Apartment Was Properly Deregulated After Temporary Exemption

Tenant complained of rent overcharge and improper apartment deregulation. Landlord showed that the apartment had been owner-occupied between 1999 and 2004, then rented at a first rent to a prior tenant, then deregulated in 2007 when a vacancy rent exceeded $2,000 per month. The DRA ruled against tenant, who appealed and lost.

The DHCR considered a number of issues raised by the parties. HSTPA didn't apply to PAR proceedings such as this one dealing with overcharges allegedly occurring prior to the effective date of HSTPA. There were insufficient indicia of fraud to warrant review of pre-base date rental events. Landlord showed proof that a family member lived in the apartment during the time the unit was registered as "TE" and there was no requirement that such exemption last for four years or for any specified duration before landlord could charge a first rent to the next tenant. The fact that landlord contemporaneously registered the apartment as "temp exempt--owner occupied" was sufficient to demonstrate that the family member paid no rent, since that status ended 17-19 years ago. When the family member moved out, landlord was entitled to charge an agreed-upon first rent to the next tenant. And, "while the RSC did require that the first agreed upon rent after a temporary exemption be set forth in a rent stabilized lease, there was industry-wide confusion regarding this requirement at the relevant time."  The DHCR "was allowing owners and tenants to set first rents after temporary exemptions even if such rents were not set forth in a rent stabilized lease, as long as such agreed upon rent was less than the threshold for deregulation, which it was in this case." Failure to give that first tenant a rent-stabilized lease didn't indicate fraud. 

Cheng: DHCR Adm. Rev. Docket No. JR410033RT (11/19/21)[12-pg. document]