Appeals Court Annuls Portion of Ceiling Provision in MCI Reasonable Cost Schedule

A tenants' association sued the DHCR in an Article 78 proceeding, seeking annulment of a newly issued regulation and related operational bulletins that set a reasonable cost schedule for major capital improvements (MCIs). The court denied tenants' petition and dismissed the case.

Tenants appealed, and the decision was modified in part. The appeals court annulled much of RSC Section 2522.11(g)(1)(ii)(ii), which allows waivers to the cost ceilings set in the schedule for items "necessary and appropriately priced higher" and based on "undue hardship" to owners, annulling much of RSC Section 2522.11(f)(1), which permits the recovery of "related expenses" and "other additional items" that are not specified or listed in the Reasonable Cost Schedule, and otherwise affirmed the lower court's decision. 

On the other hand, the appeals court upheld other challenged provisions allowing the DHCR to include in its Reasonable Cost Schedule "additional costs that can be associated with the type of improvements listed within such class" as "consistent with the enabling legislation" and "not so lacking in reason for its promulgation that they are essentially arbitrary." The appeals court also found no violation of the procedural rules of the SAPA warranting annulment of the regulation or operational bulletins. And the DHCR's annual updates to the schedule issued through operational bulletins are not rules under SAPA but instead set "parameters for calculation" of MCI rent increases, as expressly provided for in the RSC.

Stuyvesant Town-Peter Cooper Vil. Tenants Assn. v. DHCR: Index No. 155184/21, App. No. 3022, Case No. 2023-02990, 2024 NY Slip Op 5655 (App. Div. 1 Dept.; 11/14/24; Webber, JP, Singh, Gesmer, Gonzalez, JJ)