No Triple Damages Despite Partial Disallowance of IAI Rent Increase

Tenants complained to the DHCR in 2016, claiming rent overcharge and improper deregulation of their apartment. The DRA ruled for tenants and ordered landlord to refund $59,238, including interest.

Tenants appealed and lost. Tenants made a number of objections to permitted individual apartment improvements (IAIs), vacancy increases, and the DRA's finding of no willful overcharge. The DHCR rejected the claim that all IAIs should be disallowed or reduced. Under Rent Stabilization Code Section 2522.4(a)(1), in effect in 2014 when the work was done, landlord was entitled to pass on 1/60th of the cost of IAIs made while the apartment was vacant and as long as at least one form of proof of the work was submitted.

DHCR inspection confirmed that 18 out of 21 claimed IAIs listed on the contractor invoice were made. Landlord had submitted an itemized invoice detailing the scope of the apartment's gut renovation, along with two contemporaneous checks payable to its contractor. And while tenants claimed that landlord's costs were inflated, landlord wasn't compelled to use the lowest cost estimate for renovations.

As to the vacancy allowance, this was set independent of any separate claimed IAI rent increase. And the DRA correctly instructed landlord in its order to file the missing registrations. Landlord also was permitted to collect additional vacancy increases after one tenant moved into the unit in 2014, because the two additional tenants were added to the lease in subsequent years. And no triple damages were warranted since a significant portion of the IAI costs were substantiated and landlord had based its deregulation designation on the fully paid cost of IAIs. Also, the absence of a deregulation rider in the 2014 vacancy lease didn't constitute fraud.

Lauto, Aigen & Heidke: DHCR Adm. Rev. Docket No. IS210025RK (2/9/21) [8-pg. doc.]