OPINION OF THE COURT
Respondent Chelsea Partners, LLC (Owner) owns a three-story, 40-foot-deep building with a basement and eight residential units in Manhattan. Petitioner Daniel Peckham, the sole remaining occupant of the building, resides in an apartment subject to the Rent Stabilization Law and Code.
In May 2004, Owner filed an "Owner's Application for Order Granting Approval to Refuse Renewal of [Petitioner's] Lease and/or to Proceed for Eviction" (application) with the New York State Division of Housing and Community Renewal (DHCR). Owner plans to demolish the building and construct a six-story, 70-foot-deep building with 12 dwelling units in its place. According to Owner's plan, "[t]he Demolition will entail the removal of (a) the roof, (b) entire interior of the Building, (c) all partitions, (d) floor joints, (e) subfloors, and (f) building systems. In addition, much of the facade, and the entire rear wall of the Building will be removed." Petitioner opposed Owner's application, arguing that (1) Owner advised the New York City Department of Buildings (DOB) that the job involves "a reconstruction or an alteration" and (2) the evidence of financial ability could not be relied upon because the only thing it established was that the funds in question were held in the name of an entity other than Owner. On December 13, 2005, the Rent Administrator granted Owner's application, stating that "the owner has satisfied the conditions set forth under Section 2524.5 (a) (2) (i) of the New York City Rent Stabilization Code."
One month later, petitioner filed a petition for administrative review (PAR) of the Rent Administrator's order, arguing, in
Following Supreme Court's order and judgment, DHCR agreed to abide by the court order remanding the matter. Owner appealed to the Appellate Division pursuant to that court's leave grant. At the Appellate Division, DHCR sought an affirmance of Supreme Court's order. DHCR argued that (1) "articulation of a standard for demolition applications will allow for more meaningful court review and give both owners and tenants guidance in a controversial area of rent regulation that has created uncertainty and confusion" and (2) more evidence of Owner's "financial ability" is needed.
In a 3-2 decision, the Appellate Division reversed Supreme Court, concluding that the granting of the petition and remand of the matter to DHCR were improper (54 A.D.3d 27 ). According to the court, Owner was entitled to treat DHCR's determination as final. Further, the court ruled that Supreme Court erred in finding that DHCR lacked a conclusive definition of "demolition," that DHCR's order denying petitioner's PAR was not based upon an incomplete factual record, arbitrary, capricious,
Petitioner argues that Owner did not have standing to appeal Supreme Court's decision. We disagree and hold that the Appellate Division did not act in excess of its powers in granting Owner leave to appeal.
In addition, petitioner challenges DHCR's lack of a specific definition for the term "Demolition." This argument was not raised before the Rent Administrator or at petitioner's PAR. It was raised for the first time in the article 78 proceeding. As it is well settled that an argument "may not be raised for the first time before the courts in an article 78 proceeding" (Matter of Yonkers Gardens Co. v State of N.Y. Div. of Hous. & Community Renewal, 51 N.Y.2d 966, 967 ), this argument is not properly before us.
Petitioner further argues that the evidence of financial ability Owner submitted pertains to a different entity (Three Stars Associates, LLC) and that such evidence does not necessarily inure to the benefit of Owner. Although this argument was raised before the Rent Administrator, it was never repeated at the PAR or in the instant petition. Accordingly, we may not consider this argument.
However, petitioner's general arguments that DHCR's actions were arbitrary and capricious are before us. We hold that
Here, DHCR's determination denying petitioner's PAR is consistent with its own rules and precedents; accordingly, there is a rational basis for the determination. It is of no moment that there is no precise or expansive definition of "demolition" in the Rent Stabilization Law and Code. Numerous terms and concepts lack such a definition (see e.g. Rent Stabilization Law [Administrative Code of City of NY] § 26-504 [a]  [f] [does not contain a precise definition of "primary residence"]). Further, over the years, DHCR and its predecessor, the Conciliation and Appeals Board of the City of New York (CAB), have not required the proponent of a demolition application to show that it intends to "raze the structure to the ground" (the dictionary definition of "demolition") in order to be successful. An intent to gut the interior of the building, while leaving the walls intact, has been held as sufficient (see e.g. Matter of Villas of Forest Hills, CAB Op No. 15,680, at 13-14 ; Matter of Mazzia, DHCR Admin Review Docket No. PF410002OE [Sept. 27, 2002]; Matter of Schneider, DHCR Admin Review Docket No. TB420052RT, at 7 [Mar. 16, 2006]). Courts reviewing this interpretation of the term "demolition" have held likewise (see e.g. Application of Gioeli, 221 N.Y.S.2d 568 [Sup Ct, NY County 1961]; Matter of Mahoney v Altman, 63 Misc.2d 1062, 1064 [Sup Ct, NY County 1970]; Matter of 412 W. 44th St. Corp., NYLJ, Oct. 19, 1971, at 2, col 5). Here, Owner's demolition plan comports with DHCR's long-held interpretation of "demolition."
Regarding the "financial ability" that must be shown before a demolition application is granted, DHCR has stated
As there is a rational basis for DHCR's order denying petitioner's PAR, we hold that Owner is entitled to treat this determination as final. Because Owner has satisfied DHCR's requirements and obtained the necessary approvals, it should be able to proceed with its demolition project without the threat of having to revisit the entire administrative process. To be sure, DHCR has a great deal of authority to modify the orders it renders and the regulations—along with accompanying standards—it administers. However, the question here is not whether DHCR can change its regulations, standards or orders (it certainly can), but when. Here, DHCR may not get what amounts to a second chance to rule on Owner's application after setting and applying a new standard regarding what constitutes a "demolition." DHCR may, of course, modify its standards, but it must apply them on a going forward basis.
Accordingly, the order of the Appellate Division should be affirmed, with costs.
Order affirmed, with costs.