Demolition Plan Didn't Include Post-Demolition Construction Provision

Landlord applied to the DHCR in 2019 for permission to demolish a building, refuse to renew tenant's lease, and proceed for eviction. With its application, landlord submitted plans approved by DOB and a bank statement showing a balance of $1 million. Landlord claimed that this was greater than the $447,750 required for the demolition.

The DRA ruled against landlord, finding that landlord failed to prove its good faith because it presented no rational objective for demolishing the building. Landlord admitted that no immediate hazards or structural defects existed at the site. And landlord didn't claim that it planned projects for the site with approved architecture plans, scope of work, and a cost estimate based on a technical analysis of the plans and specifications. So the DHCR couldn't evaluate the feasibility and the landlord's financial ability to complete the project.

Landlord appealed and lost. Landlord argued that DHCR Operational Bulletin 2009-1 required only that landlord submit proof to the DHCR of financial ability to "complete such undertaking" with plans for the "undertaking" approved by DOB. Similarly, Rent Stabilization Code (RSC) Section 2524.5(a)(2) concerning demolition, required proof of plans and financial ability for the "undertaking." Landlord further argued that "undertaking" meant only demolition and not further work, and pointed out that in 2000, the DHCR removed additional language "and constructing a new building" from the RSC provision on demolition.

But the DHCR relied on a 2020 court case, 118 Duane LLC v. DHCR, where the court ruled in another case where a landlord similarly failed to disclose its future plans for the proposed demolition site, that "undertaking" can't be limited to the demolition and must include future plans for the proposed demolition site. The DHCR noted that "any reasonable interpretation of the term 'undertaking' must include post-demolition plans even if certain language was removed from the RSC.

First NY LLC: DHCR Adm. Rev. Docket No. IV410008RO (4/22/21) [3-pg. doc.]