Grill and Tare Victorious at the DHCR – Tenants’ Petition for Administrative Review Denied in its Entirety

November 14, 2016 | Real Estate, Zoning & Land Use | Commercial Litigation | Construction

Tenants filed a Petition for Administrative Review (“PAR”) at The New York State Division of Housing and Community Renewal (“DHCR”) seeking to overturn a Rent Administrator’s decision that found, among other things, the following: a) that the landlord did not engage in a fraudulent scheme to deregulate the apartment; b) the base date rent was reliable; and c) no overcharge.  The tenants alleged that the prior landlord engaged in a fraudulent scheme to deregulate the apartment because: a) the prior landlord raised the rent as a result of individual apartment improvements (“IAI”) made while the tenants lived in the apartment without getting tenants’ written permission; b) the IAI were not legal; c) registrations for the apartment during tenants’ tenancy were missing for some years and included one registration that listed the apartment as exempt; and d) the prior landlord had the tenants execute back-dated leases.  As a result, the tenants were seeking a finding of a fraudulent scheme to deregulate the apartment and setting the rent at the last registered rent or applying the default formula to set the rent.

In denying the tenants PAR, the Commissioner found: a) since the tenants remained in possession of the apartment during the IAI and since the tenants did not challenge the rent increase based upon the IAI within four years the DHCR did not have to investigate the IAI; b) no fraud to deregulate the apartment existed because the tenants have remained in possession of the apartment during the alleged acts and since they have remained in possession the apartment could not have been deregulated; c) the filing of a registration listing the apartment as exempt was simply an error since deregulation was not possible; d) Illegal work, use of unlicensed contractors, or work performed in an unworkmanlike manner, are potentially relevant to an overcharge case if filed within the four year review period, but are insufficient to demonstrate a scheme to deregulate an apartment; e)  The tenants’ allegation that they did not consent to the IAI and related rent increase was irrelevant because the increase was not challenged within the standard four years review period.  The DHCR does not have to review every element of an owner’s entitlement to IAI taken before the base date to make a finding on the issue of fraud; f) The base date rent of $2,009.58 is valid because that is what was charged and paid even though the leases are not valid. (Rent Administrator invalidated the leases from 2010 through 2014 because they were back dated.)  No overcharge could be found because the base date rent never changed.  Also, the failure to offer leases was not part of a fraudulent scheme because the landlord could not have deregulated the apartment since no vacancy occurred; g) The base date rent of $2,009.58 is valid because that is what was charged and paid even though the leases are not valid; and h) Tenants’ claim that the DHCR should freeze the rent at the registered rent in 2004 ($1,435.86) or the lease rent from the 2008 lease ($1,309.58) is not appropriate because the landlord did file registrations and even though the registrations may contain an improper legal regulated rent it does not invalidate the registration to the point of freezing the rents.


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