DHCR Must Explain Its Method for Setting Rent

November 21, 2019

LVT Number: #30487

Landlord asked the DHCR to determine the legal rent for tenant's SRO unit after a court ruled that tenant was a rent-stabilized permanent tenant. Tenant had checked into the SRO building in August 2015, paid a daily rate of $39, and then asked for a lease for the hotel-stabilized unit. The DRA ruled that the monthly rent should be $340.52. Tenant appealed, and the DHCR ruled that the monthly legal rent was $233.96 based on the average of reliable rent-stabilized rents in the building.

Landlord asked the DHCR to determine the legal rent for tenant's SRO unit after a court ruled that tenant was a rent-stabilized permanent tenant. Tenant had checked into the SRO building in August 2015, paid a daily rate of $39, and then asked for a lease for the hotel-stabilized unit. The DRA ruled that the monthly rent should be $340.52. Tenant appealed, and the DHCR ruled that the monthly legal rent was $233.96 based on the average of reliable rent-stabilized rents in the building. Tenant then filed an Article 78 court appeal, claiming that the DHCR's decision was arbitrary and unreasonable.

The court ruled for tenant. The DHCR didn't adequately explain its decision to apply Rent Stabilization Code Section 2522.6(b)(3)(iv), which directs the DHCR to use the sampling method only if it can't ascertain the rent using the first three alternatives listed in the code, instead of RSC Section 2522.6()(3)(i), which sets forth the lowest registered rent formula. The DRA and PAR orders sufficiently explained why the prior rent of $82.84 for the unit was inappropriate. But the PAR order offered no rational explanation as to why the DHCR didn't select the lowest appropriate registered rent, which was $207.84 per month. If the DHCR still chooses to use the sampling method on remand, it must explain its decision.

Outtara v. DHCR: 2019 NY Slip Op 33195(U) (Sup. Ct. NY; 10/25/19; James, J)

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