Tenant in Occupancy Before C of O Issued Is Exempt from Deregulation

Landlord sued to evict tenant, claiming that his tenancy was unregulated. Tenant claimed that he was rent stabilized. The court ruled for tenant, based on stipulated facts agreed to by both sides.

In 1995, prior landlord applied to DOB for permits to begin substantial rehabilitation work at the building. Work-related activity continued until September 2004 when DOB issued a final certificate of occupancy. In 2018, landlord filed an application with the DHCR for a determination that the building was exempt from rent stabilization due to the substantial rehabilitation. The DRA granted landlord's application in May 2022. The DHCR denied tenant's appeal of that order in July 2024 because it was untimely filed. 

The court found that, because tenant lived in the building before the C of O was issued in 2004, he was exempt from deregulation under RSC Section 2520(e)(5) and the apartment remained subject to rent stabilization until tenant moved out. Landlord argued that the sub rehab work was completed in 1995, even though issuance of the C of O was delayed until 2004. But the DHCR had ruled that the sub rehab was completed when the C of O was issued. And permits for projected-related work had been issued as late as 2003. 

321-323-325 W. 42nd St. LLC v. McMahan: Index No. 302277-24, 2025 NY Slip Op 50284(u), 65 Misc.3d 1226(A)(Civ. Ct. NY; 3/3/25; Stoller, J)