Building Was Substantially Rehabbed Under Pre-November 2023 Rules

(Decision submitted by Dawn R. Myers, Esq. of the Manhattan law firm of Borah Goldstein Altschuler Nahins & Goidel, P.C., attorneys for the landlord.)

Landlord applied to the DHCR in March 2023 for a ruling that its building was exempt from rent stabilization based on a substantial rehabilitation performed after Jan. 1, 1974. Landlord bought the building in 2019, began the sub rehab project in January 2020 and completed it in January 2022. Landlord claimed that the work was done under a DOB Job Number and cost $600,000.

The DRA ruled against landlord, finding that landlord failed to demonstrate that 75 percent of the building-wide and apartment systems were replaced, that five out of six units in the building were occupied immediately before the renovation, and that landlord failed to submit sufficient proof under Operational Bulletin 2023-3 to show that the building was in a substandard or seriously deteriorated condition prior to the renovation of the building.

Landlord appealed and won. The rent stabilization law, code, and operational bulletin in effect before November 2023 should have been applied to its application since the project was completed more than a year before the rules were changed. RSC amendments in November 2023 changed the rules so that landlords now had to prove that a premises was substandard or seriously deteriorated even if no tenants were living there when the renovations commenced. But in this case, the prior rules applied. Landlord showed that the building had four out of six apartments vacant when it purchased the building in 2019 and that the building was 100 percent vacant before the renovations began. Landlord also submitted an expert affidavit that the condition of the building was substandard and seriously deteriorated prior to commencement of the work. The DRA had no justification to deny the application based on a finding that the "building was occupied just prior to the commencement of the renovation. No such standard exists under the law. Landlord also proved that at least 75 percent of building systems had been replaced.

Freehold 1333 LLC: DHCR Adm. Rev. Docket No. MO210004RO (12/12/24)[5-pg. document]