Was Apartment Temporarily Exempt on Base Date?

Tenant asked the DHCR for a ruling on whether his apartment was rent stabilized and claimed rent overcharge. Tenant moved into the apartment on Aug. 1, 2013, under a one-year vacancy lease at a rent of $2,750 per month. The lease was silent as to whether the unit was rent stabilized, and was renewed several times thereafter. Tenant claimed that the apartment was improperly deregulated in 1999 when rent registration records show that the rent increased from $823 to $2,000. Landlord showed that the apartment was rented between 1998 and 2013 to Brooklyn Community Housing Services, a not-for-profit organization, for office space. Landlord claimed that the apartment was properly registered during that time as temporarily exempt and that, pursuant to Rent Stabilization Code (RSC) Section 2526.1(a)(3)(iii), in effect in 2013, landlord properly set the rent as agreed with tenant at $2,750. Although RSC Section 2526.1(a)(3)(iii) was amended in January 2014, this was after the apartment was rented. Tenant argued that prior residents still got mail at the apartment and that the apartment therefore probably wasn't used as office space by prior tenant. The DRA ruled for tenant and reduced the Aug. 1, 2013 rent to $1,754. The DRA retroactively applied the amended regulation.

Landlord appealed, and the DHCR reopened the case.  Since the apartment was temporarily exempt on the applicable base date and remained that way for more than one year, the DRA correctly applied the amended RSC Section 2526.1(a)(3)(iii) to determine the legal regulated rent in a case filed by tenant on June 15, 2015. The DRA didn't impose triple damages to the overcharge finding. But there were question that required further fact-finding including whether there was any proof of individual apartment improvements and whether the apartment was in fact temporarily exempt during prior tenant's occupancy. Prior tenant was known to provide housing for homeless people. 

Goodtree Development LLC: DHCR Adm. Rev. Docket No. EW210044RO (6/2/17) [6-pg. doc.]