MCI Increase Denied Where 35% or Fewer of Building Apartments Were Rent Regulated

Landlord applied in November 2018 for MCI rent hikes based on installation of a new boiler. The DRA ruled against landlord in November 2019 because fewer than 35 percent of the building's tenants were rent stabilized. Effective June 14, 2019, the HSTPA had amended the Rent Stabilization Law and the City Rent & Rehabilitation Law to prohibit MCI increases for buildings with 35 percent or fewer rent-regulated units.

Landlord appealed and lost. Landlord argued that its MCI application was filed before the effective date of HSTPA and that the DHCR therefore improperly applied the amended law retroactively. But the DHCR pointed out that the language of HSTPA amending both the rent stabilization and rent control laws took effect "immediately" on June 14, 2019, and the DRA's decision was issued after that date. The building contained 38 units and only eight of the units were rent regulated, which made up approximately 21 percent of the building's total apartments. The HSTPA amendments to MCI provisions affected only "the propriety of prospective relief" and therefore had no problematic retroactive effect. At the time its application was filed, landlord didn't possess a legal right to an MCI rent increase, didn't bear any increase in liability for past conduct as a result of the HSTPA amendments, and didn't have new duties imposed on it with respect to transactions already completed. The DHCR listed a number of court decisions issued since HSTPA was enacted that upheld application of the 35 percent MCI rule applied in this case. These included two appeals court decisions issued respectively in November 2023 and April 2024.

40 CPS Associates, LLC: DHCR Adm. Rev. Docket No. HX410024RO (4/30/24)[4-pg. document]