DHCR Properly Ordered Inspection to Confirm Whether IAIs Were Done

The DHCR's Tenant Protection Unit (TPU) commenced an individual apartment improvement (IAI) audit for tenant's apartment and found that landlord didn't prove costs to support the $312 IAI rent increase. The TPU advised landlord in December 2015 to reduce tenant's rent and, when landlord didn't comply, referred the matter to the DRA to open a rent overcharge case. The DRA found that the base rent date was Dec. 31, 2011, four years before the TPU referred the case and asked landlord for rent history records. The DRA also conducted an inspection of the apartment and found that many of the claimed IAIs were not done. The DRA ruled for tenant, and ordered landlord to refund $28,844, including triple damages and interest.

Landlord appealed and lost. Landlord challenged the TPU's authority to commence a rent overcharge case, that choosing not to comply with a TPU audit didn't create a presumption of willful overcharge, that it had sufficiently proved its IAIs, and that the DRA improperly inspected the apartment. The DHCR found that landlord proved only $3,081 of its claimed IAI costs and allowed this portion in calculating the legal rent increase. The DHCR also found that TPU was authorized under Rent Stabilization Code Section 2527.2 to institute a proceeding on its own initiative, and that the base rent date was properly set as four years before the date the TPU referred the case to the DRA. The DHCR's Operational Bulletin 2016-1 provides guidance on how the DHCR will review IAI installations in connection with overcharge complaints or investigations but does not limit the DHCR to the listed documentation. It was reasonable to order an inspection in this case. Triple damages also were proper given that most of the claimed IAIs were disallowed. 

Nathan Hale Gardens Inc.: DHCR Adm. Rev. Docket No. EV610061RO (4/24/17) [7-pg. doc.]