Court Rules DHCR's Application of HSTPA Amendments to Pending MCI Applications Was Improper

(Decision submitted by David B. Cabrera and Phillip Billet of the Manhattan law firm of Borah Goldstein Altschuler Nahins & Goidel, P.C., who represented the landlord.)

Between November 2018 and March 2019, owners of several rent-stabilized buildings filed MCI rent increase applications with the DHCR. While those cases were pending, the State Legislature enacted the Housing Stability and Tenant Protection Act (HSTPA), which overhauled the way that MCI rent increases were to be awarded. HSTPA made these changes to the rent stabilization law effective immediately on June 14, 2019, although the law was silent as to the effect of HSTPA's changes on pending determinations. Between November 2019 and February 2021, the owners each filed PARs and argued that the DRA had incorrectly applied HSTPA's MCI provisions retroactively since the work and their applications predated HSTPA. Landlords said that this violated their due process rights. The DHCR ruled against landlords in each of the PAR proceedings, finding that its rulings weren't retroactive but instead dealt with prospective relief.

Landlords then filed an Article 78 court proceeding, claiming that the DHCR's decisions were arbitrary and unreasonable. Landlords pointed out that HSTPA's MCI provisions made the effective date "immediately" on June 14, 2019, but didn't include any language about ongoing matters. In contrast, the same portion of other parts of HSTPA, such as rent overcharge provisions, did include qualifications about its application to pending matters.

The court ruled for landlords. Citing Regina Metropolitan v. DHCR, the court found that the DHCR's "immediate" implementation of HSTPA's MCI provisions was retroactive, as they impaired rights landlords had when they acted, increased their liability for past conduct, or imposed new duties with respect to transactions already completed. Landlords here made MCIs to their buildings and completed and submitted all of the required paperwork before HSTPA went into effect. They were entitled to not have the rules of their applications reviewed and changed retroactively. The DHCR's retroactive application of HSTPA provisions in these cases was inappropriate. The court reversed, annulled, and set aside the DHCR's decisions and sent the case back to the DHCR for application of pre-HSTPA rules.

101 E. 16th St. Realty LLC v. DHCR: Index No. 150504/2023, 2023 NY Slip Op 31882(U)(Sup. Ct. NY; 6/5/23; Engoron, J)