Landlord Can't Collect IAI Rent Increase When Default Formula Applied to Set Base Date Rent

Three rent-stabilized co-tenants complained to the DHCR of rent overcharge. The DRA ruled for tenants and ordered landlord to refund $141,157, including triple damages. Landlord appealed and lost. The base rent date was in July 2013 and landlord had failed to submit a copy of the lease and/or rent ledger in effect on that date. So, the DRA properly used a default method and set tenants' initial rent-stabilized rent by using the last rent paid after the base date by a prior tenant. This froze tenants' initial rent at $1,759, and the rent remained frozen at that rate. Landlord argued that it was entitled to a rent increase for individual apartment improvements (IAIs) that were indisputably performed before tenants moved in. But, under RSC Section 2522.6(b)(2)(i), the DHCR must use the default rent formula when the base-date rent can't be determined. And applying that formula freezes the rent from the base date and doesn't permit the addition of rent increases for vacancies, IAIs, or rent guidelines that occurred after the rent was frozen. Use of the default formula also carries a presumption of willful rent overcharge. It was no defense that a new owner didn't receive rent history records from the prior owner.

INK 1144 LLC: DHCR Adm. Rev. Docket No. KP210038RO (7/8/22)[3-pg. document]