Contractor Profit Included in 1/40th Rent Increase

Tenant complained of a rent overcharge. Landlord claimed that individual apartment improvements costing $61,500 were done before tenant moved in. The DRA ruled for tenant, but granted an increase based on $46,000 of the claimed improvement cost. The DRA disallowed an increase for asbestos abatement, overhead, profit for the general contractor, DOB fees, and general conditions. The total overcharge was $1,700. Landlord appealed, arguing that the DRA improperly disallowed contractor profit costs and that tenant's legal rent was more than $2,000 per month. The DHCR ruled for landlord. Landlord's general contractor charged landlord 10 percent of the cost of the job as a fee. This was a legitimate expense related to the work and should be included as a cost toward the 1/40th rent increase. When recalculated after adding in this amount, tenant's initial legal rent was $2,077. So there was no overcharge and tenant wasn't subject to rent stabilization.

Third Lenox Terrace Associates/LaShure: DHCR Adm. Rev. Docket Nos. VC410043RO, VD410012RT (12/6/07) [3-pg. doc.]