Court Finds DHCR Improperly Delayed Processing Deregulation Applications

[Submitted by Jillian N. Bittner, Esq., of Horing Welikson Rosen & Digrugilliers PC, who represented the landlord.]

Landlord filed two separate applications with the DHCR, in 2017 and 2018, seeking high-rent/high-income deregulation of tenant's rent-stabilized apartment. These applications were still pending before the DHCR on June 14, 2019, when the HSTPA was enacted and high-rent deregulation was abolished prospectively. The DHCR then terminated landlord's applications and denied landlord's PARs appealing those decisions.

Landlord then filed an Article 78 court appeal of the DHCR's rulings. Landlord argued that the DHCR engaged in an impermissible retroactive application of the HSTPA. The DHCR claimed that, once the HSTPA was enacted, the law prevented the agency from issuing deregulation orders. At that point, an apartment that was rent stabilized before June 14, 2019, remained regulated. Landlord pointed out that the DHCR had failed to comply with mandated timelines set forth in the Rent Stabilization Law and argued that the DHCR's processing delay was the reason that no decisions were issued by the time the HSTPA abolished high-rent deregulation. 

The court agreed and ruled for landlord. Former RSL Section 26-504.3 required the DHCR to inquire from tenants about their income within 20 days after landlord filed a high-rent/high-income deregulation application. There was no proof that the DHCR complied with that requirement. The RSL further provided that, if tenants didn't respond to the DRA's inquiry within 60 days, then the DHCR was compelled to deregulate an apartment. The first communication landlord received in response to its 2017 application was the DRA's order dated Nov. 13, 2019, which denied landlord's application based on the HSTPA. The court found that the June 14, 2019, cut-off date "only passed due to the [DHCR's] failure to timely process petitioner's applications."

The court also found that the DHCR's PAR decisions, which relied on the HSTPA, showed "circular reasoning." If timely processed, landlord's 2017 and 2018 applications would have been decided based on tenant incomes in 2015, 2016, and 2017. These events occurred long before passage of the HSTPA. The court ruled that the only reason that a timely decision on the merits of landlord's applications wasn't made was because of DHCR's "failure to issue a timely decision." The fact that the DHCR "was overwhelmed, disorganized, or simply behind on issuing decisions does not authorize the Court to modify the timeline in the Rent Stabilization Law....The only reason for the instant circumstances is respondent's inordinate delay." The court sent the two decisions back to the DHCR for further processing.

Matter of 305 Riverside Corp. v. DHCR: Index No. 150659/2023, 2023 NY Slip Op 31113(U)(Sup. Ct. NY; 4/11/23; Bluth, J)