see any articulated change in the Child's best interest away from this frequent contact, which forms the basis of the parties' stipulation, as stated supra. In addition, there is no credible information alleged that Father is no less capable of continuing as the meaningful co-parent that he has been for the Child. A proposed relocation of the Child to Katonah would cut out Father's meaningful parenting contact with the Child, which would not be in the Child's best interest, as that interest was already stipulated to by the parties and So Ordered by the Court, and, out of abundance of caution, reaffirmed on herein motions.

While acknowledging the long-negotiated and extremely specific relocation restrictions in the parties' Stipulation, the Court also considers the proposed relocation under the Tropea factors. Whether analyzed in concert with the required "changed circumstances" analysis discussed supra, or even purely pursuant to the Tropea factors, here, Mother's proposed relocation with the Child does not satisfy the Tropea factors at all, such that not even a hearing would be required, since there are not sufficient facts alleged by Mother to trigger such a hearing.

The Tropea factors are:

[C]ourts should be free to consider and give appropriate weight to all of the factors that may be relevant to the [relocation] determination. These factors include, but are certainly not limited to each parent's reasons for seeking or opposing the move, the quality of the relationships between the child and the custodial and noncustodial parents, the impact of the move on the quantity and quality of the child's future contact with the noncustodial parent, the degree to which the custodial parent's and child's life may be enhanced economically, emotionally and educationally by the move, and the feasibility of preserving the relationship between the noncustodial parent and child through suitable visitation arrangements. In the end, it is for the court to determine, based on all of the proof, whether it has been established by a preponderance of the evidence that a proposed relocation would serve the child's best interests.

[fn] The separation agreements [here] require only that the custodial parent apply for judicial approval before moving out of a specified area without making any mention of criteria or standards. A geographical relocation restriction agreed to by the parties and included in their separation agreement might be an additional factor relevant to a court's best interests determination.

Tropea v. Tropea, 87 NY2d 727, 740-41 [1996]

As discussed supra, there is no legally sufficient reason even stated for the relocation. Instead, what actually happened, is Mother moved and is now saying that she is in Katonah, so she created her own changed circumstances by moving (including by giving up her Manhattan apartment early and telling the Court on the record she "had to be" out of the apartment). That is not a legal changed circumstance. The alleged "medical" support for the move was similarly not presented or addressed, as discussed supra, in detail. Simply stated: there is no reason for the relocation except for Mother's preference to do so. And there is no allegation that the move would enhance the child (or Mother's) life "economically, emotionally and educationally." Id. Indeed, Mother not only did not present any information about the educational options, she blocked the child's attorney from even speaking with her new proposed school to discuss his special educational needs. On the other hand, there is uncontroverted agreement that if the Child were permitted to relocate to Katonah that much of his parenting time with Father would no longer be possible, the very detailed, and very specific frequent contact that parties stipulated is in the Child's best interest, and the very frequent (truly almost daily) that this special-needs boy has been enjoying since (and before) the parties' 2020 stipulation. For the Court to `balance' the factors, there would have to be some factors favoring the move. Here, there are no such factors alleged, at all, let alone in any meaningful manner. Accordingly, there is truly no `balancing' for the Court to do, when there is nothing on one side of the balancing scales, and therefore, there is no basis for a hearing. See, e.g., Cleary-Thomas v. Thomas, 200 AD3d 516 [1st Dept 2021] ("Plaintiff did not provide any evidentiary basis to show that relocation to Long Island would be in the children's best interests given that they attend private school in Manhattan and defendant, who returned to Manhattan in September 2020, has equal physical and legal custody that requires transitions every two to three days. Accordingly, the court properly denied plaintiff's application, without an evidentiary hearing, to remove the radius clause and granted defendant's request that plaintiff be responsible for transporting the children for his parenting time while she remains outside the agreed upon radius"); Gravel v. Makrianes, 120 AD3d 815, 817 [2d Dept 2014] (upholding a denial of relocation motion without a hearing, where "under the circumstances presented here, it was not necessary for the Family Court to have conducted a full evidentiary hearing in this matter, as it possessed adequate relevant information to enable it to make an informed and provident determination with respect to the best interests of the children"); see, e.g., Hardie v. Hardie, 224 AD3d 474, 475 [1st Dept 2024] (upholding an order not permitting mother to relocate with the child, stating that "wife failed to make a prima facie case that there were changed circumstances requiring a modification of the 2018 stipulation of settlement and that the proposed relocation to Pennsylvania was in the child's best interest. The court properly determined that there was no economic necessity for the relocation, the child's special educational needs could be adequately addressed in New York, and the wife's plan to relocate her parents to Pennsylvania to provide childcare was tenuous. There was a sound and substantial basis in the record for the determination that the relocation to Pennsylvania would not be in the child's best interest."); See also Erica B. v. Louis M., 218 AD3d 421, 423 [1st Dept 2023] (while mother did show that there was a material change of circumstances for her move from New York City to Rochester related to housing, "we find that the mother failed to establish the second prong of her prima facie case. . . mother failed to submit sufficient proof to substantiate her claim that the relocation would enhance the child's educational or economic condition, and she has not shown that the claimed benefits resulting from relocation would outweigh the disruption in the child's relationship with the father"); Kessler v. Charney, 206 AD3d 450 [1st Dept 2022] (upholding a relocation determination without a hearing, where both parents had moved to suburban areas outside of the city, where "Supreme Court providently exercised its discretion in determining the mother's motion to relocate with the child without holding a hearing, appointing an attorney for the child, or ordering a forensic examination. Supreme Court, which was operating under time constraints imposed by the imminent start of the school year, had sufficient, uncontroverted information before it from the parents' motion papers to make an informed decision regarding the child's best interests."); Lecaros v. Lecaros, 127 AD3d 1037, 1038 [2d Dept 2015] (upholding a relocation determination without a hearing, where "the Supreme Court possessed adequate relevant information to enable it to make an informed and provident determination, without a hearing, as to whether it was in the children's best interests to relocate with the mother to London"). C.f., Louie v. Plissner, 174 AD3d 607, 608 [2d Dept 2019] (error to deny a relocation motion without a hearing because "the mother demonstrated sufficient merit to the relocation request to warrant a hearing on so much of her petition as sought to relocate with the subject child").

Further, although not determinative on this motion, "it is the rights and needs of the child that must be accorded the greatest weight," (Tropea, 87 NY2d at 739), and here, Mother has attempted to present her needs (although, as stated supra, has not made a sufficient showing on those), and has not addressed the child's needs.

Herein motions only address the move to Katonah (and its consequences). To the extent that Mother (who only recently completed this move, just before the end of the Child's school year), reverses her move and remains living in Manhattan, Father does not seek any change in parenting time schedules, nor would there be any request or need for any such change. See, e.g., Glaser v. McFadden, 287 AD2d 902, 905 [3d Dept 2001] (finding that mother, who requested to move with the children from New York to Virginia, also stated unequivocally that she would remain in New York if her relocation request was denied, and therefore, there was no cited basis to modify parenting time even after denial of the relocation request). As previously stated in Court, any interim schedule modifications ordered by the Court in connection with these motions are only for the situation where Mother remains in Katonah and does not return to Manhattan.

Currently, it is the school summer for the Child, and now that Mother represented in Court under oath that she is already living in Katonah and does not have a current place in Manhattan, the Court had to set a parenting-time schedule that (hopefully only temporarily) deviates from the parties' carefully delineated 15-page parenting time schedule discussed supra. That summer schedule Interim Order (NYSCEF doc. 141), states, in relevant part:

The mother shall have parenting time with the subject child on alternating weekends from Friday after camp until Sunday evening drop off in New York City, at the father's residence, no later than 7:30pm.

The mother shall have overnight parenting time with the child on alternate Wednesdays until drop off at camp on Thursday morning. The mother shall have parenting time with the child every Tuesday and Thursday from pick up at camp until 7:30pm drop off at the father's residence.

This shall be the schedule for the summer of 2024 only.

