Demolition Costs Related to Vacancy Improvements

Tenant complained of a rent overcharge. Landlord claimed that it completely renovated tenant's apartment before tenant moved in and was entitled to a 1/40th rent increase for this work, including the demolition costs. Landlord argued that there was no rent overcharge. The DRA ruled for tenant and disallowed demolition costs included in landlord's claim for improvement costs. Landlord appealed and said that the DRA should have allowed the demolition costs. The DHCR ruled for landlord. DHCR Policy Statement 91-1 says that demolition costs associated with vacancy improvements may be included in the calculation of permissible rent increases if the demolition costs are necessary and are performed at the same time as the vacancy improvements. Landlord showed that demolition costs totaling $7,000 included installation of Sheetrock and the taping, plastering, priming, and painting of all walls in the apartment. These costs qualified as allowable demolition costs for which landlord was entitled to a 1/40th rent increase. The amount of the overcharge finding was substantially reduced.

Fenton: DHCR Adm. Rev. Dckt. No. RD410011RP (7/28/03) [5-pg. doc.]