First Department Affirms Tenant's Right to Challenge Deregulation — and Declines to Follow McNeely

Thurman v Sullivan Properties L.P., 226 AD3d 453 (1st Dept 2024)

By Bikram Singh, Esq. | Singh & Rani LLP

---

On April 4, 2024, the Appellate Division, First Department, unanimously affirmed the denial of a landlord's motion to dismiss in Thurman v Sullivan Properties L.P. — a decision that reinforces a tenant's ability to challenge an apartment's deregulated status at any point during the tenancy, and that expressly rejects a Civil Court ruling landlords had leaned on for years to shut those challenges down.

Bikram Singh of Singh & Rani LLP represented the plaintiff-respondent, tenant Todd Thurman, on the appeal.

---

The Dispute

Our client was a market-rent tenant who brought suit in New York County Supreme Court against his landlord, alleging that the apartment had been illegally removed from rent regulation. The apartment had been rent-controlled. After the rent-controlled tenant vacated on or about June 30, 2005, the landlord entered into a lease with a new tenant at a monthly rent exceeding $2,000 — the luxury decontrol threshold then in effect under former Rent Stabilization Code § 2520.11(r)(4).

The landlord moved to dismiss under CPLR 3211(a)(1) — defense founded on documentary evidence — and CPLR 3211(a)(5) — statute of limitations. Supreme Court (Suzanne J. Adams, J.) denied the motion by order entered June 6, 2023. The landlord appealed.

---

What the First Department Held

The Appellate Division affirmed in all respects, without costs. Three points are worth practitioners' attention.

1. The documents were admissible — but they didn't win the motion

The Court gave the landlord its procedural due. Leases and a so-ordered Housing Court stipulation, submitted through the affidavit of an employee familiar with the files, were properly before the Court (Basis Yield Alpha Fund [Master] v Goldman Sachs Group, Inc., 115 AD3d 128, 134 n 4 [1st Dept 2014]; DeLeon v Port Auth. of N.Y. & N.J., 306 AD2d 146 [1st Dept 2003]). And leases do qualify as documentary evidence under CPLR 3211(a)(1) (150 Broadway N.Y. Assoc., L.P. v Bodner, 14 AD3d 1, 5 [1st Dept 2004]).

That was not enough. Admissibility is the threshold, not the standard. Under Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326 (2002), documentary evidence must utterly refute the plaintiff's factual allegations and conclusively establish a defense as a matter of law. Leases showing a post-vacancy rent above $2,000 establish what the landlord charged. They say nothing about whether the apartment was lawfully entitled to leave regulation in the first place. As the Court put it, the documents did not utterly refute the allegation that the apartment was wrongly or fraudulently removed from rent regulation.

This is the practical lesson for tenant-side practitioners: a landlord's paper trail of high-rent leases is not a defense to a fraudulent deregulation claim. It is the very evidence being challenged.

2. A regulatory status claim is not a fair market rent appeal

The landlord's limitations argument had real force on its own terms. Under pre-HSTPA law, a fair market rent appeal challenging the initial legal regulated rent had to be filed within four years of the last rent-controlled tenant's vacancy — here, by June 30, 2009 — regardless of whether RR-1 notices were served (Matter of Park v New York State Div. of Hous. & Community Renewal, 150 AD3d 105, 113-114 [1st Dept 2017], lv denied 30 NY3d 961 [2017]).

The First Department accepted that proposition and then held it irrelevant. This action was not a fair market rent appeal. Where the question is the apartment's regulatory status rather than the correctness of an initial rent calculation, the rental history may be examined beyond four years (Rosa v Koscal 59, LLC, 162 AD3d 466 [1st Dept 2018]; Olsen v Stellar W. 110, LLC, 96 AD3d 440, 441-442 [1st Dept 2012], lv dismissed 20 NY3d 1000 [2013]).

The Court restated the governing principle in unqualified terms: it is well settled that a tenant may challenge the ostensibly deregulated status of a dwelling at any time during their tenancy (Gersten v 56 7th Ave. LLC, 88 AD3d 189, 199-200 [1st Dept 2011]; East W. Renovating Co. v New York State Div. of Hous. & Community Renewal, 16 AD3d 166, 167 [1st Dept 2005]).

3. 3505 BWAY Owner LLC v McNeely is not controlling

The most consequential sentence in the decision is also the shortest. Addressing 3505 BWAY Owner LLC v McNeely, 67 Misc 3d 583 (Civ Ct, NY County 2020), affd 72 Misc 3d 1 (App Term, 1st Dept 2021) — which had reached a different conclusion, and which landlords had cited repeatedly to argue that a deregulation challenge is really a time-barred FMRA in disguise — the Court stated that the case is not controlling and declined to follow it.

McNeely had become a reliable citation in landlords' opposition papers. After Thurman, it is not one.

---

Why It Matters

Thurman landed roughly ten weeks before the Court of Appeals decided Liggett v Lew Realty LLC, 2024 NY Slip Op 03378 (June 20, 2024), in which the Court held that no statute of limitations bars a plaintiff's claim that an apartment is subject to rent stabilization, notwithstanding substantial delay between the challenged conduct and the commencement of the action.

The two decisions now travel together. In Four Forty-Two W. 50th St. LLC v Fiel, 2024 NY Slip Op 51327(U), the Appellate Term, First Department, cited Liggett and Thurman side by side in affirming a Civil Court's examination of an apartment's rental history — including the legality of a purported "first rent" — because the FMRA limitations period does not apply where the inquiry concerns regulatory status.

For practitioners on either side of a deregulation dispute, the takeaways are concrete:

• A high-rent lease is not documentary evidence of lawful deregulation. Under Goshen, the documents must utterly refute the allegations. Leases generated by the allegedly improper deregulation cannot do that work.
• The four-year rule is a rent-calculation rule, not a status rule. Framing matters. A claim pleaded as a challenge to regulatory status is not subject to the FMRA deadline.
• Timing is not the defense it once appeared to be. Between Thurman and Liggett, delay alone will not defeat a claim that an apartment belongs in the stabilization system.
• Check your string cites. McNeely no longer carries the weight it once did in the First Department.

---

A Note on Posture

Thurman affirmed the denial of a pre-answer motion to dismiss. It did not resolve the merits of whether this apartment was in fact improperly deregulated — only that the tenant is entitled to litigate that question. That distinction matters, and it is precisely the distinction the First Department drew: documentary evidence at the pleading stage must conclusively end a case, and here it did not.

---

Singh & Rani LLP represents tenants and landlords in rent stabilization, overcharge, and deregulation litigation throughout New York City's Housing Courts, Civil Courts, and Supreme Courts. Bikram Singh represented plaintiff Todd Thurman in Thurman v Sullivan Properties L.P. If you believe your apartment may have been improperly removed from rent regulation, we can review your rental history and advise you on your options.

Singh & Rani LLP 5 Penn Plaza, 19th Floor New York, NY 10001

---

Attorney Advertising. This article is provided for general informational purposes only and does not constitute legal advice, nor does it create an attorney-client relationship. Prior results do not guarantee a similar outcome. Each matter turns on its own facts and applicable law.

Related: Court Declares Former Rent-Controlled Apartment Rent-Stabilized: What Tenants Should Know