DHCR Properly Denied Deregulation Applications Filed in 2019

Landlord applied for high-rent/high-income deregulation of six separate apartments in early 2019. While these applications were pending on June 14, 2019, the HSTPA prospectively repealed luxury deregulations of the rent stabilization and rent control laws. Landlord appealed and argued that the HSTPA had been improperly applied to these cases retroactively and that this constituted a taking in violation of the U.S. Constitution. The DHCR ruled against landlord, who then filed an Article 78 court appeal. The court sent the case back to the DHCR for reconsideration of the question of whether the apartments would be legally deregulated and what the effective date of such deregulation would be.

The DHCR ruled against landlord. Deregulation of apartments based on high rent and high income no longer was permitted as of June 14, 2019. Under the HSTPA, a lawfully deregulated unit on the effective date of that law remains deregulated. But the six apartments here were neither lawfully deregulated prior to the enactment of the HSTPA, nor could they be deregulated after the law was passed. Landlord couldn't have deregulated the apartments before June 14, 2019, because the current leases for the units expired after the HSTPA became effective. Prior to the HSTPA, Rent Stabilization Law Section 26-504.3 conditioned high-income/high-rent deregulation on the expiration of an existing lease. The condition was something that existed when landlord filed its luxury deregulation applications in 2019 and was something that landlord was well aware of. Any deregulation order issued prior to June 14, 2019, would not have been effective because the current leases expired after passage of the HSTPA. And an appeals court has upheld explanatory addenda issued by the DHCR in luxury deregulation cases after the HSTPA went into effect. 

Missionary Sisters, Inc.: DHCR Adm. Rev. Docket Nos. KM41007RP et al. (3/8/22)[3-pg. document]