DHCR Can't Deny MCI Increase to All Tenants Based on Small Number of Water-Damaged Apartments

Landlord applied for MCI rent hikes based on pointing and waterproofing. The DHCR ruled for landlord in part but vacated a percentage of the total rent increase and ordered a refund to rents collected from all tenants based on water damage found in 10 of the 108 apartments. Landlord appealed, claiming that the DHCR's decision was arbitrary and unreasonable. The court ruled for landlord. The DHCR then appealed and lost. The DHCR initially had ruled that it was proper to exempt from MCI rent hikes only the 10 apartments with water damage. This was consistent with some other DHCR decisions. But after tenants appealed, the DHCR took the case back to reconsider its policy. The DHCR then revoked the MCI increases for all tenants. The DHCR neither followed its own prior precedent nor explained its reason for deciding differently in a case with facts very similar to other cases where it only disallowed MCI increases for tenants with damage resulting from the MCI. There also was no proof that the DHCR ever had a specific policy to deny a rent increase outright where defects relating to the MCI were found in a relatively small number of apartments. The case was sent back to the DHCR for recalculation of the approved MCI rent hikes.

20 Fifth Avenue, LLC v. DHCR: 2013 NY Slip Op 05434, 2013 WL 3793503 (App. Div. 1 Dept.; 7/23/13; Tom, PJ, Andrias, Renwick, DeGrasse, JJ)