Rent Stabilization Code Change Upheld

Facts: In 2007, the DHCR amended Rent Stabilization Code Section 2522.3(f)(4) 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 (U/P) circumstances. The code says that landlords can now seek additional rent increases only by filing hardship applications. Landlord claimed that the amended code section was invalid and sued the DHCR. The court dismissed the case, and landlord appealed.

Court: Landlord loses. Where the Mitchell-Lama rents had been set by HUD, the last HUD rents became the first rent-stabilized rents when the buildings converted. Landlord 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 U/P increases, but those subject to regulation under the Rent Stabilization Law of 1969 couldn’t. But the KSLM decision didn’t guarantee landlords automatic entitlement to U/P rent increases. It simply acknowledged landlords’ rights to apply for such rent increases. Landlord 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, and the code amendment was consistent with the DHCR’s authority and with governing law. Otherwise, tenants who had no control over landlord's decision to opt out of Mitchell-Lama would face drastic rent increases. The amendment simply clarified the law.

Columbus 95th Street, LLC v. DHCR: 2010 NY Slip Op 09569, 2010 WL 5297164 (App. Div. 1 Dept.; Gonzalez, PJ, Mazzarelli, Nardelli, Richter, JJ)