DHCR Order Permitting Discontinuance of Preferential Rent for Successors Unenforceable

Landlord sued to evict family member successor tenant of rent-stabilized apartment for failure to sign a renewal lease. The renewal lease offer was for $2,720 for a one year or $2,747 for a two-year renewal. Tenant claimed that the offered rent amounts were incorrect. In 2005, the prior landlord had filed a DHCR application to adjust the legal regulated rents following the building's exit from the Mitchell-Lama program. Prior landlord and building tenants later signed a settlement agreement of that proceeding by which landlord would be able to set the LRR while the tenant paid a lower, preferential rent that couldn't be assigned, sold, etc. to anyone other than the tenant then in occupancy. The agreement specified that any successor tenants generally would have to pay the higher LRR. The DHCR incorporated the terms of the agreement into an order. The last renewal the prior tenant signed under the agreement was in 2017, shortly before he died. In June 2019, HSTPA included a provision that that disallowed landlord from discontinuing preferential rents for successor tenants. Tenant relied on this in refusing to renew the offered renewal lease.

The court ruled against landlord, rejecting its argument that the DHCR's ratification of the 2005 settlement agreement created an "increase permissible by law." The court found that the DHCR had no specific authority to set the rents in rent-regulated apartments. Only the Rent Guidelines Board could do so. And HSTPA superseded any private agreement between the parties, whether so-ordered by a court or ratified by the DHCR, especially when the agreement waived rent stabilization protections. This was void as against public policy.

West Side Marquis LLC v. De Jourdan: Index No. LT74208/19 (Civ. Ct. NY; 8/5/22; Chinea, J)[4-pg. document]