Landlords' Appeal of 2014 Rent Stabilization Code Amendments Denied

Landlords and real estate organizations sued the DHCR in 2014 to challenge the agency's adoption of 2014 amendments to the Rent Stabilization Code (2014 Amendments) as unconstitutional. Among other things, landlords sought to stop the DHCR from enforcing the 2014 Amendments concerning the "four-year rule," which, at that time, was both a four-year statute of limitations on rent overcharge claims and a rule that generally barred consideration of an apartment's rent history more than four years prior to the commencement of a rent overcharge proceeding. Landlords also challenged the creation and operations of the DHCR's Tenant Protection Unit (TPU), claiming they violated due process.

The lower court granted the DHCR's motion to dismiss the case in 2017. The court ruled that the 2014 Amendments didn't change the four-year statute of limitations. In addition, amended RSC Sections that allowed the DHCR to review more than four years of rent records when landlord claimed that there was a preferential rent, or where an apartment was vacant or temporarily exempt on the base rent date, were authorized by the Rent Act of 2011, which expressly authorized the DHCR to issue regulations under the Rent Stabilization Law (RSL).

The court also found that the 2014 Amendments were consistent with case law that created exceptions to the four-year rule. The preferential rent exception was issued for the purposes of establishing the existence or terms and conditions of a preferential rent. And the four-year rule didn't apply to determine whether an apartment was rent regulated.

The court also upheld the 2014 Amendments concerning requirements for the rent stabilization lease rider, the effect of hazardous violations on MCI rent increase applications, the elimination of a requirement that tenants provide notice to landlords of service reductions before filing service complaints, and barring collection of MCI or vacancy rent increases where a rent reduction order was in effect.

The court also found that codification of the DHCR's default formula in the RSC didn't violate the separation of powers doctrine since the default formula wasn't new and New York's highest court had approved the use of the DHCR's default formula. The court also dismissed landlords' challenge to new RSC provisions that required landlords to apply for permission to amend apartment rent registrations filed for a prior year, and that barred certain rent increases when landlords failed to register an apartment. The court also denied landlords' challenge to the creation of the TPU.

Landlords appealed and lost. The appeals court found that the Housing Stability and Tenant Protection Act of 2019 (HSTPA) eliminated the language in the Rent Stabilization Law and ETPA that formed the basis for most of the lawsuit. So, these claims were now moot. As to issues not affected by HSTPA, the lower court properly determined that the remaining 2014 RSC amendments, such as the new rule requiring lease riders to include a detailed description of rent adjustments, were consistent with the RSL and ETPA. And pre-adjudicative investigations by the TPU didn't violate due process since the TPU provided proceedings that gave landlords a full and fair opportunity to be heard, including the right to administrative and judicial review. 

Portofino Realty Corp. v. DHCR: Index No. 2017-08366, 2021 NY Slip Op 02184 (App. Div. 2 Dept.; 4/7/21; Dillon JP, Lasalle, Barros, Christopher, JJ)