Landlord Can't Prove Apartment Became Deregulated After 1993 Fire

Landlord asked the DHCR to determine whether tenant’s apartment was rent stabilized, arguing that the apartment should be exempt. Landlord claimed that: (1) the apartment was vacant from 1993 to 2003 following a fire; (2) the apartment was substantially rehabilitated at a cost of $32,000 in 2003; (3) the building was uninsured at the time of the fire; (4) therefore no insurance proceeds were obtained or used to fix the apartment; and (5) the apartment was first rented after the fire in 2004. In March 2004, landlord gave new tenant a deregulated two-year lease at a monthly rent of $2,000 with a preferential rent of $800. Tenant responded that landlord fraudulently deregulated the apartment. The DRA ruled against landlord, finding that the building was rent stabilized and that there was no high-rent vacancy deregulation of tenant’s apartment.

Landlord appealed and lost. While it was the DHCR’s long-standing policy that the cost of individual apartment improvements (IAIs) made to an apartment based on fire damage can’t be passed on to tenants, that policy applied where insurance proceeds were used to pay for the IAIs. But there was proof in HPD complaints filed in 1996 and 2016 that a tenant was living in the apartment after the fire. The DHCR annual rent registrations for 2003-2006 showed the legal rent as $800-$850. The 2009 registration listed the legal rent as $1,200, and the 2009 registration listed the apartment as exempt at a legal rent of $2,000 with expired J-51 benefits. The current legal rent for the apartment would be determined in a pending rent overcharge complaint filed by tenant.

McDavid: DHCR Adm. Rev. Docket No. EU210015RO (1/13/17) [4-pg. doc.]