Landlord Must Deduct Appliance Electricity Charges from Base Rents

Tenants complained of a rent overcharge. When their building left the Mitchell-Lama program in January 2005, they became rent stabilized. Electricity was included in their rents under Mitchell-Lama, although they were charged additional amounts for large appliances. The DHCR granted new landlord permission to convert to submetering in 2007 and ruled that after the conversion, for every unit that became individually metered, landlord would not be permitted to collect any previously authorized appliance charges to offset the cost of electricity for large appliances. But landlord continued to include appliance surcharges in tenants' rents. The DRA ruled for tenants and ordered landlord to refund the excess electricity charges.
Landlord and tenants appealed and lost. Landlord claimed that it was improper to make changes to the base rents set when the building left Mitchell-Lama. But the appliance charges must be removed upon conversion to submetering. The fact that the appliance charges imposed under Mitchell-Lama were folded into the rent-stabilized base rents didn't mean they couldn't be removed later. And while it was appropriate to compensate landlord for appliances that used an excessive amount of electricity, once the building was converted to submetering and tenants were paying for their own electricity, landlord could no longer continue to collect a charge for a cost it didn't pay for. Tenants claimed that the overcharge was willful and that landlord should be charged triple damages. But landlord's interpretation of the applicable laws and regulations was reasonable, and there was no prior ruling on this question by the DHCR or the courts that landlord could rely on.

West 97th Street Realty Corp./Various Tenants: DHCR Adm. Rev. Docket Nos. YA410024RT, YA410047RO et al. (8/25/10) [9-pg. doc.]