Rent Stabilization Code Change Ruled Valid

(Decision submitted by David Hershey-Webb of the Manhattan law firm of Himmelstein, McConnell, Gribben, Donoghue, & Joseph, attorneys for the tenants.)

In 2007, the DHCR amended the Rent Stabilization Code. Prior Code Section 2522.3(f)(4) was revised so that landlords of former Mitchell-Lama buildings that became rent stabilized when landlords exited the Mitchell-Lama program couldn’t seek rent increases based on unusual or peculiar circumstances. The Code says that landlords could now only seek additional rent increases by filing hardship applications. Landlords claimed that the amended Code section was invalid and sued the DHCR.

The court dismissed the cases. Where the Mitchell-Lama rents had been set by HUD, the last HUD rents became the first rent-stabilized rents when the buildings converted. Landlords claimed that a 2005 Court of Appeals case, KSLM v. DHCR, ruled that landlords were entitled to rent increases for unique or peculiar circumstances solely based on prior Mitchell-Lama status. The DHCR and tenant groups argued that the KSLM case merely ruled that owners subject to stabilization under the ETPA could apply for unique and peculiar circumstance increases, but those subject to regulation under the Rent Stabilization Law of 1969 couldn’t. And the court noted that the KSLM decision made no determination on the merits of any “U/P” rent increase applications. The KSLM decision didn’t guarantee landlords automatic entitlement to U/P rent increases, but simply acknowledged landlords’ rights to apply for such rent increases. Landlords also claimed that the DHCR improperly set public policy through the Code amendment, since the legislature never amended any law on that question. But the DHCR had broad rulemaking authority, the Code amendment was consistent with the DHCR’s authority and with governing law, and the amendment simply clarified the law. The amendment was primarily based on considerations directly related to the DHCR’s traditional role in maintaining affordable rents. The amendment wasn’t arbitrary and should be applied to U/P rent increase applications pending at the time it was issued in 2007.

Columbus 95th Street, LLC v. DHCR: Index No. 113148/07 (11/25/09) (Sup. Ct. NY; Schlesinger, J); Highbridge House Ogden v. DHCR, Index No. 100845/08 (11/25/09) (Sup. Ct. NY; Schlesinger, J) [31 pg.-doc.]