Landlord Didn't Prove Building Was Substantially Rehabilitated

Landlord asked the DHCR for a ruling that its building was exempt from rent stabilization due to substantial rehabilitation. Landlord bought the building in 2015 and claimed that the building was in seriously deteriorated condition, it filed alteration plans with DOB, completed a gut renovation by 2017, and no prior tenants re-occupied any previous apartments. Landlord also claimed that at least 80 percent of the building and apartment systems listed in DHCR Operational Bulletin 95-2 had been replaced.

The DRA ruled against landlord, who appealed and lost. The DHCR found that DOB job records didn't support a finding that the building was substantially rehabbed. In DOB documents, landlord answered "no" to questions as to whether it was performing work in 50 percent or more of the building area and whether it was demolishing 50 percent or more of the area of the building. And the performance of replacement or renovation work in 50 percent or less of the building can't result in an exemption from rent regulation. The opinion of landlord's architect, engineer, or contractor, standing alone, was insufficient to prove a substantial rehab. The DRA's consideration of the PW3 form filed with DOB also was appropriate, and the DRA properly found landlord's two PW3 cost affidavits grossly underestimated the total job cost, tainted the DOB permit and approval process, and didn't support a finding of substantial rehab. The Letter of Completion issued by DOB in 2017 also didn't prove substantial rehab since it didn't encompass the extent of work needed for a substantial rehabilitation under DHCR OB 95-2. 

398 Crescent LLC: DHCR Adm. Rev. Docket No. JN210030RO (6/2/21) [7-pg. document]