First Rent Charged to Tenant in 421-a Building Was Approved by HPD

Tenant complained of rent overcharge. Tenant was subject to rent stabilization because the building received 421-a tax benefits. Tenant, the first tenant of the apartment after construction, signed a lease for monthly rent of $5,183. Tenant received one month's free rent plus a monthly rent abatement of $399 for the first year. The initial lease also contained a fully executed recreational facilities rider that set a nonrefundable facilities fee per person for amenities, including a gym, club room, terrace, and sky lounge. Tenant and his two roommates paid $75 per month for the facilities fee. The DRA ruled for tenant and adjusted tenant's initial vacancy lease period from 14 months to two years, thereby invalidating tenant's December 2011 renewal lease. The DRA further ruled that tenant then remained in the apartment as a month-to-month tenant. The DRA also found that HPD's certificate of eligibility set the legal regulated rent for the apartment at $3,509. The DRA ordered landlord to refund a total overcharge of $35,560, including interest.

Landlord appealed, arguing that the DRA improperly relied upon the HPD final certificate of eligibility and that there was no overcharge. Tenant also appealed, claiming that the overcharge was willful and that triple damages should be added. The DHCR ruled for landlord in part, and ruled against tenant. Landlord showed that HPD had approved landlord's application to set the initial rent for tenant's apartment at $5,710. Since landlord charged tenant $4,784 after the rent abatement, there was no overcharge. But the DRA properly reset tenant's initial lease period and the resulting overcharge was $1,425 with interest. Since tenant owed back rent, no refund was required. Tenant also argued that the gym fees were part of the rent and should have been refunded. The DHCR ruled against tenant. The facilities fee was a separate charge reserved in a lease rider.

505 West 37 LLC/Rohlman: DHCR Adm. Rev. Docket No. BV410001RO (10/21/14) [8-pg. doc.]