Not Enough Systems Replaced to Qualify as Substantial Rehab

The DRA ruled against landlord, finding that work performed didn’t constitute a substantial rehabilitation of the building and that the building remained subject to rent stabilization. Landlord appealed and lost. Landlord bought the vacant building in 2010, and claimed that more than 80 percent of the building-wide systems were replaced within two years. It was undisputed that the building had no incinerators or elevators. The DHCR otherwise found that landlord replaced plumbing, heating, gas supply, windows, kitchens, bathrooms, floors, and pointing.  But landlord didn’t submit sufficient proof of replacement of electric wiring, intercoms, roof,  interior stairways, ceilings and walls, and doors and frames, and fire escapes were merely repainted, not replaced. Therefore, only eight of the 15 relevant building-wide and apartment systems, or 53.33 percent, had been replaced. This was less than the 75 percent of systems required to be replaced to qualify as a substantial rehabilitation. And while a new Certificate of Occupancy isn't always required to prove substantial rehabilitation, DOB records generally didn’t support landlord’s claim of substantial rehabilitation. Landlord argued that, if not a substantial rehab, the DHCR should grant MCI rent hikes for the work performed. But this wasn't done automatically. Landlord must apply separately for MCI rent increases.

383 W 125 LLC: DHCR Adm. Rev. Docket No. DV410049RO (7/20/16) [8-pg. doc.]