DHCR Improperly Required Landlord to Prove Post-Demolition Plans and Financial Ability

Landlord applied to the DHCR for permission to demolish its building, which housed rent-regulated tenants. The DHCR ruled against landlord, finding that landlord didn't provide post-demolition plans or proof of financial ability for any post-demolition project. Landlord filed an Article 78 court appeal and argued that the DHCR's decision was arbitrary and unreasonable.

The court ruled against landlord, who appealed and won. The appeals court noted that landlord was required to show the DHCR a good-faith intention to demolish the building, along with the financial ability to demolish the building, and produced approved DOB plans for demolition. Once landlord made this showing pursuant to RSC Section 2524.5(a)(2)(i), it was improper for the DHCR to examine what the landlord planned to do post-demolition. The appeals court found that the DHCR's decision was an error of law, as well as arbitrary and capricious. The court also pointed out that more than 20 years ago, an amendment to the RSC "specifically deleted the very requirement that DHCR imposed on petitioner here."

First NY LLC v. DHCR: Index No. 155909/21, App. No. 16288, Case No. 2022-00687, 2022 NY Slip Op 05269 (App. Div. 1 Dept.; 9/27/22; Manzanet-Daniels, JP, Friedman, Scarpulla, Mendez, JJ)