June Insights
By Eileen O’Toole, Esq., Contributing Editor
Of particular interest this month is a decision by the Appellate Division, First Department that addresses the difference between what rent history records the DHCR can seek to determine rent-regulatory status and what must be documented in response to a rent overcharge claim.
In AEJ 534 E. 88th v. DHCR (LVT #31435), the landlord filed an Article 78 court appeal of a 2018 DHCR decision that tenant’s apartment was rent-stabilized and where the DHCR calculated a rent overcharge by using its “bridge-the-gap” formula due to a base date vacancy. Landlord had filed a request for an administrative determination (AD) in 2015 and argued that the apartment had been properly deregulated 10 years earlier, in 2005. The appeals court noted that, “regardless of its age,” an apartment’s rent history was always subject to review to determine whether the apartment was rent regulated, and that examination of an apartment’s rent history wasn’t restricted to the four-year lookback period applicable to the corollary overcharge claim.
The appeals court ruled that the DHCR correctly considered the records relating to the building’s ownership and rent history for the apartment to determine its regulated status. But, separately, the DHCR had erred by applying its own policy of bridging the gap to determine the base date rent of the apartment by using the last filed registered rent.
Since the apartment was vacant or temporarily exempt for more than one year, Rent Stabilization Code Section 2526.1(a)(3)(iii) specified that the legal regulated rent was the prior legal regulated rent, not the last registered rent. The absence of contemporaneous DHCR rent registration filings didn’t allow for a lookback beyond the applicable four-year period to an earlier legal regulated rent reported to the DHCR. And, in the absence of fraud, for overcharge calculation purposes the base date rent was the rent actually charged on the base date and overcharges were to be calculated by adding subsequent rent increases legally available to the landlord.
The DHCR quickly followed the AEJ appeals court decision in a separate administrative ruling in another case. In Matter of Fengji Enterprise, Inc. (LVT #31459), where a tenant complained of rent overcharge and improper apartment deregulation, the DHCR pointed out that, even prior to the Rent Stabilization Code amendments in 2014, the DHCR was obligated to look beyond the four-year review period in cases involving deregulation questions. The DHCR cited the AEJ decision, as well as a number of prior court decisions on this point. The DHCR also stated that the 2020 Court of Appeals decision in Regina v. DHCR (LVT #30741) didn’t restrict those prior rulings.
In other news, the housing courts are still addressing eviction moratorium issues under the CEEFPA as the moratorium is presently extended to Aug. 31, 2021. In one case, Bronx Park Phas II Preserv. LLC v. V.C. (LVT #31447), the court found no grounds to delay a nuisance holdover trial under the hardship statute but accommodated tenant by permitting a virtual trial rather than required appearances in court.