Landlord Didn't Itemize Claimed IAIs

The DHCR's Tenant Protection Unit (TPU) brought an individual apartment improvement (IAI) audit against landlord for tenant’s apartment. Based on rent registration data, TPU asked landlord to submit proof justifying the IAI costs applied to the legal regulated rent in 2013. Landlord failed to respond, and TPU issued a Notice of Audit Determination, which disallowed any IAI rent increases and directed landlord to re-register the rent at $919 instead of $1,759 for 2013. TPU also referred the matter to the DRA because landlord didn’t rectify the legal rent within 30 days after its order was issued.

The DRA opened a rent overcharge complaint and, after landlord failed to respond to its notice, sent landlord a final notice of imposition of treble damages. Landlord then submitted documentation of a contract for performing IAIs costing $32,500 and a bank statement indicating that landlord had paid $25,350. The DRA then asked landlord for a breakdown itemizing the contract items. Landlord said that it was unable to provide a breakdown, but that courts had ruled that this wasn’t required where IAIs were otherwise adequately documented. The DRA ruled for tenant and ordered landlord to refund $41,859, including triple damages and interest.

Landlord appealed and lost. Landlord didn’t submit sufficient proof of its IAIs. Documentation should include: (a) cancelled checks contemporaneous with the work; (b) an invoice receipt marked paid in full contemporaneous with the completion of the work; (c) a signed contract agreement; or (d) a contractor’s affidavit indicating that the work was completed and paid in full. Landlord also must show that the work done was an improvement rather than a repair or normal maintenance. Here, landlord claimed a rent increase for sanding, floor staining, and painting, which normally don’t qualify as IAIs. Plus, the contract submitted wasn’t accompanied by an invoice marked paid in full. Checks submitted by landlord didn’t show what the payments were for. The contract landlord submitted also indicated that a significant portion of the claimed costs were for repairs and maintenance. The DRA also properly assessed triple damages based on the inadequacy of the proof submitted by landlord. [Download PDF of decision here.]

Savuti II, LLC: DHCR Adm. Rev. Docket No. EO210058RO (9/14/16) [6-pg. doc.]