TPU and DRA Calculate Rent Overcharge Differently

The DHCR’s Tenant Protection Unit (TPU) conducted an Individual Apartment Improvement (IAI) audit for tenant’s apartment after reviewing rent registration records. TPU required landlord to submit proof justifying the IAIs. The TPU later sent landlord a Notice of Audit Determination on Default based on landlord’s failure to respond to the TPU’s request and directed landlord to reduce tenant’s legal rent to $690 per month, file amended registrations, refund any rent overcharges, and deliver an amended lease reflecting the new legal rent. TPU further advised landlord that if action wasn’t taken within 30 days, it would transfer the investigation to the DRA for processing of a rent overcharge complaint.

Landlord then answered TPU and claimed it spent $28,000 on IAIs. Landlord said that documentation of the IAIs had been destroyed in a fire 15 months earlier and that the DHCR could inspect the apartment to verify the IAIs. The TPU sent landlord an amended audit determination disallowing any IAI rent increase. But TPU added a 24-year longevity increase and found that the legal rent was $773. At that time the registered rent was $1,312, and tenant paid a preferential rent of $1,200. Landlord then asked TPU for a final determination so that it could file an Article 78 appeal. TPU then sent an inspector to the apartment and found that some of the claimed IAIs had been performed. The case was then transferred to the DRA, who set the base rent date as Sept. 10, 2010, which was four years before the DRA opened the overcharge proceeding.

The DRA ruled against landlord using the statutory default formula, based on landlord’s failure to submit documentation. Landlord was ordered to refund $12,000, including interest, and tenant’s rent was reduced to $663.

Landlord appealed and lost. When the DHCR applies its default formula, IAI rent increases can’t be added. Landlord also pointed out that TPU set the legal rent at $773. But the TPU had allowed some increase for IAIs. The DRA, on the other hand, had to set the base rent and follow the law’s default formula. [Download decision here.]

PACST 1244-46, 1356 LLC: DHCR Adm. Rev. Docket No. DP210024RO (7/8/15) [6-pg. doc.]