New York’s highest court – The Court of Appeals – recently ventured into the arcane world of rent regulation and issued a surprising decision awarding succession rights to the family member of a deceased tenant notwithstanding the undisputed fact that the purported successor was not named on the income affidavit that the deceased tenant had filed in the 2 years prior to her death. The name of the case is Murphy v. State Division of Housing and Community Renewal, ___N.E.2d ___, ___ N.Y.S.3d ___ (October 19, 2013).
Why Does the Filing of the Income Affidavit Matter?
The apartment at issue is a Mitchell-Lama apartment. In the event that Mitchell–Lama tenants vacate an apartment, their co-occupants are not automatically entitled to succeed to the tenancy. Under the applicable regulations, succession applicants must make an affirmative showing in order to establish their eligibility. Specifically, they must demonstrate:
- that they qualify as family members or were otherwise sufficiently interdependent with the tenant-of-record;
- that the unit at issue was the applicant’s primary residence during the two years immediately prior to the tenant’s vacatur;
- and that they were listed as co-occupants on the income affidavits filed for the same two-year period.
The income affidavit is crucial because Mitchell-Lama apartments are only for those with a low enough income to qualify to have them. The government requires everyone living in the apartment to be listed on the income affidavit with a requisite showing of income. The failure to be listed on the income affidavit indicates either that the person was living in the apartment but wasn’t listed so as to avoid showing income or wasn’t living in the apartment at all. The failure to be listed on the affidavit has always been a disqualification from succession.
Murphy v. New York State DHCR
In this case, Paul Murphy was denied succession rights to the Mitchell–Lama apartment because he wasn’t listed on the income affidavit. The Court of Appeals determined that the DHCR finding that he wasn’t entitled to succession rights was arbitrary and capricious. They held that because the evidence of Murphy’s primary residency was overwhelming, and because there was no relationship between the tenant-of-record’s failure to file the income affidavit and the succession applicant’s income or occupancy, the agency’s determination was arbitrary and capricious.
Murphy is a lifelong resident of the apartment who had moved into the apartment with his parents when he was one month old, in 1981, and continued to live in the apartment ever since. In January 2000, Murphy’s parents vacated the apartment, and in 2004, Murphy filed a succession application to succeed to the tenancy. The landlord rejected the application and DHCR subsequently denied Murphy’s appeal. DHCR based its denial on the fact that Murphy’s mother, the tenant-of-record, had failed to file an annual income affidavit listing Murphy as a co-occupant for one of the two years prior to her vacatur in 2000. DHCR considered this failure an absolute bar to Murphy’s succession eligibility under its regulations. Murphy then filed an Article 78 petition in Supreme Court challenging the agency’s determination, and DHCR moved to dismiss the proceeding. Supreme Court denied DHCR’s motion, annulled the agency’s denial of Murphy’s appeal, and granted his succession petition. The Appellate Division affirmed and DHCR successively moved for leave to appeal to the Court of Appeals – and leave to appeal obviously was granted.
In the past the Court of Appeals has held that “[t]he Mitchell–Lama law prescribes strict guidelines for tenant eligibility and succession” ( Matter of Schorr v. New York City Dept. of Hous. Preserv. & Dev., 10 N.Y.3d 776, 778  ). The basis for the Court of Appeals ignoring its own precedent was stated as follows:
“The sole basis for DHCR’s denial of Murphy’s application was that his mother did not file the requisite income affidavit for 1998, the year prior to Murphy’s high school graduation. Given the overwhelming evidence of primary residence, and the absence of any indication that the failure to file was related to Murphy’s status as a co-occupant or an income-earner, we hold that it was arbitrary and capricious for DHCR to deny succession on the basis of the failure to file a single income affidavit.”
New Precedent for Succession Rights
This new holding sets a remarkable new precedent. Whereas before the failure to file an income affidavit would disqualify a purported successor – it appears Courts (and DHCR) will be able to reach its/their own conclusion as to why an income affidavit was not filed. As a result, people committing fraud may end up succeeding to apartments to which they should not succeed and people who would have been denied apartments through no fault of their own will now be able to succeed.