No Hardship Rent Hike for Holder of Unsold Co-op Shares
LVT Number: #20880
(Decision submitted by David Hershey-Webb of the Manhattan law firm of Himmelstein McConnell Gribben Donoghue & Joseph, attorneys for the tenants.)
Landlord was the owner of unsold shares of 51 rent-controlled apartments in a building converted to cooperative ownership. Landlord applied to the DHCR for rent increases based on hardship. Landlord claimed that it was earning less than an 8.5 percent return on capital value for the apartments. The DRA ruled for landlord. This resulted in rent increases to tenants ranging between 61 percent and 766 percent, far more than the 7.5 percent annual rent control rent increases.
Tenants appealed, claiming, among other things, that the DRA used the wrong 1994 equalization rate to determine return on capital value. They pointed to a prior court decision that ruled that the holder of unsold shares in a co-op building wasn't entitled to hardship rent increases. And they said that any maintenance payments made by the co-op corporation to the holder of unsold shares as the co-op conversion sponsor should be considered as income in calculating eligibility for any hardship increase.
The DHCR ruled for tenants. In light of prior court decisions, the DHCR has to look at the income of the building as a whole, including maintenance fees, before awarding any hardship rent increase to landlord. Otherwise, the effect of the hardship increase application process is to place rent-controlled tenants in a worse position for not buying their apartments while the building as a whole may be financially healthy. Landlord can refile a hardship rent increase application if it believes that the building as a whole wasn't economically viable during the applicable test period.
Tenants appealed, claiming, among other things, that the DRA used the wrong 1994 equalization rate to determine return on capital value. They pointed to a prior court decision that ruled that the holder of unsold shares in a co-op building wasn't entitled to hardship rent increases. And they said that any maintenance payments made by the co-op corporation to the holder of unsold shares as the co-op conversion sponsor should be considered as income in calculating eligibility for any hardship increase.
The DHCR ruled for tenants. In light of prior court decisions, the DHCR has to look at the income of the building as a whole, including maintenance fees, before awarding any hardship rent increase to landlord. Otherwise, the effect of the hardship increase application process is to place rent-controlled tenants in a worse position for not buying their apartments while the building as a whole may be financially healthy. Landlord can refile a hardship rent increase application if it believes that the building as a whole wasn't economically viable during the applicable test period.
Four Corners Tenants Association/Petrakis: DHCR Adm. Rev. Docket No. UK430074RT (11/7/08) [5-pg. doc.]
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