This Court had also scheduled a hearing for an interim schedule for when the Child's school year resumes. For two hearings in a row, Mother has requested an adjournment, allegedly because of medical reasons, which the Court has granted. That re-adjourned hearing remains scheduled for [redacted], which date and time has been confirmed by all. As stated supra, such a schedule change is only being discussed if Mother choses to remain in Katonah, as neither Court nor Father seeks to modify the parties' carefully negotiated schedule, with which the Child has been living for years now, seeing both parents frequently, so much so, that he told his attorney, that he "lives with both of them," crediting that he has a home with each parent. [Affirmation by Attorney for the Child, NYSCEF doc. 102].

The Court would be remiss if it did not also remind Mother that it would not be helpful to place the Child in a position where he feels he needs to choose between his parents, instead of enjoying a loving and guilt-free relationship with both parents who love him, as alleged. The Court reminds all that "Parental alienation of a child from the other parent is an act so inconsistent with the best interests of the children as to, per se, raise a strong probability that the [offending party] is unfit to act as custodial parent." Khan v. Potder, 185 AD3d 822, 823 [2d Dept], leave to appeal denied, 36 NY3d 902 [2020]. The Court need not, on these motions, state how sad it would be to place the Child even further in the middle of these proceedings, especially at a time when his Mother is either seeking to or is relocating, and therefore, hopes that the parties support the Child's loving relationship with the other parent and do not disparage the other parent to the Child, or in his presence; the Court hopes that the parents do not suggest to the Child that he should choose which parent to live with, or to inquire (in the Child's presence) if the other parent will "permit" him to live with the parent allegedly asking these not-child-appropriate questions in front of the child. If Mother remains steadfast in her decision to relocate even without the Child, the Court is hopeful that she will not attempt to make the Child feel guilty about her choice and for the Child's continued meaningful relationship with his father.

Decision and order on the motions has already been filed. This original Supplemental Order is filed by the Court on NYSCEF, which shall constitute filing and entry. Plaintiff is hereby directed to file a Notice of Entry of herein Decision and Order within five days."

PET LAW - WHEN SOLD A SICK PET

Buckner v. DEMLING, 2024 NY Slip Op 50857 - NY: City Court, Civil Court 2024:

"In this action, plaintiff alleges that she purchased a cat from defendant, a cat breeder. Plaintiff contends that the cat, "Sugar," was terminally ill at the time of sale. Plaintiff brings this action for $8,062.21, representing Sugar's purchase cost and medical expenses for treating Sugar's illness through the first year of his life. Defendant contends that she sold a healthy cat to plaintiff. A trial was conducted on April 8, 2024, where both parties testified. Plaintiff is granted judgment, as follows:

At trial, plaintiff testified that in February 2023, she viewed a profile for Sugar on a website that facilitates the sale of cats (see Pltf Exhs 1 and 2). It was undisputed that Sugar was advertised as healthy, with the language "[k]ittens come with health guarantee, pedigree papers. Will be dewormed and vaccinated" (see Pltf Exh 1). It was also undisputed that in early March 2023, plaintiff purchased Sugar from defendant for $1,700.00, which included transportation fees for delivery to New York City.

Plaintiff testified that soon after delivery she noticed that Sugar was congested and seemed sick. In March 2023, within days of purchasing Sugar, plaintiff took Sugar to a veterinarian. Defendant reimbursed plaintiff for those initial medical expenses in the amount of $387.81.

In late May 2023, Sugar became severely ill. Plaintiff testified that Sugar underwent emergency surgery at an animal hospital to remove fluid from his lungs. At that time, plaintiff became aware that Sugar was diagnosed with "FIP," a terminal illness, and was given a week to live. Plaintiff testified that she was sad and distraught over the diagnosis and spent significant time and energy caring for Sugar over the next month. Also in June 2023, plaintiff testified that she became aware that there were "experimental" treatments that might prolong Sugar's life. She purchased those treatments and began administering them to Sugar, which was time consuming and emotionally taxing.

Plaintiff also testified that in June 2023, she contacted defendant and informed her of the FIP diagnoses. Plaintiff testified that defendant offered to take Sugar back, or if plaintiff wanted to keep Sugar, defendant would return $300.00. Plaintiff testified that she rejected the offer for several reasons. Plaintiff believed that Sugar was too frail to survive a trip back to defendant's home. Plaintiff also believed that defendant may euthanize Sugar. Plaintiff also testified that there was a dispute regarding the terms of returning Sugar to defendant, stating that defendant offered to take Sugar back, but she did not offer a full reimbursement of Sugar's purchase price and medical expenses to date. Consequently, plaintiff opted to keep Sugar in her care. Plaintiff incurred additional medical expenses, which she sues for here.

Defendant testified that she is sorry for the situation and did not intentionally deliver a sick animal to plaintiff. Defendant claimed that in June 2023, after learning of the FIP diagnoses, she offered to take the cat back for a full refund or provide $300.00 to plaintiff if she wanted to keep Sugar.

General Business Law (GBL) §§ 752-755 governs the sale of animals and grants consumers rescission rights 14 days after purchase if a licensed veterinarian "certifies such animal to be unfit for purchase due to illness, a congenital malformation . . ., or the presence of symptoms of a contagious or infectious disease" (GBL § 753).^[1] Options provided to the buyer are that the buyer may: (1) return the animal and obtain a refund of the purchase price plus the costs of the veterinarian's certification; (2) return the animal and receive an exchange animal plus the certification costs; or (3) retain the animal and receive reimbursement for veterinarian services in curing or attempting to cure the animal. For this last option, the statute provides that reimbursement to cure or attempt to cure the animal may not exceed the animal's purchase price (GBL § 753[1][c]).

Here, plaintiff cannot avail herself of this statute as she did not comply with the requirements set forth in GBL § 753 — namely acquiring a certification from a licensed veterinarian that the animal was not fit for purchase. However, the Uniform Commercial Code ("UCC") permits plaintiff recovery beyond the remedies of GBL § 753 (see Saxton v Pets Warehouse, Inc., 180 Misc 2d 377, 378 [App Term, 2d Dept 1999]).

The purchaser of an unhealthy animal may recover damages pursuant to UCC § 2-714 on the theory that a merchant seller breached the warranty of merchantability (see UCC 2-314 [implied warranty]; see Gebbia v Schulder, 32 Misc 3d 144(A) [App Term, 2d, 11th, and 13th Jud Dists 2011]). Cats constitute "goods" within the meaning of UCC § 2-105, and a private breeder may be considered a "merchant" within the meaning of UCC § 2-104(1) (see Appell v Rodriguez, 14 Misc 3d 131[A] [App Term, 9th & 10th Jud Dists 2007]).

UCC § 2-714 provides that "[w]here the buyer has accepted goods . . . [s]he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable." Section 2-714(2) further defines the measure of damages available for breach of warranty as "the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they been as warranted. . . ."

This court credits plaintiff's testimony that she purchased a cat that was ill at the time of sale. Plaintiff testified that she noticed Sugar's congestion within a day or so of purchase and that Sugar was isolated from all other animals immediately after delivery from defendant. Defendant here breached the subject sale agreement and damaged plaintiff as a result. Plaintiff did not receive what she bargained, paid for, and was guaranteed — a healthy cat.

As to damages, this court is guided by the statutes discussed above. GBL § 753 allows for a return and replacement of the animal, or a reimbursement of veterinary costs not exceeding the purchase price of the animal. UCC § 2-714(2) allows for damages beyond the purchase price to bring the goods back into conformity to what was promised. When an unhealthy animal is delivered, courts have refunded the purchase price for the animal (see Cahill v Blume, 8 Misc 3d 1004(A) [Civ Ct, Richmond Cty 2005]; Bazzini v Garrant, 116 Misc 2d 119, (NY Dist Ct, Sixth Dist, Suffolk Cty 1982]). In assessing damages pursuant to the UCC, the Appellate Term reasoned that a buyer is entitled to the purchase price, any sales tax, and the "reasonable cost of veterinarian expenses incurred by plaintiff in the treatment of the animal" (Saxton v Pets Warehouse, Inc., 180 Misc 2d 377 [App Term, 2d Dept 1999]). Therefore, plaintiff here is entitled to Sugar's purchase price and reasonable veterinarian expenses.

