TPU Investigation of IAI Costs Leads to Rent Overcharge Determination

The DHCR's Tenant Protection Unit (TPU) conducted an audit concerning individual apartment improvements (IAIs) at tenant's apartment. Based on TPU's review of apartment rent registrations, TPU demanded the submission of landlord's proof of the IAI costs. Landlord submitted documentation of work costing $17,250 but didn't respond to TPU's follow-up request for additional proof. The TPU issued a letter to landlord discounting most of the improvement costs and finding that the legal IAI rent increase was $17 instead of $431. TPU further advised landlord that if it didn't reduce tenant's rent, the matter would be referred to the DRA for processing of a rent overcharge complaint. Landlord didn't respond. The case was transferred to the DRA, who ruled for tenant and ordered a refund of $20,600, including interest and triple damages.

Landlord appealed and lost. Landlord argued that TPU had no authority to refer an overcharge claim to the DRA without the filing of a tenant complaint. Landlord also claimed that the IAI increases were lawful and were arbitrarily denied. The DHCR disagreed. RSC Section 2527.2 authorized the DHCR to institute a proceeding on its own initiative whenever the DHCR deemed it necessary or appropriate under the Rent Stabilization Law or Code. Since TPU was a unit within the DHCR, TPU had the authority to start a proceeding. The Rent Stabilization Law and Code also both authorize the DHCR to commence investigations independent of any proceeding in furtherance of its responsibility to enforce the law. TPU's actions didn't require initial evidence or a complaint from tenant, didn't violate the Separation of Powers doctrine, and didn't deny landlord due process. Landlord also had the chance to submit additional evidence or refund overcharges during the TPU investigation and while the case was pending before the DRA, but failed to do so. And the DRA properly disallowed various IAI costs that either were duplicated, lacked proof of payment, of were insufficiently explained. 

Besi Properties, LLC: DHCR Adm. Rev. Docket No. CT110034RO (2/27/15) [9-pg. doc.]