Landlords' Challenge to Creation of DHCR Tenant Protection Unit Denied

Landlords and real estate organizations sued the DHCR to challenge the DHCR's adoption in 2014 of amendments to the Rent Stabilization Code as unconstitutional. Among other things, landlords sought to eliminate the DHCR's Tenant Protection Unit (TPU), to stop the DHCR from enforcing the 2014 Amendments, and to bar the TPU from conducting further investigations or issuing determinations. Landlords claimed that the 2014 Amendments concerning the TPU violated the due process clause of the New York State Constitution and the separation of powers doctrine. Both sides asked the court to rule on the issues without a trial.

The court ruled for the DHCR and against landlords, and dismissed the case. The court found that the creation of the TPU didn't violate landlords' due process rights. TPU audit or investigation determinations didn't make legally binding administrative orders or findings that could deprive landlords of their legal rights. TPU audits were preliminary and, if cases were forwarded to the Office of Rent Administration (ORA), landlords were given required due process protections. Landlords argued that, if they failed to comply with TPU audit determinations, they lost the "safe harbor" of time to refund a rent overcharge without a presumption of willful overcharge or triple damages. But the DHCR claimed that landlords still have been able to take advantage of the safe harbor and avoid triple damages by cooperating with the ORA once a rent overcharge case was filed with ORA by the TPU. The TPU itself didn't make willfulness determinations or recommend triple damages in connection with rent overcharge cases it referred to the ORA. Therefore, the creation of the TPU didn't deprive landlords of due process since landlords were given a fair and meaningful opportunity to present proof on the issue of the willfulness of the overcharge prior to the DHCR's final determination. [Download PDF of case here.]

Portofino Realty Corp. v. DHCR: Index No. 501554/14 (Sup. Ct. Kings; 5/31/17; Velasquez, J) [44-pg. doc.]