Plaintiff conceded that she was advised by a veterinarian that Sugar's illness was terminal, and any treatments were experimental. It stands to reason medical bills prior to the diagnosis are reasonable and those that follow were not. As such, this court awards plaintiff the purchase price and reimbursement of veterinarian bills through Sugar's diagnoses with FIP on May 30, 2023. Accordingly, plaintiff is awarded a judgment of $4,310.15 ($1,700.00 purchase price + $2,610.15 in medical bills incurred on May 30, 3023). This court does not make an award for medical bills incurred in March 2023, as defendant already reimbursed plaintiff for those expenses.

Accordingly, it is hereby ORDERED that plaintiff is awarded $4,310.15, with interest as of March 4, 2023, and costs against defendant.

This constitutes the decision and order of the court.

[1] In addition, pet dealers are required to have animals inspected by a veterinarian prior to sale (GBL § 753-a) and provide consumers with certain information concerning the sale, health of the animal, and pedigree (GBL §§ 753-b, 753-c), which does not appear happened here."

LANDLORD TENANT LAW: STANDARD FOR COMMON LAW FRAUD RE: RENT STABILIZATION

1532-1609 OCEAN AVE LLC v. HERTZAN, 2024 NY Slip Op 24180 - NY: City Court, Civil Court 2024:

This is a nonpayment proceeding commenced against Dena Hertzan ("respondent") on the basis of an unregulated lease agreement to pay rent in the amount of $1,800 per month commencing April 1, 2020 and expiring March 31, 2021. (NYSCEF Doc No. 1, petition ¶ 2; NYSCEF Doc No. 13 at 3-8.) The petition pleads that the premises are subject to the Rent Stabilization Law ("RSL"). (NYSCEF Doc No. 1, petition ¶ 7.) Respondent answered the petition through her attorney on May 17, 2023, and asserted, as is relevant for this motion, a rent overcharge defense and counterclaim. (NYSCEF Doc No. 4, attorney answer ¶¶ 10-19.)

Respondent moved for leave to amend the answer filed on May 17, 2023, to include "an overcharge counterclaim pleading a common law fraudulent scheme to deregulate (emphasis added)." (NYSCEF Doc No. 9, notice of motion [sequence 1]; NYSCEF Doc No. 10, respondent's attorney's affirmation ¶ 8; NYSCEF Doc No. 14, proposed amended answer.) Respondent also moved for discovery related to her amended claims and defenses. (NYSCEF Doc No. 17, respondent's exhibit E, proposed discovery demands.) Petitioner opposed on the basis that "[r]espondent has not sufficiently plead[ed] fraud or demonstrated the common law elements of fraud as articulated in Regina Metro Co. LLC v State Div. of Hous. & Community Renewal, 35 NY3d 332 (2020)" and Burrows v 75-25 153rd Street LLC, 215 AD3d 105 (1st Dept 2023). (NYSCEF Doc No. 20, petitioner's attorney's affirmation in opposition ¶¶ 3, 5.) On January 16, 2024, respondent's attorney filed a reply affirmation. On February 26, 2024, the parties conferenced the proceeding and provided the court with a draft decision/order, which the court so-ordered, whereby the petition was amended sua sponte "to reflect [the] premises [are] unregulated," and adjourned the proceeding to April 25, 2024 for oral argument. (NYSCEF Doc No. 26, decision/rider.)

In the meantime, two identical bills passed both the State Assembly and Senate, signed by the Governor into law on December 22, 2023, regarding the scope of the "fraud exception" to the "look back" restriction that applies to consideration of documents outside of the relevant statute of limitations. (L 2023, ch 760, Part B, § 2(b).) On March 1, 2024, the Governor signed another bill into law, amending the December 2023 law as it relates to the "fraud exception." (L 2024, ch 95, § 4.) On May 9, 2024, the parties agreed that the changes in law could affect the outcome of respondent's motion, depending on the court's interpretation of the new law. Accordingly, the parties stipulated on the record that respondent would withdraw her reply papers, and file them anew to include arguments regarding the relevant Chapter Amendment. (Id.) Petitioner was permitted a sur-reply, such that both parties had the opportunity to present their individual constructions of the new law. Respondent's original motion and petitioner's opposition were to remain part of the record, along with all exhibits. (NYSCEF Doc No. 27, adjournment and briefing schedule order.) Oral argument was held on the record on June 7, 2024.

APPLICABLE LAW AND ARGUMENTS

Applicable Law^[1]

On April 13, 2023, the Appellate Division, First Department issued Burrows v 75-25 153rd St., LLC, 215 AD3d 105 (1st Dept 2023). The Burrows court held that respondent had failed to sufficiently plead the common law elements of fraud as required by Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal, 35 NY3d 332 (2020).^[2] After New York courts almost universally agreed that a traditional common law fraud exception to the four-year (now six year)^[3] evidentiary bar (commonly referred to as the "look back period") must be properly pleaded, Burrows held that the element of justifiable reliance could not be established "as a matter of law" if public records, specifically the Division of Housing and Community Renewal ("DHCR") rent registration history, could be examined to reveal a representation of fact upon which a tenant claiming a fraudulent scheme to deregulate could not have justifiably relied. (Burrows, 215 AD3d at 109.) After Burrows, claims of fraud were eliminated at the pleading stage because "disclosure in the publicly available rental histories of the discrepant figures for legal regulated rent and preferential rent negates any inference of fraud as a matter of law (emphasis added)."^[4] (Id. at 113.) Burrows transformed the subjective element of justifiable reliance, generally not susceptible to dismissal before trial, into an objective, bright-line rule applied in this context to proceedings involving parties of unequal sophistication and bargaining power.^[5]

The Legislature acted swiftly "in direct response [to Burrows] . . . to retroactively redefine `fraud' under the pre-HSTPA [Housing Stability and Tenant Protection Act of 2019] law."^[6] On June 20, 2023, just two months after Burrows was handed down, the legislature passed a bill, which entirely eliminated common law fraud from the calculus of fraudulent overcharges stemming from a fraudulent deregulation. On December 23, 2023, the Governor signed the bill into law. Chapter 760 of the Laws of New York of 2023 took effect immediately and stated that:

"With respect to the calculation of legal rents for the period either prior to or subsequent to June 14, 2019, an owner shall be deemed to have committed fraud if the owner shall have committed a material breach of any duty, arising under statutory, administrative or common law, to disclose truthfully to any tenant, government agency or judicial or administrative tribunal, the rent, regulatory status, or lease information, for purposes of claiming an unlawful rent or claiming to have deregulated an apartment, whether or not the owner's conduct would be considered fraud under the common law, and whether or not a complaining tenant specifically relied on untruthful or misleading statements in registrations, leases, or other documents (emphasis added). The following conduct shall be presumed to have been the product of such fraud: (1) the unlawful deregulation of any apartment, including such deregulation as results from claiming an unlawful increase such as would have brought the rent over the deregulation threshold that existed under prior law, unless the landlord can prove good faith reliance on a directive or ruling by an administrative agency or court. . . ." (L 2023, ch 760, Part B, § 2(b).)

Just as many believed that Burrows had gone too far, it was surmised the L 2023, ch 760 would pose the same kind of constitutional retroactivity questions that arose in the wake of Regina.^[7] On March 1, 2024, after debate on the Senate floor,^[8] the Governor signed into law Senate Bill 8011/Assembly Bill 8506 (the "Chapter Amendments"), which amended Section 2 of Part B of Chapter 760 the Laws of 2023. Relevant here is the following section:

2-a. When a colorable claim that an owner has engaged in a fraudulent scheme to deregulate a unit is properly raised as part of a proceeding before a court of competent jurisdiction or the state division of housing and community renewal, a court of competent jurisdiction or the state division of housing and community renewal shall issue a determination as to whether the owner knowingly engaged in such fraudulent scheme after a consideration of the totality of the circumstances (emphasis added).

