DHCR Reclassifies Formerly Hotel-Stabilized Building

In 2022, landlord asked the DHCR for an Administrative Determination regarding whether it was entitled to rent-stabilized rent increases from tenants if it renewed tenant's leases. Although landlord and tenants had agreed in a 2012 housing court stipulation that tenants would remain subject to hotel stabilization rent guidelines, the DHCR later determined that the building was reclassified under the Rent Stabilization Code (RSC) from hotel status to apartment building status effective Jan. 1, 2014. The reclassification was ordered since landlord no longer provided the hotel services required under the RSC. In that order, the DHCR gave the building's "permanent" hotel-stabilized tenants rent reductions due to the lack of hotel services and directed landlord to offer tenants rent-stabilized leases. Landlord asked the DHCR for a ruling because tenants disputed whether landlord could collect rent-stabilized guideline increases. The DRA ruled that landlord was entitled to offer tenants lawful rent guideline increases for apartments and not hotels based on the DHCR's reclassification order, which was issued after the housing court stipulation.

Tenants appealed and lost. There was no dispute that the DHCR had reclassified the building effective Jan. 1, 2014. It also was undisputed that prior landlord and tenants entered into a stipulation of settlement dated June 4, 2012, which settled rent overcharge claims, established legal rents, and stated that the legal rents would remain subject to the Rent Guidelines Board Orders pertaining to hotels. The DHCR's subsequent building reclassification order made the building thereafter subject to RSC Section 2521.3 provisions applicable to apartment buildings. The DHCR noted that any purported waiver of rent stabilization rights in a settlement agreement was invalid as a matter of public policy, even if it benefits the tenants. 

Martin/Hamilton: DHCR Adm. Rev. Docket No. KX410015RT (12/20/23)[4-pg. document]