DHCR Rejects Landlord’s Settlement with Former Tenants in Case Started by TPU

The DHCR’s Tenant Protection Unit (TPU) commenced an Individual Apartment Improvements (IAI) audit for tenant’s apartment. Based on TPU’s review of apartment registrations, TPU sent a letter in February 2014 that required landlord to submit proof justifying the cost of IAIs that were applied to the legal regulated rent in 2012. TPU later sent landlord a Notice of Audit Determination in June 2014 based on landlord’s failure to respond to the audit letter. The TPU ordered landlord to reduce tenant’s rent to $762 per month, file amended rent registrations, refund any rent overcharges, and give tenant an amended lease reflecting the new legal rent. The letter also said that if landlord didn’t comply within 30 days, TPU would transfer the investigation to the Rent Administrator (RA) for processing of a rent overcharge complaint that could result in triple damages.

In October 2014, the RA opened an overcharge case and set the base rent date as Oct. 24, 2010. The RA requested rent history records from landlord and sent landlord a triple damages notice. Landlord claimed that it had settled the matter with tenants and submitted letters from the tenants withdrawing any complaint. The RA sought confirmation from the now former tenants, who didn't respond. The RA then ruled for tenants, reduced the base date rent to $675, froze the base date rent, and found an overcharge of $17,000 including interest. The DRA noted that since the case was started by TPU, tenants’ withdrawal letters couldn’t be accepted without confirmation and proof that the rent had been adjusted with a refund or credit to the current tenant.

Landlord appealed and lost. Landlord argued that a rent overcharge wasn’t an enforcement mechanism of the DHCR and that only tenants had standing to maintain a complaint. Landlord claimed that it reasonably relied on the settlement with tenants, which the DHCR must honor. The DHCR found that tenants can’t agree to waive the benefit of rent stabilization benefits and the settlement letters were unclear. And since tenants had moved out, the settlement would not be binding on current tenants. 

118 West 137 Street LLC: DHCR Adm. Rev. Docket No. DS410045RO (2/16/16) [6-pg. doc.]