DHCR Improperly Disallowed Some IAI Costs

Tenant complained of rent overcharge. Landlord claimed that tenant’s apartment was unregulated. The DHCR ruled for tenant, finding that tenant’s apartment wasn’t eligible for deregulation, and ordered landlord to refund a rent overcharge. In calculating the apartment’s legal rent, the DHCR disallowed some of the costs for individual apartment improvements (IAIs) made by landlord before tenant moved in. Landlord filed an Article 78 appeal, claiming that the DHCR’s decision was unreasonable. The court ruled against landlord, who appealed and won. The DHCR allowed charges for installation of new drywall and flooring but irrationally disallowed expenses related to finishing the new surfaces. Landlord’s invoice for the work was clear and showed that over 68 percent of the total painting charge was attributed to the new drywall. When the total IAI costs of $22,733 were divided by 40 and added to the prior $1,264 rent, along with a vacancy increase,  the new legal regulated rent for the apartment was $2,035, which was above the $2,000 deregulation threshold in effect at the time. 

18 St. Marks Place Trident LLC v. DHCR: 50 NY.S.3d 273, 2017 N.Y. Slip Op. 03042 (App. Div. 1 Dept.; 4/20/17; Acosta, JP, Renwick, Manzanet-Daniels, Webber, JJ)