DHCR Reasonably Denied Landlord's Demolition Application

Landlord applied for permission from the DHCR to demolish a building containing rent-regulated tenants. The DHCR ruled in 2018 that landlord's proposal didn't constitute demolition. Landlord filed an Article 78 court appeal and lost. Although the court annulled the DHCR's finding that landlord's proposal didn't constitute demolition, it otherwise denied landlord's appeal.

Landlord then appealed to a higher court. This time, the appeals court found that the lower court should have denied landlord's appeal of the DHCR's decision altogether. The DHCR's ruling that the proposed work didn't constitute demolition within the meaning of RSC Section 2524.5(a)(2) was based on the agency's rational interpretation of its own regulations in its area of expertise. The DHCR's ruling was rational because landlord's proposal called for a portion of the second floor and adjacent stairs to remain intact to provide an emergency exit for an adjoining building. The DHCR found that this wouldn't effectuate a total gutting of the building's interior. Also, while the DHCR erred in demanding proof of post-demolition plans for the site and funds segregated to finance such plans, the agency had a rational basis for finding that the bank records submitted by landlord, standing alone, were insufficient to show that landlord had the financial ability to complete the proposed project.

118 Duane LLC v. DHCR: Index No. 158893/18, App. No. 17030, Case No. 2022-00270, 2023 NY Slip Op 00023 (App. Div. 1 Dept.; 1/5/23; Renwick, JP, Gesmer, Kennedy, Scarpulla, Pitt-Burke, JJ)