Legal Rent of Apartment Owner Occupied on Base Date Set Using Comparable Rents

Rent-stabilized tenant complained of rent overcharge. The DRO ruled for tenant and ordered landlord to refund $35,000, including interest. Landlord appealed and lost. Landlord argued that, before tenant moved into the apartment in 2010, the apartment had been temporarily exempt from rent stabilization due to owner occupancy. In 2010, following the Rent Stabilization Code Section 2526.1 in effect at that time, landlord set tenant’s rent at more than $2,000 per month and gave tenant a rent concession. But the code was amended in 2014 so that, if an apartment was temporarily exempt on the base rent date, the legal regulated rent is the prior legal regulated rent, increased by successive two-year guideline increases that could otherwise have been offered during the period of vacancy or temporary exemption. Here, the apartment was owner occupied from 1984 through 2010. Because there was no prior rent-stabilized rent, the DRO properly set tenant’s initial rent by using the average of three same-sized comparable apartments in the building plus a vacancy guideline rent increase plus 1/40th of the costs of allowable individual apartment improvements. Since there was no prior tenant, no longevity increase was added to the first rent. No default formula was used to set this rent, and there was no finding of fraud by the landlord.

West 122 LLC: DHCR Adm. Rev. Docket No. DR410057RO (2/2/16) [5-pg. doc.]