Substantially Rehabilitated Building Exempt from Rent Stabilization

Landlord asked the DHCR to decide whether its building was exempt from rent stabilization. Landlord claimed that the building had been substantially rehabilitated after a 1982 HPD vacate order. Landlord filed alteration plans and received a new Certificate of Occupancy in 1986. The DRA ruled for landlord, finding that at least 75 percent of building systems cited in DHCR Operational Bulletin 95-2 had been replaced. Tenants appealed, and the DHCR reversed its decision, finding that common area ceilings were only plastered and patched, not replaced. Landlord then filed an Article 78 court appeal challenging the DHCR’s decision. The case was sent back to the DHCR for reconsideration.

The DHCR then ruled for landlord. Tenants claimed that landlord waited too long to ask the DHCR to decide whether the building was substantially rehabilitated. But there is no requirement in the Rent Stabilization Law or Code that landlord file an application to obtain exemption from rent stabilization on this basis. A building simply is exempt by law if it was substantially rehabilitated. Landlord also replaced the systems that tenants disputed. Landlord showed that it replaced the common area ceilings. The floors were “made as new” as required. The roof capping performed provided a totally new roof surface. Complete replacement of fire escapes wasn’t required. The replacement gas system work included installation of gas risers, gas valve, flexible gas supply to kitchen ranges, new gas meters, gas meter rigs, and replacement of defective gas piping. A portion of the gas piping that was structurally sound was left in place. The replacement heating system included two new cast-iron boilers with burners, and new radiators in the apartments. Because DOF records showed that the building received J-51 tax benefits from 1985 until 2006, only those tenants in occupancy during that time who didn't receive J-51 riders with all of their leases remained subject to rent stabilization. Other tenants were exempt from rent stabilization.

Various Tenants: DHCR Admin. Rev. Docket No. BW210002RP (7/22/15) [6-pg. doc.]