DHCR Disapproves HVAC System Replacement That Shifts Costs to Tenants

Landlord applied to the DHCR for approval of modification of services in connection with the building's heating and air conditioning (HVAC) system. Landlord sought to replace the existing fan coil heating and cooling system with a Water Source Heat Pump (SWHP) system. Tenants objected and argued that the service modification would shift nearly all HVAC costs from landlord to tenants. The DRA ruled against landlord because landlord failed to provide adequate justification and proof for the proposed modification. The DRA said that landlord could reapply at a later date with the required information.

Landlord appealed and lost. The initial DHCR 1984 building registration listed heating and air conditioning as building-wide services included in tenants' rents. Landlord claimed that the building still operated under the old HVAC system. But DHCR records showed that between January and April 2016, the DRA issued a series of separate orders granting rent reductions to 19 tenants because landlord had unilaterally removed the service of providing heat and hot water from a central heating system. Landlord didn't appeal those decisions. So, landlord's claim that the proposed modification of service was de minimis was clearly incorrect. Some tenants also had submitted Con Ed bills received in February or March 2016, which showed substantial increases in utility costs to tenants after landlord modified the heating system. Landlord could file a new application to either show that the HVAC changeover was being effected at no charge to tenants or to assist the DHCR in determining an appropriate permanent rent reduction as a result of the system replacement.

Stellar Sutton LLC: DHCR Adm. Rev. Docket No. ER410002RO (10/26/17) [4-pg. doc.]