Landlord Didn't Show Building Was in Substandard Condition Before Sub Rehab

Landlord applied to the DHCR for a ruling that its building was exempt from rent regulation due to a substantial rehabilitation performed in 2022 after landlord purchased the building. The DRA denied the application, finding that landlord failed to prove that the building was substandard or 80 percent vacant when the work commenced.

Landlord appealed and lost. DHCR Operational Bulletin 95-2 stated that, in order for the work to qualify as a sub rehab, it must commence in a building "that was in a substandard or seriously deteriorated condition," and that when work was done "in a building that was at least 80% vacant of residential tenants, there shall be a presumption that the building was substandard or seriously deteriorated at that time."

It was undisputed that four of the six apartments in the building here were occupied before the sub rehab work began in 2022. While landlord correctly pointed out that a building needn't be 80 percent vacant to actually be in substandard condition, occupancy of two thirds of the apartments in the building showed that the building was habitable and therefore not in a substandard condition. Four of the six apartments were occupied just before the sub rehab work began, and the prior landlord had entered into surrender agreements with two of those tenants just before the rehabilitation commenced, paying each of them at least $175,000 to move out. This showed that these apartments weren't substandard and that these apartments had considerable value and therefore were in reasonable condition. The pre-project photographs submitted by landlord weren't labeled and not all of them depicted a "substandard" condition. And while landlord's architect stated that none of the 14 building systems had been replaced since 1920, this was inconclusive. 

139 Devoe Mgmt LLC: DHCR Adm. Rev. Docket No. LX210022RO (3/18/24)[3-pg. document]