DHCR Sets Rents at Levels Above Those Collected from Prior Landlord's Family

Landlord sought a court ruling on the rent-regulatory status of four tenants in a six-apartment building it had purchased in 2012. The court referred the matter to the DHCR for a ruling on the lease validity, legal rent, and succession rights in connection with each of the apartments. Landlord argued that tenants were exempt from rent stabilization for various reasons. In each of the four cases, the DRA ruled that: (1) the apartment was rent stabilized; (2) the tenant was a family member of a prior owner; (3) "sweetheart" leases previously given to the tenant charged very low rents; and (4) a legal rent for the apartment was set by the DHCR at either $1,000 or $1,200 per month for each tenant. Each tenant appealed, and the DHCR affirmed the rents set by the DRA as the legal rents.

Each tenant disputed the default formula used by the DRA to set their apartment rent. The DHCR noted that prior monthly rents for each tenant were either $80 or $150 and remained unchanged for at least 10 years. In a prior proceeding, the DHCR had ruled that tenants were rent stabilized because they moved in before a fire caused temporary relocation and the building had thereafter been substantially rehabilitated. But the DRA didn't establish tenants' legal regulated rents in that prior proceeding. "[I]t becomes clear that given the family relationship, the rent recited and the term of 10 years, the leases in question were 'sweetheart' leases and cannot be viewed as providing a reliable indicator of what an actual rent between unrelated parties would have been." It therefore was appropriate for the DRA to set tenants' legal rents using a default formula that reflected DHCR database information about average rents in the area.

Steven Ramos: DHCR Adm. Rev. Docket No. FW210023RT (4/18/24)[7-pg document]; Wilfredo Ramos: DHCR Adm. Rev. Docket No. FW210032RT (4/18/24)[7-pg. document]; Cruz: DHCR Adm. Rev. Docket No. FW210033RT (4/18/24)[7-pg. document]; Juan Ramos: DHCR Adm. Rev. Docket No. FW210034RT (4/18/24)[7-pg. document]