DHCR Reclassifies Former Hotel-Stabilized Building as Rent-Stabilized Apartment Building

In 2018, the DHCR's Rent Administrator issued an order reclassifying landlord's building from a hotel to an apartment building based on loss of certain hotel services. The DRA also issued a rent reduction due to landlord's failure to provide hotel services to tenants. It was undisputed that hotel services, including maid, linen, and furniture services, were reduced in or around the 1980s and that over 51 percent of the building's permanent tenants were not currently receiving those services. Landlord and tenants both appealed and lost. The DHCR ruled that the building was properly reclassified as an apartment building under the Rent Stabilization Code.

Tenants argued that landlord must obtain their consent in order for the building to be reclassified as an apartment building. They claimed landlord never notified them of their rights as hotel tenants and that prior landlords systematically removed hotel services. The DHCR found no proof to support tenants' claim that services were reduced for the purpose of reclassification. And no tenant consent was required for landlord's reclassification application. 

Landlord argued on appeal that, since no tenant complained within four years before landlord filed its DHCR application seeking reclassification, the hotel services were de minimis, and that tenants already had received a rent reduction based on reduced hotel services. The DHCR ruled that the hotel services in question can't be considered de minimis as these services were expressly required by the Rent Stabilization Code for a hotel to maintain its classification under hotel stabilization. The 2007 court case that landlord referred to involved one tenant and, despite instructions from the court, neither landlord nor tenant had filed a reclassification application with the DHCR at that time. And landlord incorrectly claimed that tenants already had received a rent reduction from the DHCR. The DRA properly used the Ernst and Whinney 1988 reduction amounts in connection with the yearly NYC Rent Guidelines Board Hotel Order increased from Oct. 1, 1988, until the effective date of the order to determine updated monthly rent reduction amounts for the reduction in hotel services. Rents were permanently reduced from March 1, 2017. 

Windermere Owners LLC/Various Tenants of 666 West End Avenue: DHCR Adm. Rev. Docket Nos. GQ410002RT, GQ410004RO, GQ410006RT, GQ410008RT, GT410010RT (8/4/23)[6-pg. document]