DHCR Won't Rule on Landlord's Application Without Landlord-Tenant Dispute

During March 2018, while an apartment was vacant, landlord made various individual apartment improvements (IAIs) costing $57,000. Under the law in effect when the IAIs were completed, landlord was entitled to add a monthly $950 increase to the next rent, representing 1/60th of the IAI cost. Effective June 14, 2019, HSTPA amended the Rent Stabilization Law (RSL) to substantially reduce IAI rent increases. For purposes of rent increase, IAI costs now were limited to $15,000 within a 15-year period and only three separate IAI increases could be added within the 15-year period. An IAI increase also was now limited to 1/180th of IAI cost. At the time HSTPA was enacted, landlord hadn't yet rented the apartment following IAIs made in March 2018. Because the IAIs were completed before HSTPA amendments became effective, landlord applied to the DHCR on Oct. 1, 2019, and requested an administrative determination that the legal rent could be calculated based on pre-HSTPA law concerning IAIs.

The DHCR never assigned a docket number to landlord's application but instead issued a notice of rejection on Oct. 11, 2019. The Rejection Notice stated that landlord's application was rejected because the apartment was vacant when the application was filed and there was no court proceeding where a tenant of the apartment disputed the rent. The Rejection Notice also stated that landlord must charge a lawful rent and keep all rent records in case a tenant sought a ruling regarding the apartment's legal rent. 

In response to the Rejection Notice, landlord filed an Article 78 court proceeding for mandamus relief, seeking to compel the DHCR to "perform an act which it is required by law to perform but which it has failed to perform." The DHCR opposed landlord's court petition, arguing that landlord's application wasn't ripe for determination because there was no controversy between landlord and a tenant. In response, landlord claimed that there was no requirement that a tenant occupied an apartment before the DHCR could determine the legal rent.

The court agreed with DHCR. The RSL gave the DHCR the discretion to determine the legal rent of an apartment where there's "a dispute between the owner and the tenant, or is in doubt, or is not known," and that the DHCR "may issue an order in accordance with the applicable provisions of" RSC Section 2522.6(a). Landlord also completed the IAIs in March 2018 but waited until October 2019, more than 12 months later, before filing its DHCR application without renting the apartment. Any prejudice to landlord in this case was due to its own failure to re-rent the vacant apartment. 

3569 Assoc., LLC v. DHCR: Index No. 161383/2019, 2020 NY Slip Op 33795(U)(Sup. Ct. NY; 11/13/20; Crane, J)