In making such determination, the court or the division shall consider all of the relevant facts and all applicable statutory and regulatory law and controlling authorities, provided that there need not be a finding that all of the elements of common law fraud, including evidence of a misrepresentation of material fact, falsity, scienter, reliance and injury, were satisfied in order to make a determination that a fraudulent scheme to deregulate a unit was committed if the totality of the circumstances nonetheless indicate that such fraudulent scheme to deregulate a unit was committed (emphases added)." (L 2024, ch 95, § 4.)

The Chapter Amendments "shall take effect immediately and shall apply to any action or proceeding in any court or any application, complaint or proceeding before an administrative agency on the effective date of this act." (Id., § 5.) Thus, the amended version is effective as of December 23, 2023, the date the Governor signed the original bill into law. The amendment relevant to this decision is interpreted herein; and it has been portended that construing the language will prove challenging.^[9]

Arguments

Respondent's attorney correctly advances that petitioner has not set forth any specific denial of the alleged facts underlying respondent's claims of fraudulent deregulation and fraudulent overcharge in its attorney's opposition to respondent's motion to amend her answer and for leave to conduct discovery. In opposition to respondent's motion, petitioner relies almost exclusively on the heightened common law pleading standard ostensibly espoused in Regina Metro Co. LLC v State Div. of Hous. & Community Renewal, 35 NY3d 332 (2020), which courts embraced as applying to pre-HSTPA claims of fraudulent deregulation and overcharges stemming from same. In support of its position, petitioner cites to Burrows, Gridley v Turnbury Village LLC, 196 AD3d 95 (2d Dept 2021), and Woodson v Convent I LLC, 216 AD3d 585 (1st Dept. 2023). Petitioner's premise is that because respondent does not plead each element of common law fraud in detail, respondent has not stated a cause of action upon which the court could find ample need for discovery.^[10]

Enter the Chapter Amendments, specifically L 2024, ch 95, § 4. Respondent argues that "[t]he new law requires the [c]ourt to look at the totality of the circumstances to determine whether an owner engaged in a fraudulent scheme to deregulate the unit." (NYSCEF Doc No. 28, respondent's attorney's affirmation in reply at 2.) Respondent presents her argument as follows:

"Looking at the totality of the circumstances, [p]etitioner has engaged in a fraudulent scheme to deregulate the subject premises and the [c]ourt should order the disclosure of documents beyond the four-year look back rule. The subject premises is rent stabilized as it was built in 1923 and contains more than six units. Yet, for decades the subject premises was never registered with the Division of Housing and Community Renewal ("DHCR"). Petitioner has a statutory duty to file the proper regulatory status and legal regulated rent with [DHCR]. Rent Stabilization Code § 2528.3. In 2016 Petitioner filed retroactive rent registration statements for the years 2008 through 2016. The retroactive 2015 registration statement lists Linda Gonzalez as the tenant of record and a legal regulated rent of $1,405.79. The 2016 rent registration statement lists the apartment as vacant with a legal regulated rent of $1,702.60. The 2017 and 2018 registration statements list Shlomo Amsel as the tenant of record, a legal regulated rent of $3,150.00, and a preferential rent of $1,575.00. The subject premises has not been registered since 2018." (Id. at 2-3.)

Respondent points out that petitioner has voluntarily provided a number of documents to respondent in support of proper deregulation of respondent's apartment through Individual Apartment Improvement ("IAI") increases, a mechanism (available at the time) by which a landlord could increase rent by 1/40th of the cost of improvements. (Former 9 NYCRR § 2522.4[a][4].) Apparent from the rent registration history provided by petitioner, in 2017, petitioner registered an unexplained 85% increase to the legal regulate. (NYSCEF Doc No. 15, DHCR rent registration history; NYSCEF Doc No. 13, respondent's exhibit A at 2-14, leases provided by petitioner.)^[11] Respondent also notes that "many of [the] improvements" purportedly made to her apartment in the amount of $60,000 as set forth in a "Contract to Perform Work" from a contractor "have not been made." (NYSCEF Doc No. 12, Hertzan affidavit ¶ 21.) Specifically, respondent avers,

"In 2017, my husband renovated my previous apartment. The apartment underwent a complete renovation. I was very involved with the renovation, picking out the material and discussing the cost with the contractor. . . .

Renovations to the subject premises costing over $60,000.00 would have been evident five years later when I moved. Specifically, they would have resulted in structural changes to the apartment. This was not done. I have seen inside other apartment on my line and they have the same layout as my apartment. When I moved into the apartment I could only see minor aesthetic changes to the apartment.

"My apartment has no French doors, the floors throughout the apartment are old and uneven, the plumbing in the bathroom is old, the toilet will constantly leak, the pipes in the living room are also old and leaking causing my living room ceiling to cave in, my kitchen countertops are not granite, I have no dishwasher in my apartment, no dimmer switches, no toggle switches to control the countertop light, and no fluorescent lighting fixture under the cabinetry." (Id. ¶¶ 19-21.)

Respondent's attorney further advances that respondent states she relied upon petitioner's representation that her apartment was not rent stabilized, because she received a market rate lease, and had no indication that her apartment may have previously been regulated. (NYSCEF Doc No. 28, respondent's attorney's reply affirmation at 4.) Respondent asserts:

"Previously, I did not know the subject premises was rent stabilized. The lease I signed was a market rate lease. I assumed the Landlord could charge whatever rent they wanted. I did not possess the legal knowledge to recognize that the subject premises is rent stabilized. I did not receive any notice stating my apartment was previously rent stabilized. Accordingly, I did not think my apartment was rent stabilized and that I could pull a rent history with DHCR. When I signed my lease I assumed the rent in the lease was proper as it was not a rent stabilized lease." (NYSCEF Doc No. 12, Hertzan affidavit ¶¶ 14-15.)

In its sur-reply, while acknowledging that after the Chapter Amendments passed "a court cannot solely rely on Burrows (emphasis added)" to make a determination as to whether fraud has been "properly raised," petitioner argues that the Chapter Amendments maintain the requirement that respondent specifically plead common law fraud as required by CPLR 3016(b). (NYSCEF Doc No. 29, petitioner's attorney's sur-reply affirmation ¶¶ 26-27 ["CPLR 3016[b] has not changed (emphasis in original)."]) Petitioner contends that respondent has not set forth a claim of fraud under either the common law fraud standard or the totality of the circumstances test, because (1) respondent's answer is verified only by her attorney and thus inadequate to plead a claim, and (2) because respondent has not supplied an affidavit based on her own personal knowledge of her claims. The court rejects this argument. First, respondent's attorney verified the proposed amended answer, just as petitioner's attorney verified the petition. CPLR 3020 provides that this is permissible when the attorney's office is in a different county than their client's. Petitioner's attorney's office is incorporated in Rockland County, and NYLAG's office is in New York County. Second, petitioner is incorrect that respondent herself has not attested to the facts and her impressions. (See NYSCEF Doc No. 12, Hertzan affidavit.) Respondent's affidavit, to the extent even necessary, fully rehabilitates her amended answer.

DISCUSSION

Presuming as it must that the relevant Chapter Amendment will pass constitutional muster,^[12] the court infers from the legislative history that the legislature intended to return us to the analysis of fraud utilized in pre-HSTPA overcharge cases, and, once a colorable claim that an owner knowingly engaged in a fraudulent scheme to deregulate a premises is properly raised, to allow the court more leeway in determining fraud. The "totality of the circumstances" test requires a court, or DHCR, to consider "all of the relevant facts and all applicable statutory and regulatory law and controlling authorities."

This court postulates that the holding in Regina can be reconciled with both pre-HSTPA law, and the new law. Relying on Thornton v Baron, 5 NY3d 175 (2005), specifically Matter of Grimm v New York State Div. of Hous. & Community Renewal Off. of Rent Admin., 15 NY3d 358 (2010), and Conason v Megan Holding, LLC, 25 NY3d 1 (2015) as precedent, the Regina Court famously stated, "The rule that emerges from our precedent is that, under the prior law, review of rental history outside the four-year lookback period was permitted only in the limited category of cases where the tenant produced evidence of a fraudulent scheme to deregulate and, even then, solely to ascertain whether fraud occurred — not to furnish evidence for calculation of the base date rent or permit recovery for years of overcharges barred by the statute of limitations (Grimm, 15 NY3d at 367." (Regina, 35 NY3d at 355.) In other words, if fraud is determined to have occurred, then the default formula is utilized to determine the base date rent upon which to calculate an overcharge. Thornton, Grimm, and Conason remain good law and are controlling authorities.

