No MCI Increase for "Groupwork" Kitchen/Bathroom Renovations

Landlord applied in August 2018 for MCI rent hikes based on water repiping and kitchen/bathroom modernization work. The DRA ruled for landlord in part, granting the rent increase for the water repiping. But the DRA ruled that the kitchen and bathroom work no longer qualified as an MCI because the HSTPA modified Rent Stabilization Law (RSL) Section 26-511.1(a)(2) effective June 14, 2019, to exclude "groupwork" for individual apartments that wasn't otherwise an improvement to an entire building.

Landlord appealed and argued that, because the work was completed and the MCI application filed before HSTPA took effect, the denial was an improper retroactive application of HSTPA. Landlord also claimed that the DRA had engaged in undue delay in issuing its order.

The DHCR ruled against landlord. Landlord relied on the Court of Appeals decision in Regina Metro v. DHCR, which struck down retroactive application of some RSL provisions concerning rent overcharge. But the Court of Appeals expressly limited its review in Regina to specific overcharge amendments found in HSTPA, Part F. HSTPA, Part K, related to MCI proceedings. Unlike the rent overcharge provisions, the application of HSTPA Part K amendments didn't have "an unjust retroactive effect" on landlord and that "rent regulation does not confer vested rights." This was not a case where landlord held a pre-HSTPA judgment related to the MCI rent increase in question. In such a case rights may already have been adjudicated and fixed. Here, there was "simply an application that was to be in accordance with the rules in effect when determined." Landlord's "right," as it vested prior to HSTPA, "was an ability to make an application for an increase that would then be subject to review and a determination." Applying HSTPA Part K to landlord's MCI application also didn't increase "the owner's liability for past conduct, as was the case in Regina." The amount of potential rent increase was reduced but no liability was increased. So there was no retroactive effect as prohibited in Regina. 

There also was no undue delay in the processing of landlord's MCI application. And as further provided in HSTPA Part K, the kitchen/bathroom work wasn't "essential" for the preservation, energy efficiency, functionality, or infrastructure" of the entire building.

4040 BA LLC: DHCR Adm. Rev. Docket No. IM610034RO (8/25/21)[4-pg. document]