Landlord's Demolition Application Denied

Landlord asked the DHCR for permission to evict rent-controlled tenant for three reasons: owner occupancy; withdrawal from the rental market; and demolition. Tenant was the only occupant left in a four-story townhouse. Landlord later dropped the owner-occupancy claim. Landlord offered tenant a similar apartment in the neighborhood and agreed that she would remain rent controlled. Landlord said that the building exterior must remain intact as a landmark but that the building otherwise would be gutted. Landlord submitted architect plans and proof of a bank proposal for a loan of $3.7 million. Landlord said that the new building would be used for corporate headquarters in connection with landlord's business. Landlord claimed that it didn't intend to use the building as a residence and that it intended to withdraw the building from the rental market. The DRA ruled against landlord after a hearing, even though tenant voluntarily moved out nine months earlier into another building owned by landlord.
Landlord appealed and lost. Landlord didn't qualify for demolition approval, because it didn't prove it wouldn't use the new building as a housing accommodation. Landlord's architect testified that the building was in a residential zone, that it was zoned as a one- or two-family residence, and that the building was to be used as office space with a sleeping accommodation for officers of the corporation, but that it wasn't for rent. The architect said that landlord's plans didn't indicate any commercial use but showed the new use as a two-family home with two separate entrances and each unit having its own kitchen. Landlord also didn't qualify to withdraw occupied apartments from the rental market, because it failed to show it intended to immediately use the whole building for a business that it owned and operated in the neighborhood. At the hearing, landlord's architect testified that landlord intended to occupy the new building in connection with a new bed-and-breakfast operation.

R.E.M. Residential: DHCR Adm. Rev. Docket No. VB420049RO (5/30/08) [5-pg. doc.]