Courts are now clear as to what the default formula comprises. Courts now know when to apply the default formula, to wit, when it has been determined that the landlord has engaged in a fraudulent scheme to deregulate a premises. However, prior to the judicial interpretation that Regina required a traditional common law analysis for fraudulent deregulation claims, courts wrestled with how to reach a determination of fraudulent conduct precipitating deregulation of a premises on the part of a landlord. And, importantly, first and foremost, a tenant must raise "a colorable claim of fraud." But what is "a colorable claim?" This terminology evades a bright-line test; and perhaps it is intended to do so.

If Regina and its progeny laid this question to rest by purporting to define fraud in the context of deregulation as "common law fraud," then the Chapter Amendments have revived the debate, raising even more questions. What if footnote seven in Regina, when read completely, actually distinguishes common law fraud from fraud in the context of rent regulation? The second sentence of footnote seven, almost entirely ignored in favor of the infamous first sentence,^[13] states, "[i]n this context, willfulness means `consciously and knowingly charg[ing] . . . improper rent' (emphasis added, internal citations omitted]." (Regina, 35 NY3d at 356 n 7.) Citing to Matter of Old Republic Life Ins. Co. v Thacher, 12 NY2d 48 (1962), the Regina Court notes that "`willful' in a regulatory context [] mean[s] [no more than] intentional and deliberate (emphasis added).'" (Id.) What if the Regina Court did not intend to exalt the first sentence over the second? What is the purpose of setting forth the common law elements of fraud, and then referring to fraud in the context of regulation? Was it significant that the Regina Court stated, "Nor is it necessary to recognize an additional common law exception that would create or increase the amount of overcharge damages in order to give proper effect to Roberts (emphasis added)"? (Regina 35 NY3d at 360.) By citing favorably to the seminal trilogy of Thornton, Grimm, and Conason in explicating "the rule" we are to follow, is it not reasonable to wonder whether the Regina Court was referring to Thornton, Grimm, and Conason as the common law rule, and distinguishing another common law rule by comparison?^[14] Can it be concluded that fraud in the "context" of determining regulatory status is different from common law fraud?

Common Law vs Regulatory Fraud

There is a dearth of New York case law regarding regulatory fraud. A recent search on Westlaw for the term "regulatory fraud" in New York yielded only one (1) result.^[15] A broader search (for fraud in the regulatory context), filtering the results to cases dealing with rent stabilization ("rent stab!"), yielded only nine (9) results, none of which provide any guidance regarding why fraud might be construed differently in a regulated housing market than in an unregulated market. Most regulatory fraud claims arise in the context of federal law and regulations, e.g., the Federal Food, Drug, and Cosmetic Act ("FDCA") and the Securities and Exchange Act. Nevertheless, those cases are instructive here because they arise in the context of heavily regulated industries and can be analogized — albeit less than perfectly because they do arise in the specific context of rent regulation — to issues involving the heavily regulated rent stabilized housing stock in New York.

In a 2005 comment in the University of Chicago Law Review, referring to the complex series of requirements to which participants in the regulated securities market must adhere, the author, Brian Rubens, postulates that "there are two types of fraud statutes."^[16] The first type of fraud is "generic fraud . . . [which] essentially fill[s] the role that common law fraud holds at the state level. They act to enforce the upper boundary of acceptable conduct in unregulated markets (emphasis added)."^[17] The second type is "[t]he `focused' type [of fraud], which operates in regulated markets with significant legislative guidance, [and] uses a different definition of fraud given the entirely different circumstances in which it operates (emphases added)."^[18]

Rubens turns to the Securities and Exchange Act and FDCA as examples to illustrate his point:

"Within the tightly delineated boundaries of the regulated market, the strict common law controls on fraud are not necessary. In regulated markets, judges have detailed enumerations of specific prohibitions to guide their discretion. Potential defendants are put on notice by the substantive provisions of the statute, which carefully lay out acceptable conduct. `Fraud' language is still used because it is a traditional hallmark of market regulation. But the `focused' fraud statute requires different qualifications from its fraud language.

`Fraud' in this case is being used in a highly regulated market where the government has consciously placed burdens on suppliers in order to establish a regime that protects the uninformed public. Rather than the narrowly constrained common law characteristics that are appropriate in an unregulated market definition of fraud, a broader definition of fraud is appropriate to shift the burden onto knowledgeable parties in the regulated market context."^[19]

It is remarkable that Rubens could just as easily have been referring to the rent stabilization regime.

In another section of Rubens' comment, analyzing a Federal Court of Appeals circuit court split regarding the standard for determining fraud in the regulatory context, Rubens asks "whether there is a difference between free-market, common law fraud and public-welfare regulatory fraud — and if so, what the difference means[.]"^[20] Rubens posits that some circuit courts have adopted a more lenient standard for determining fraud in the regulatory context of the FDCA. Decisions from the Fourth and Eighth Circuits instruct that fraud "is shown when the evidence demonstrates that the defendant has deliberately frustrated the purpose for which registration [of manufacturing premises] is required. . . . The inquiry, therefore, is whether the defendant designed his conduct to avoid the regulatory scrutiny of the [agency]."^[21] Rubens continues, "With this relaxed standard, the regulatory fraud interpretation of `to defraud or mislead' maintains a scienter requirement while ensuring a greater ease of prosecution than with the background common law standard."^[22] Again, a distinct regulatory context, but with evident applicability to the case at bar.

Notwithstanding that the federal cases parsed by Rubens involve criminal penalties for fraud, as opposed to punitive monetary penalties at issue here, the conclusion Rubens reaches is that a broader construct of fraud in the regulatory context better serves the ameliorative purposes of statutes and regulations enacted to protect the public. "The purpose of [a regulatory] regime, to protect the public [], has been recognized by the Supreme Court as the key principle in interpreting the statute (emphasis added)."^[23] Rubens succinctly propounds his thesis in the final sentence of the article: "Adopting the regulatory conception of fraud, with its broader intent standard, best gives effect to Congress's purpose in enacting the FDCA and effectively rebuts the presumption in favor of common law incorporation.^[24]

Similarly, here, because "the rent stabilization laws were enacted to prevent exactions of unjust, unreasonable and oppressive rents and rental agreements and to forestall profiteering, speculation and other disruptive practices," the court must look to this purpose when interpreting the legislative intent of L 2024, ch 95, § 4. (Hughes v Lenox Hill Hosp., 8 AD3d 140, 140 [1st Dept 2004] [internal citations and quotation marks omitted].) "The central, underlying purpose of the [Rent Stabilization Law] is to ameliorate the dislocations and risk of widespread lack of suitable dwellings" that accompany a housing crisis. Noting their remedial nature, this Court has repeatedly interpreted laws regulating rents broadly to effectuate their intended purpose (internal citations and quotation marks omitted)." (Fed. Home Loan Mtge. Corp. v. New York State Div. of Hous. & Cmty. Renewal, 87 NY2d 325, 332 [1995].) Looking to the purposes of the Rent Stabilization Law as a guiding principle, the court finds that a broader, more flexible definition of fraud better serves the public policy behind rent stabilization.

