DHCR Must Apply Pre-2014 RSC Provision to First Rent Set After Temporary Exemption

Rent-stabilized tenant complained of rent overcharge. The DRA ruled for tenant. Since the apartment had been temporarily exempt from rent regulation on the four-year base date in 2010, tenant's legal regulated rent was determined by averaging the monthly rents of all comparable apartments in the same building, as listed in the DHCR's 2013 rent registrations ($1,305) and adding to that average rent the vacancy increase applicable to tenant's 2013 vacancy lease. The DRA ordered landlord to refund $22,365, including interest.

Landlord and tenant both appealed. Landlord argued that the DHCR had previously ruled that, prior to Rent Stabilization Code amendments made effective on Jan. 8, 2014, if an apartment was vacant or temporarily exempt on the base date the first tenant could be charged a negotiated rent. Tenant argued that the DRA made a number of errors and that triple damages should be assessed.

The DHCR denied landlord's PAR and granted tenant's PAR only to the extent of ruling that landlord could hold only one month's security deposit. Landlord and tenant then both filed Article 78 court appeals, claiming that the DHCR's decision was arbitrary and unreasonable.

The court ruled for landlord and sent the case back to the DHCR to apply the version of RSC Section 2526.1(a)(3)(iii) that was in effect before the 2014 RSC amendments. The court denied tenant's Article 78 appeal. Based on the court's remand order, the DHCR ruled that landlord was entitled to collect the monthly rent of $2,175 that it negotiated with the first tenant after temporary exemption. There was no rent overcharge. But landlord must refund to tenant an illegal application fee of $225 plus interest. And the DRA correctly ruled that landlord couldn't add a "pet fee" to tenant's monthly rent. 

Bradbury/ AEJ 534 East 88th LLC: DHCR Adm. Rev. Docket No. HM410012RP (5/5/21) [4-pg. doc.]