DHCR Increases Tenant's Rent-Stabilized Rent Based on Unique and Peculiar Circumstances

(Decision submitted by Eileen O'Toole, of the Manhattan Law Office of Eileen O'Toole, who represented the landlord.)

In 1988, the building's prior landlord gave loft tenant a lease for an "indefinite" term at $300 per month, and it was later determined that the apartment was subject to rent stabilization. The building also was later converted to a condominium, and tenant remained in occupancy under the lease.

New landlord bought the apartment in 2017 in a common charge foreclosure auction, and in 2020 an appeals court affirmed that tenant was rent stabilized and ruled that the DHCR should establish an appropriate lawful rent. In 2020, the new unit owner applied to the DHCR and requested a rent increase based on "unique and peculiar circumstances." The DRA ruled for landlord, increased the apartment rent from $300 to $744 effective May 1, 2022, and directed the issuance of renewal leases going forward. The rent increase was calculated by applying corresponding two-year RGB increases to the $300 rent between May 1, 1988, and 2022. 

Landlord and tenant both appealed. Landlord argued that the granted rent increase was insufficient, created a hardship, and was far below the market rent for the unit. Tenant argued that the DHCR had no authority to overrule prior court orders concerning the apartment and apply a bi-annual rent increase for the past 34 years.

The DHCR ruled against both parties, finding that the prior owner's "indefinite lease agreement," which waived all future rent increases, warranted consideration of all factors bearing upon the equities involved. Courts had repeatedly upheld or directed the DHCR's use of its equitable powers in setting rents to effect the purposes of rent regulation. As a matter of public policy, where the parties had operated outside of the rent regulatory system for decades, the DHCR may use an appropriate method based on the equities involved, to set the rent. The DRA did so here and properly ruled that renewal leases should apply going forward in accordance with the Rent Stabilization Law.

Fergusson/East Hampton Capital LLC: DHCR Adm. Rev. Docket Nos. KQ410024RT/KQ410036RO (7/14/23)[6-pg. document]