A Colorable Claim of Fraud and the Totality of the Circumstances

The Chapter Amendments require a tenant to properly raise "a colorable claim of fraud." This terminology has persisted in every iteration of the law pre-HSTPA,^[25] in Regina,^[26] and today.^[27] "A colorable claim is a plausible legal claim. This means that the claim is `strong enough' to have a reasonable chance of being valid if the legal basis is generally correct and the facts can be proven in court."^[28] That the legislature chose to use this deep-rooted diction should come as no surprise and requires little interpretation beyond the guidance provided in the controlling authorities of Thornton, Grimm, and Conason. The "requisite factors" of a properly raised colorable claim of fraud are cogently distilled from Grimm in Pehrson v Div. of Hous. & Cmty. Renewal of State, 34 Misc 3d 1220 (A), 2011 NY Slip Op. 52487 (U) (Sup Ct, New York County 2011).^[29]

Here, again, an analogy to another body of law is helpful. In Illinois v Gates, 462 US 213 (1983), a criminal case involving the standard for a finding of probable cause for a search warrant, an inflexible two-pronged test for determining probable cause for a search warrant was abandoned by the Court and replaced by a totality of circumstances approach. The Court described this new test as a "flexible, common-sense standard[.]" (Gates, 462 US at 214, 239.) A judge need only have a "substantial basis for determining" that a search warrant (investigation) will reveal evidence of a crime. (Id. at 238.) Just as with regulatory fraud, which utilizes a broader definition of fraud to best promote the purposes of a regulatory regime, the Supreme Court in Gates explained that when balancing the concerns of the government against the right to protection from unreasonable searches and seizures, the totality of the circumstances is preferred over rigid formulas because it is a "flexible, easily applied standard [which] will better achieve the accommodation of public and private interests." (Id. at 239.) The Court explicated that "probable cause is a fluid concept—turning on the assessment of probabilities in particular factual contexts—not readily, or even usefully, reduced to a neat set of legal rules." (Id. at 232.) Neither is the construct of fraud in the context of deregulation susceptible to a bright-line test.^[30] The legislature recognizes this hypothesis in the new law. Accordingly, if a tenant evinces a substantial basis for inferring the probability that fraud exists (a colorable claim), then the court or DHCR will determine whether a wrong (a fraudulent stratagem to remove a premises from rent regulation) actually exists. If so, then the default formula will be employed to calculate any resulting overcharge.

Viewed as it is herein within the "regulatory context" of the regulated housing in New York — the purpose of which is to promote stability and affordability in housing — this construction also harmonizes Regina's footnote seven with Thornton, Grimm, and Conason. At the same time, this reading of the new law also remedies what the legislature and some judges view as an unintended judicial interpretation of Regina that took footnote seven too far — e.g. Burrows^[31] — and recognizes that the elements of fraud, in particular justifiable reliance, must be considered in the context of the true nature of landlord-tenant relationships which are marked by unequal sophistication and bargaining power between the parties, generally sophisticated property owners and the public at large.^[32]

Contrary to petitioner's argument, each element of a common law fraud claim no longer must be pleaded. Indeed, not every element must be proven. This is explicitly stated by the legislature, which has appropriately imported the more flexible totality of the circumstances test into the calculus. Now, a court is constrained to consider the totality of the circumstances that surround an occurrence such as deregulation to determine whether fraud exists after a tenant raises a colorable claim. This does not mean that fraud actually exists, only that the duty of DHCR or a court of competent jurisdiction to investigate further has been precipitated. Indeed, upon investigation and consideration of the facts, a court or DHCR might find that no fraud actually exists. But the duty to investigate a colorable claim of fraud is sacrosanct. As the Appellate Division, First Department stated in Grimm,

"Given the specific facts of this case, DHCR should not be allowed to turn a blind eye to what could be fraud and an attempt by the landlord to circumvent the Rent Stabilization Law . . . "[W]here, as here, there is an indication of possible fraud that would render the rent records unreliable, it is an abuse of discretion for DHCR not to investigate it (emphasis added) (internal quotation marks omitted)." (Grimm, 15 NY3d at 364 (quoting Grimm v New York State Div. of Hous. & Community Renewal Off. of Rent Admin, 68 AD3d 29, 33 [1st Dept 2009].)

In Conason v Megan Holding, LLC, 25 NY3d 1 (2015), cited favorably by the Regina Court and decided after Grimm and Thornton — both cited in Regina as precedent — the Court hailed Grimm as defining a "colorable claim."

"Here, tenants do not just make a generalized claim of fraud. They instead advance a colorable claim of fraud within the meaning of Grimm—i.e., tenants alleged substantial evidence pointing to the setting of an illegal rent in connection with a stratagem devised by [the landlord] to remove tenants' apartment from the protections of rent stabilization." (Conason, 25 NY3d at 16.)

The Conason Court also understood the desirability of recognizing the fluid nature of the totality of the circumstances test:

"[W]hatever the minimum scope of the inquiry that must be made by the courts or DHCR to resolve an overcharge claim where fraud has been alleged and there exist substantial indicia of fraud on the record, and whatever minimum quantum of evidence is required for a tenant to establish fraud sufficient to taint the reliability of the rent on the base date (see Grimm, discussed earlier), these thresholds have been crossed here: Civil Court made extensive findings of fraud based on a record developed at a trial, which afforded both sides the opportunity (even though shunned by defendants) to submit evidence and present and cross-examine witnesses regarding the apartment's rental history." (25 NY3d at 18.)

The law is thus: In the context of the rent stabilization regime, a tenant must set forth "more than a generalized claim" of fraud ("a colorable claim") within the definition of Grimm and Perhson to enable a court, or DHCR, to infer a landlord's fraudulent scheme to evade remedial rent regulations which, in turn, gives rise to a duty to investigate further (past the lookback period) to determine, by considering all controlling authorities — and all the circumstances surrounding the alleged fraudulent deregulation — if a fraudulent scheme actually exists so as to apply the default formula to calculate a resulting overcharge.

Application of the Chapter Amendments to Respondent's Motion

Petitioner's unyielding adherence to the heightened pleading standard for common law fraud as the sum of its argument in opposition to respondent's motion, once a viable position, has been displaced by the Chapter Amendments. Here, the legislature imported the elements of common law fraud — previously eliminated in L 2023, ch 760 — only to clarify that all the elements need not be proven. The standard of proof for common law fraud is "clear and convincing evidence." (Gaidon v Guardian Life Ins. of America, 94 NY2d 330, 349-350 [1999] ["The elements of fraud are narrowly defined, requiring proof by clear and convincing evidence (internal citation omitted)."] Common sense dictates that a tenant cannot be required to plead with specificity every element of common law fraud, when they do not have to prove every element at trial.

Petitioner purchased the building in December 2007, yet did not file any registration statements for the subject apartment until 2016. (NYSCEF Doc No. 19, respondent's exhibit G, deed; NYSCEF Doc No. 15, respondent's exhibit C, DHCR rent registration history.) In August 2016, petitioner retroactively registered the apartment for the years 2008 through 2015. (NYSCEF Doc No. 15, respondent's exhibit C, DHCR rent registration history.) The increases taken on the legal registered rent ("LRR") reported on the initial retroactive registration in 2008 follow allowable Rent Guidelines Board Order ("RGBO") increases (with some de minimis exceptions).

The registration statement for 2016 indicates the apartment was vacant but also reflects a vacancy increase in excess of the allowable increase at the time for a two-year lease of twenty percent, pursuant to RGBO No. 47 and No. 48, which provide the applicable vacancy percentage increases for leases that commenced in 2016. (NYSCEF Doc No. 15 at 5.) Petitioner entered into a two (2) year lease, commencing May 1, 2016 and ending April 30, 2018, with Shlomo Amsel, at a monthly preferential rent of $1,575. The only rider attached to this lease is a "Temporary Rent Concession Rider," indicating that the LRR is $3,150, well above the vacancy deregulation threshold at the time,^[33] but with no rider explaining the increase in rent, much less notifying the tenant that the apartment had reached the then-threshold for vacancy deregulation.^[34] (NYSCEF Doc No. 13 at 9-11.) In 2018, petitioner filed both a retroactive 2017 registration and a current registration for 2018, which both reflect the two (2) year lease from May 1, 2016 through April 30, 2018, at a LRR of $3,150 and a preferential rent of $1,575. (NYSCEF Doc No. 15 at 5.) Petitioner then entered into a one (1) year rent-stabilized lease renewal with Shlomo Amsel and Yaakov Amsel, commencing May 1, 2019 (the lease does not indicate whether the tenants selected a one-year at a preferential rent of $1,625, or a two-year lease term at the LRR of $3,269.11.) (NYSCEF Doc No. 13 at 13.) Despite entering into this rent-stabilized lease renewal, petitioner ceased registering the apartment altogether after 2018, without ever filing any registration statement explaining how, if at all, the apartment was exempt from rent stabilization. (NYSCEF Doc NO. 5 at 5-6.) Respondent's unregulated lease commenced April 1, 2020 for a one year term, expiring March 31, 2021, at a monthly rental of $1,800. (NYSCEF Doc No. 13 at 3.)

