DHCR Default Method Used to Calculate Overcharge

Facts: Tenant moved into rent-stabilized apartment in August 1986, and filed a rent overcharge complaint in May 1987. Prior tenant had rented the apartment from 1981 until 1986. During that time, prior tenant never lived in the apartment. Instead, he sublet it to commercial entities for use by their employees or officers. The DRA ruled against tenant in 1994, finding no rent overcharge. Tenant appealed. In 1999, the DHCR ruled for tenant. The DHCR stated that the Rent Regulation Reform Act of 1997 (RRRA 97) barred the agency from looking at any rent history before May 1983. The DHCR also found that prior tenant was an illusory tenant. He was renting four apartments in the building and not living in any of them. So the DHCR used its default method to calculate tenant's legal rent. The DHCR found no willful overcharge. Both landlord and tenant appealed. The court sent the case back to the DHCR for a hearing on prior tenant's rental of the apartment. The DHCR again ruled for tenant and ordered landlord to refund $58,000 in overcharges, including interest. Landlord appealed and lost. Landlord appealed again, claiming that the DHCR's decision was unreasonable.

Court: Landlord loses. Although there was some delay in deciding the case, the RRRA 97 applied to all pending cases. So the DHCR couldn't look back to rent charged before prior tenant had rented the apartment to set the legal rent. And because prior tenant was illusory, the DHCR reasonably applied its default method to calculate the legal rent for tenant's apartment.

Partnership 92 LP v. DHCR: NYLJ, 12/24/07, p. 27, col. 6 (App. Div. 1 Dept.; Tom, JP, Marlow, Nardelli, Gonzalez, Kavanagh, J)