DHCR Reasonably Set Base Date Rent Using Comparables

Tenant complained of rent overcharge and improper deregulation of a rent-stabilized apartment. The DHCR ruled for tenant and used a sampling method to determine the legal regulated rent based on the average stabilized rents for studio apartments in the 2006 rent registration records for the building. Tenant appealed, claiming that this was arbitrary and unreasonable. The court agreed and ruled that the DHCR should set tenant's base date rent by applying the method set forth in the 2005 Court of Appeals decision in the Thornton v. Baron case.

The DHCR appealed and won. The appeals court found that the DHCR correctly exercised discretion to fashion an equitable solution to the question of the appropriate rent for an apartment that was improperly treated as deregulated for years. The $2,200 market base date rent was the result of improper deregulation by landlord and may not be used as the proper base date rent. But landlord deregulated the apartment based on the DHCR's mistaken pre-Roberts v. Tishman Speyer Properties LP (2009) policy concerning high-rent vacancy deregulation of apartments in buildings receiving J-51 tax benefits. Since there was no proof of fraud, using the punitive default formula set forth in the Thornton decision was inappropriate. The appeals court did send the case back to the DHCR for correction since the DHCR's order contained conflicting amounts for the legal regulated rent.

160 East 84th Street Associates LLC v. DHCR: 160 A.D.3d 474, 2018 NY Slip Op 02433 (App. Div. 1 Dept.; 4/10/18; Renwick, JP, Mazzarelli, Kahn, Gesmer, Kern, JJ)