DHCR Should Have Considered Proof of Substantial Rehab

Tenant complained of a rent overcharge. The DRA ruled for tenant based on landlord’s failure to answer the complaint. Landlord appealed, claiming that tenant told him that the complaint was a mistake and that she would withdraw it. Landlord said that it bought the building in 1984 when it was completely empty as the result of a fire. Landlord substantially rehabilitated the building and believed it wasn’t subject to rent stabilization. The DHCR denied landlord’s PAR, and its later request for reconsideration, because landlord didn’t submit its answer to the DRA. Landlord then filed an Article 78 petition, and argued that the DHCR’s decision was arbitrary and unreasonable.

The court ruled for landlord. The DHCR said that it wasn’t required to consider new information submitted for the first time with a PAR. But Rent Stabilization Code Section 2527.5 states that “at any stage of a proceeding the DHCR may…make investigations of the facts, conduct inspections, hold conferences and require the filing of” other relevant evidence. Here, the DHCR made its decision arbitrarily and unreasonably, without considering the true facts. Landlord showed the DHCR that the building was an empty shell when purchased in 1984, that it submitted plans to DOB for total rehabilitation of the building, and that a new Certificate of Occupancy was issued in 1986. The DHCR also incorrectly determined that landlord had given tenant a rent-stabilized lease in 1984. The case was sent back to the DHCR for a new ruling.

Ditmas Gardens Inc. v. DHCR: NYLJ, 7/15/09, p. 29, col. 3 (Sup. Ct. Kings; Schneier, J)