Landlord Doesn't Prove Substantial Rehab of Building

Landlord asked the DHCR in 2016 to determine whether its building was rent stabilized. Landlord claimed that the building was exempt from regulation due to substantial rehabilitation performed after Jan. 1, 1974. Landlord stated that the building interior was demolished and rebuilt between June 2008 and February 2009, and that 100 percent of the building's systems were replaced. Landlord submitted plans, DOB permit and application detail, along with construction photos, cancelled checks, and an engineer's affidavit.

The DRA ruled against landlord in 2018. The building's heat distribution system, fire escapes, interior stairways, and roof weren't replaced. Since five of the building's 15 systems weren't replaced, landlord didn't replace 75 percent of the building systems and its work therefore didn't qualify as a substantial rehab.

Landlord appealed and lost, then filed an Article 78 court appeal of the DHCR's decision. The case was sent back for further consideration, and the DHCR again ruled against landlord. Although landlord finally submitted a DOB Letter of Completion, along with a revised expert affidavit, it still didn't satisfy the requirements of DHCR Operational Bulletin 95-2. Landlord also didn't demonstrate that it replaced the electricity system. And six open DOB boiler violations as well as a DOB lien for "failure to maintain building in code-compliant manner" prevented the boiler/heating system from qualifying toward a sub rehab finding. There were also indications that the fire escapes were nonfunctional. Landlord filed another Article 78 court appeal. The court sent the case back for further DHCR review.

The DHCR again denied landlord's PAR. Landlord's DOB filings contradicted its claims concerning the extent of work done and indicated that replacement or renovation work was done in 50 percent or less of the building. And the Letter of Completion that landlord obtained in 2019 didn't encompass the extent of work needed to prove a substantial rehabilitation exemption from rent stabilization. 

Gates Residence LLC: DHCR Adm. Rev. Docket No. JT210001RP (11/17/21)[13-pg. document]