Court Upholds DHCR Explanatory Addenda to Deregulation Order

In June 2018, landlord filed an application for high-rent/high-income deregulation of rent-stabilized tenants' apartment. The DRA ruled for landlord and issued an Order of Deregulation in January 2019 based on tenants' admission that their total annual household income was more than $200,000 in 2016 and 2017. The Deregulation Order stated that, since the monthly legal rent was $2,700 or more when landlord's application was filed, the apartment was deregulated "effective upon the expiration of the existing lease, as the subject housing accommodation is subject to the RSL of 1969 and/or the ETPA of 1974." The existing lease expired on June 30, 2019, shortly after HSTPA was enacted and became effective on June 14, 2019.

In September 2019, the DRA sent landlord and tenants an "explanatory addenda" (EA), to explain the impact of HSTPA on the previously issued Deregulation Order. Landlord appealed the EA, claiming that it improperly changed the Deregulation Order. The DHCR denied landlord's PAR. Landlord then filed an Article 78 court appeal, arguing that the EA contained errors of law.

The court ruled against landlord. Landlord argued incorrectly that the apartment deregulation became effective on the day that the DHCR issued the Deregulation Order. The plain language of RSC Section 2531.3 authorizes the DHCR to enter orders terminating an apartment's rent-stabilized status "upon the expiration of the current lease," which is usually a different date that falls after the one on which the DHCR enters a deregulation order. It was no "error of law" for the DHCR to have abided by the "lease expiration" instruction set forth in the RSC. Under HSTPA, any unit that was lawfully deregulated prior to June 14, 2019, remained deregulated. But high-income deregulation was no longer available because the laws that authorized it (RSL Sections 26-504.1 and 26-504.3) were repealed effective June 14, 2019. The DHCR didn't retroactively apply HSTPA to the Deregulation Order for tenants' apartment, and landlord didn't have a "vested" right to deregulation on the date of the Deregulation Order.

160 E.84th St. Assoc., LLC v. DHCR: Index No. 157576/2021, 2021 NY Slip Op 30176(U)(Sup. Ct. NY; 1/19/21; Edmead, J)