Building That Was 25% Occupied When Work Began Didn't Qualify as Substantially Rehabbed

(Decision submitted by David Hershey-Webb, Esq., of the Manhattan law firm of Himmelstein McConnell Gribben & Joseph LLP, attorneys for the tenants.)

Landlord applied for a DHCR ruling that its building was exempt from rent stabilization due to substantial rehabilitation. The DRA ruled against landlord, who appealed and lost. Landlord argued that, even though less than 80 percent of the building was vacant when the work was performed, the building had been in "substandard" condition. The DHCR affirmed the DRA's finding that there was insufficient proof of the building being substandard. Twenty-five percent of the building's 40 apartments were occupied when the work commenced, and nine apartments, representing 22.5 percent of the vacant apartments, had been "habitable"  since landlord paid buyouts to those tenants. The DHCR noted that 47.5 percent of the building's apartments were therefore habitable when the work began.

DHCR Operational Bulletin 95-2 required that a building be substandard or 80 percent vacant when the rehab commenced. The affidavit of the landlord's architect stated that 10 out of the building's 40 apartments were occupied during the substantial rehab. Landlord pointed out that its engineer stated that the building was in substandard or seriously deteriorated condition before the work began. Landlord had submitted an HPD report dated June 2018 showing that the building was in the Alternative Enforcement Program (AEP) for "severely distressed" buidings and that there were 519 violations against the building, most of which were Class B and C violations. [Download PDF of decision here.]

245 Sullivan Ave LLC: DHCR Adm. Rev. Docket No. LM210012RO (6/27/23)[18-pg. document]