Following the Pehrson guidelines,^[35] the court finds that respondent has properly raised a colorable claim of a fraudulent scheme to deregulate the subject apartment. Petitioner violated the Rent Stabilization Law by (1) failing to file registrations consistent with the leases in effect at the time of the registrations, (2) by failing to accurately reflect when the apartment was deregulated, and (3) by failing to provide Shlomo Amsel with a lease rider which explains the first rent after deregulation and charging Amsel a rent of exactly half ($1,575) that which petitioner claims to be the LRR of $3,150, thus likely lulling Amsel not to challenge the deregulation.^[36] Respondent's detailed, credible affidavit which generally disputes the contractor's purported scope of work based on her past experience with an apartment-wide renovation, and specifically disputes improvements such as marble countertops, and appliances, raise more questions about what improvements were actually made and how much the improvements cost. Respondent's affidavit rises far above "mere skepticism." (Cf Breen v 330 E. 50th Partners, LP, 154 AD3d 583, 584 (1st Dept 2017).

Respondent's colorable claim triggers the court's duty to investigate further to determine the propriety of the deregulation. Respondent's answer must be amended nunc pro tunc to May 17, 2023, the date the original answer was filed to reflect this colorable claim.^[37] Thus, May 17, 2017 is the base date for calculation of any overcharge unless a fraudulent scheme to deregulate the premises is revealed.^[38] Respondent's claim of unlawful deregulation is not temporally limited. (E.W. Renovating Co. v New York State Div. of Hous. and Cmty Renewal, 16 AD3d 166, 167 [1st Dept 2005] ["DHCR's consideration of events beyond the four-year period is permissible if done not for the purpose of calculating an overcharge but rather to determine whether an apartment is regulated (internal citations omitted)."]; Thurman v Sullivan Props. LP, 226 AD3d 453 [1st Dept 2024], citing E.W. Renovating Co.). Discovery is granted as to respondent's claims in order to facilitate the trial.^[39] Because petitioner has owned the building since the building was purportedly deregulated, and the document demands are narrowly tailored (modified as they are as set forth below) petitioner will not be prejudiced. Because fraudulent overcharge must be accompanied by a fraudulent deregulation, respondent's demands are limited to September 1, 2015 forward, the day after the expiration of Linda Gonzalez's lease, through March 31, 2020, the day before respondent's initial unregulated lease commenced.

CONCLUSION

Accordingly, it is

ORDERED that respondent's motion to amend her answer is granted pursuant to CPLR 3025 and the amended answer is deemed served and filed as of May 17, 2024; and it is further

ORDERED that respondent's motion for leave of court to conduct discovery pursuant to CPLR 408 and CPLR Article 31 is granted; and it is further

ORDERED that respondent shall serve discovery demands which comport with this decision and order upon petitioner's counsel within three (3) business days; and it is further

ORDERED that the proceeding is marked off the court's calendar to enable petitioner to produce documents pursuant to the document demands within 45 days of receipt of same from respondent as set forth above preserving all objections and supplying a "Jackson affidavit" regarding any documents that could not be located after a diligent search was conducted;^[40] and it is further

ORDERED that the parties shall make good faith efforts to resolve all discovery disputes without court intervention, and be able to demonstrate same to the court; and it is further

ORDERED that either party may restore this proceeding to the court's calendar by eight (8) days' notice of motion for appropriate relief including motion practice pursuant to CPLR Article 31 or trial.

This constitutes the decision and order of this court.

[1] This section borrows liberally from a decision of this court issued on June 11, 2024 which involved a more narrow analysis of the new law. See 41-47 Nick LLC v Odumosu, 2024 NY Slip Op 24167, *3-5 (Civ Ct, New York County 2024).

[2] "Fraud consists of evidence [of] a representation of material fact, falsity, scienter, reliance and injury (internal quotation marks and citations omitted)." Regina, 35 NY3d 332, 356, n 7.

[3] See Wise v 1614 Madison Partners, LLC, 214 AD3d 550, 550 (1st Dept 2023) ("The court correctly determined that the four-year statute of limitations under the former CPLR 213—a governed the rent overcharge claims, which accrued prior to the enactment of the Housing Stability and Tenant Protection Act." But see 9 NYCRR 2523.7(b) (owners "shall not be required to maintain or produce any records relating to rentals of such accommodation more than six years prior to the most recent registration or annual statement for such accommodation" but may destroy older records at their own risk).

[4] Because a tenant cannot obtain the rent registration history from the Division of Housing and Community Renewal ("DHCR") prior to executing a lease, the Burrows reasoning also eschews the general principle that a party "must take [] reasonable steps to protect itself against deception [and] requires a plaintiff claiming [fraud] . . . to allege that, before entering into the transaction, it availed itself of the opportunity to verify the [other party's] representations[.]" Basis Yield Alpha Fund Master v Morgan Stanley, 136 AD3d 136, 141-142 (1st Dept 2015) (emphasis added).

[5] Brunetti v Musallam, 11 AD3d 280, 281 (2d Dept 2004). In Brunetti, the Appellate Division, Second Department reversed the trial court, finding that the court erred in dismissing the proceeding on summary judgment. "[T]he motion court should not have resolved factual issues by determining, based on this record, that defendants established as a matter of law that plaintiff could not prove all the elements of his fraud claim. The issues of material misrepresentation and reasonable reliance, essential elements of a fraud claim, are not subject to summary disposition." Id. (internal citations omitted).

[6] Gary M. Rosenberg and Ethan R. Cohen, "The `Fraud Exception' Requires Fraud," NYLJ, Aug. 2, 2023, available online at https://www.law.com/newyorklawjournal/2023/08/01/the-fraud-exception-requires-fraud/ (last accessed June 19, 2024).

[7] See e.g. Anthony Morreale, "The `Totality of the Circumstances' Surrounding the New Statutory Definition of a Fraudulent Deregulation Scheme," Belkin, Burden, Goldman, LLP Update, Spring 2024, Vol. 70, available online at https://bbgllp.com/wp-content/uploads/2024/03/BBG_Newsletter_Spring2024.pdf (last accessed June 19, 2024) ("By attempting to redefine the fraud exception retroactively, the legislature's bill raised serious questions of its constitutionality.")

[8] "We now follow in the footsteps of the Legislature, which passed the Rent Regulation Reform Act of 1997 and clarified the law on overcharges. These amendments make clear that Burrows is no longer good law, and are (sic) returned to the Thorton (sic), Grimm, Connison (sic) line of cases." Assembly Member Rosenthal, Transcript of Assembly Floor debate, page 33, available at https://www2.assembly.state.ny.us/write/upload/transcripts/2023/2-13-24.pdf#search="8011, last accessed June 19, 2024; see also Assembly Mem in Support of 2023 NY Assembly Bill A06216, incorporated in L 2023, ch 760, available at https://nyassembly.gov/leg/?default_fld=%0D%0A&leg_video=&bn=A06216A&term=&Actions=Y&Memo=Y (last accessed June 19, 2024) ("This amendment will help clarify and codify the standard for applying a fraud exception to the four-year rule that was in place before HSTPA was enacted in light of Burrows v 75-25 153rd Street.")

[9] See, Itzkowitz PLLC Blog, The "F" Word — the NYS Legislature Takes a Stab at Defining "Fraud" in the Rent Stabilization Context, But in So Doing, Raises More Questions Than It Provides Answers, https://itkowitz.com/blog/2023/12/the-f-word-the-nys-legislature-takes-a-stab-at-defining-fraud-in-the-rent-stabilization-context-but-in-so-doing-raises-more-questions-than-it-provides-answers.html (June 21, 2024 7:48 a.m. ("But then, if a `fraudulent scheme to deregulate' is not the same as common law fraud, then what is it? If one cannot look to common law fraud to establish elements of a fraudulent scheme to deregulate, then where do we look for the elements of a claim of a fraudulent scheme to deregulate? The statute asks us to look at the `totality of the circumstances'. Which circumstances? If there `need not be a finding that all of the elements of common law fraud, including evidence of a misrepresentation of material fact, falsity, scienter, reliance and injury', then one assumes we can still rely upon the presence of some of those elements, combined with the overall circumstances of the matter. . . . It is almost as if the legislature is saying to the courts, "Come on, you know a fraudulent scheme to deregulate when you see it (emphasis in original)."

