DHCR Set First Rent for Former Professional Unit Using Comparability Data

Tenant complained of rent overcharge and improper deregulation of her apartment. The DRA ruled for tenant and ordered landlord to refund $35,392, including interest. The DRA found that since the apartment had no rent history prior to tenant's occupancy and was vacant on the base date, the base date rent was $2,554. This was based on an average of comparable rents in the building on the base date plus an IAI rent increase plus a vacancy allowance. The DRA also found that the apartment wasn't deregulated in July 2015 when tenant moved in since, at that time, the deregulation threshold was $2,700.

Landlord appealed and lost. Landlord argued that the apartment was previously used for professional or commercial purposes as a dentist's office for 35 years. The apartment therefore should be treated differently under Rent Stabilization Code (RSC) Section 2520.11(n) than units treated as temporarily exempt under RSC Section 2520.11(m). The DHCR ruled that the exemption under RSC Section 2520.11(n) for units used exclusively for professional, commercial, or nonresidential purposes was by no means intended to be permanent, and once the apartment became residential the legal regulated rent had to be established, and it was reasonable for the DRA to rely on RSC Section 2526.1(a)(3)(ii) to use comparables to set the rent. 

201 Parkway Co. LLC: DHCR Adm. Rev. Docket No. GR210016RO (5/21/19) [3-pg. doc.]