DHCR Policy Change in Useful Life of Steam Heat System Was Reasonable

Landlord applied for MCI rent hikes based on installation of a new boiler in 2014. The DRA ruled for landlord. Tenants appealed and pointed out that Con Edison had installed the prior steam radiator heating system in 1962. Tenants argued that, under long-standing DHCR policy, a steam heat system provided by a public utility had no useful life limitation. Tenants claimed that it was therefore improper to grant an MCI increase in this case. The DHCR ruled against tenants and pointed out that it had replaced its prior policy with a policy that Con Ed steam heat systems could be replaced after a 50-year useful life had expired. Tenants filed an Article 78 court appeal, claiming that the DHCR's decision was arbitrary and unreasonable.

The court ruled against tenants. The DHCR explained that it had revisited its policy since a 1992 court case held there was no useful life for a public utility heating system. And, since the DHCR departed from its prior policy with a reason, it was reasonable to change the policy. The useful life of the Con Ed system was 50 years, landlord replaced the system after 52 years, the DHCR had changed its policy in 2004 and followed its new policy since then, and the DHCR found it was less expensive to replace the Con Ed system than to try to find parts for continued repair. 

360 E. 65t St. Tenants' Assn. v. DHCR: Index No. 158788/2020, 2021 NY Slip Op 30575(U)(Sup. Ct. NY; 3/1/21; Edmead, J)