[10] In Housing Court, because discovery is conducted only by leave of court, a litigant must be able to demonstrate ample need for discovery related to a cause of action or defense, discovery regarding fraudulent overcharge claims is inextricably entwined with proper pleading. See CPLR 408; New York Univ. v Farkas, 121 Misc 2d 643, 647 (Civ Ct, New York County 1983) ("In determining whether a party has established ample need for discovery, courts consider a number of factors, not all of which need be present in every case, including: (1) whether the movant has asserted facts to establish a claim or defense; (2) whether there is a need to determine information directly related to the claim or defense[.]" The Farkas court expressly stated that discovery "should never be permitted" where it is being utilized to formulate a cause of action of "establish a defense.[.]" Id.

[11] Not relevant here, IAI increases were amended as part of L 2024, ch 56, Part FF, § 3, increasing the aggregated maximum cost from $15,000 to $30,000.

[12] Petitioner has not advanced a constitutional challenge. Regardless, "[L]egislative enactments are entitled to a `strong presumption of constitutionality'."

[13] See n 2, supra.

[14] Common law is defined as "law that is derived from judicial decisions instead of from statutes." Cornell Law School, Legal Information Institute, available online athttps://www.law.cornell.edu/wex/common_law (last accessed June 19, 2024).

[15] Rodriguez v. Fredericks, 213 AD2d 176, 177 (1st Dept 1995) — a legal malpractice action which notes that nominal damages of $1 were awarded against defendants for "regulatory fraud claims" without definition or further explication.

[16] Brian Rubens, Comment, Common Law Versus Regulatory Fraud: Parsing the Intent Requirement of the Felony Penalty Provision of the Food, Drug, and Cosmetic Act, 72 U. Chi. L. Rev. 1501, 1523, 1526 (2005).

[17] Id. at 1524.

[18] Id. at 1526.

[19] Id. at 1525-1526.

[20] Id. at 1515.

[21] Id. at 1519.

[22] Id.

[23] Id. at 1531; see also U.S. v Dotterweich, 320 US 277 (1943).

[24] Id. at 1532.

[25] Matter of Grimm v State of NY Div. of Hous. & Community Renewal Off. of Rent Admin., 15 NY3d 358, 367 (2010) ("Generally, an increase in the rent alone will not be sufficient to establish a `colorable claim of fraud, and a mere allegation of fraud alone, without more, will not be sufficient [to pierce the lookback period] (emphasis added).")

[26] Regina, 35 NY3d at 362 (referring to one of the four consolidated cases therein and holding that "the complaint was properly dismissed based on the tenants' failure to allege a colorable claim of fraud. . . . (emphasis added).")

[27] L 2023 ch 760, Part B, § 2(b), as amended by L 2024, ch 95, § 4.

[28] Cornell Law School, Legal Information Institute, available at https://www.law.cornell.edu/wex/colorable_claim (last accessed June 19, 2024).

[29] In Pehrson, the tenant filed an Article 78 proceeding to challenge DHCR's denial of an overcharge complaint. The Supreme Court found that the facts and circumstances alleged by the tenant "support[ed] the requisite factors set forth in Grimm [and] trigger[ed] DHCR's duty to ascertain whether those allegations of fraud in the record, in turn, warrant[ed] the use of the default formula in calculating any rent overcharge. . . ." Pehrson, 2011 NY Slip Op. 52487 (U), *2. The Pehrson court set out three categories of actions set forth in Grimm, which together can demonstrate sufficient indicia of fraud, to wit: "(1) The tenant alleges circumstances that indicate the landlord's violation of the Rent Stabilization Law (RSL) and Rent Stabilization Code (RSC) in addition to charging an illegal rent. (2) The evidence indicates a fraudulent scheme to remove the rental unit from rent regulation. (3) The rent registration history is inconsistent with the lease history." Id. Applying these factors, the Supreme Court found that "the evidence in the record establishes a colorable claim of the landlord's fraud." Id. The proceeding was remanded to DHCR.

[30] See n 5, supra.

[31] After New York courts almost universally agreed that common law fraud must be properly pleaded, Burrows held that justifiable reliance could not be demonstrated if public records, such as a DHCR rent registration history, could be examined to reveal a representation of fact upon which a tenant claiming unlawful deregulation or fraudulent overcharge could have discovered. Burrows went so far as to apply this standard to current and predecessor tenants. After Burrows — disregarding the fact that DHCR rent registration histories are not available to tenants until after they sign the lease — claims of fraud were eliminated at the pleading stage because "disclosure in the publicly available rental histories of the discrepant figures for legal regulated rent and preferential rent negates any inference of fraud as a matter of law (emphasis added)." Burrows, 215 AD3d at 113. The subjective element of justifiable reliance between parties of unequal sophistication and bargaining power became an objective, bright-line rule.

[32] See Kimmell v Schaefer, 89 NY2d 257 (1996) ("Whether the nature and caliber of the relationship between the parties is such that the injured party's reliance on a negligent misrepresentation is justified generally raises an issue of fact. In determining whether justifiable reliance exists in a particular case, a fact finder should consider whether the person making the representation held or appeared to hold unique or special expertise; whether a special relationship of trust or confidence existed between the parties; and whether the speaker was aware of the use to which the information would be put and supplied it for that purpose.")

[33] Former Rent Stabilization Law of 1969 [Administrative Code of the City of NY] § 26-504.2.

[34] The court presumes that petitioner's position is that the apartment was deregulated after Linda Gonzalez's vacatur and prior to Shlomo Ansel's initial occupancy in May 2016.

[35] Replicated here for ease of reading: "(1) The tenant alleges circumstances that indicate the landlord's violation of the Rent Stabilization Law (RSL) and Rent Stabilization Code (RSC) in addition to charging an illegal rent. (2) The evidence indicates a fraudulent scheme to remove the rental unit from rent regulation. (3) The rent registration history is inconsistent with the lease history." Pehrson, 2011 NY Slip Op. 52487 (U), *2.

[36] Referring to Thornton v Baron, the Conason Court explained "we declined to read the four-year limitations period in a way that would allow a landlord whose fraud remains undetected for four years—however willful or egregious the violation—[to], simply by virtue of having filed a registration statement, transform an illegal rent into a lawful assessment that would form the basis for all future rent increases (internal citations and quotation marks omitted)." Conason, 25 NY3d 1 at 14 (2015).

[37] CPLR 3025; CPLR 203(f) ("A claim asserted in an amended pleading is deemed to have been interposed at the time the claims in the original pleading were interposed, unless the original pleading does not give notice of the transactions, occurrences, or series of transactions or occurrences, to be proved pursuant to the amended pleading.") Here, the original answer, filed by respondent's attorney on May 17, 2023, certainly placed petitioner on notice of the transactions and occurrences that underlie respondent's claim of fraud.

[38] But see n 3, supra.

[39] CPLR 3101(a) states in relevant part that "[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action (emphasis added)[.]" These words "are . . . to be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial." Siegel v Snyder, 202 AD3d 125, 130 (2d Dept 2021) (internal citations and quotation marks omitted).

[40] "Jackson Affidavits" are frequently used in New York courts to confirm that documents requested as part of discovery have been searched for and not found. See Jackson v City of New York, 185 AD2d 768 (1st Dept 1992). A proper Jackson affidavit will indicate "where the subject records were likely to be kept, what efforts, if any, were made to preserve them, whether such records were routinely destroyed, or whether a search had been conducted in every location where the records were likely to be found[,]" such that a court may infer a good faith effort to comply with discovery demands. Id. at 770.