DHCR Reasonably Ruled That Landlord Substantially Rehabbed Building

In 2018, landlord applied to the DHCR for a ruling that its building was exempt from rent stabilization based on a substantial rehabilitation of the premises performed in 1995. Landlord claimed that it had replaced more than 75 percent of the requisite building and apartment systems, and submitted documentation that included the DOB job folder, approved DOB plans for the renovation project, cost affidavits, architectural plans, an affidavit from the licensed architect who designed and oversaw the renovation, letters from the architect to DOB certifying that the work had been completed, and a new certificate occupancy dated Aug. 9, 2004. Landlord also submitted to the DRA prior DHCR orders finding that two adjoining apartment buildings also owned by landlord were exempt from rent stabilization based on similar renovation. A court had denied an Article 78 court appeal of those orders. Tenants opposed landlord's new sub rehab exemption application in 2021, claiming that landlord hadn't met the required criteria set forth in DHCR Operational Bulletin 95-2 (OP 95-2). The DRA ruled for landlord in 2022, despite a claim by tenants' architect that several systems landlord claimed had been replaced were not in fact done. Tenants appealed and lost, then filed an Article 78 court appeal, claiming that the DHCR's decision was arbitrary and unreasonable.

The court ruled against tenants, finding that the DHCR's decision had a rational basis. The DHCR wasn't required, as argued by tenants, to set down an analysis in writing of every one of the building-wide systems in question. The DHCR also wasn't required, as tenants claimed, to conduct an inspection of the building before making its ruling. The DHCR reasonably found that an inspection wasn't necessary and wouldn't render definitive conclusions concerning work done 28 years previously. The DHCR also reasonably found the prior DHCR orders exempting landlord's adjoining buildings to be "persuasive" in connection with its decision that landlord had substantially rehabilitated the third building.

Friedman v. DHCR: Index No. 156849/2023, 2024 NY Slip Op 32757(U) (Sup. Ct. NY; 8/7/24; Shahabuddeen, J)