Building Wasn't in Substandard Condition Before Claimed Sub Rehab

Landlord applied to the DHCR, seeking a determination that its building was exempt from rent regulation due to substantial rehabilitation. The DRA ruled against landlord, finding that landlord failed to prove that the building was in substandard or seriously deteriorated condition before the work commenced, as required by DHCR Operational Bulletin 2023-2. The DRA noted that three of the eight units in the building were vacated due to surrender agreements, another two out of the eight units were occupied by landlord immediately before the renovation, and landlord failed to submit sufficient proof to support its claim that the building was substandard or seriously deteriorated.

Landlord appealed and lost. The DHCR did note that landlord was correct to point out that OB 2023-3 wasn't applicable to this case because the work involved was completed in 2022, but also noted that the DRA applied the relevant provisions of OB 95-2 to the application even though it stated incorrectly that OB 2023-3 was applied. In this case, landlord secured the vacancy of three of the building's eight apartments by buyout agreements ranging from $150,000 to $175,000 per apartment. The DHCR found that the buyout agreements showed that these three apartments had substantial value, that they were therefore habitable, and that the building wasn't substandard since 37.5 percent of the apartments were habitable and of some considerable value. Nothing in the buyout agreements implied or established that substandard conditions had any bearing on the tenants' acceptance of the buyouts. The fact that landlord occupied two of the building's other apartments immediately before the renovation also showed that those units also were habitable at that time.

Since five of the eight apartments (i.e. 62.5 percent) were habitable before the work at issue, this supported the DRA's conclusion that the building wasn't substandard at that time. Landlord's claim that the building was substandard because it hadn't been worked on for over 100 years was unsupported, and contradicted by the fact that five of the eight units were habitable and occupied. The large amount of money spent on the building work also didn't prove that the building had been in substandard condition.

Creas, Inc.: DHCR Adm. Rev. Docket No. MN210018RO (10/30/24)[4-pg. document]