DHCR Finding of Substantial Rehab Exemption Is Retroactive

Landlord applied to the DHCR for an order exempting its building from rent regulation based on substantial rehabilitation. The DRA ruled for landlord. Tenant appealed and lost. Landlord bought the building in 2014 but proved that prior landlord had completed a substantial rehab in July 2011. Proof included DOB work permits, approved architectural plans, a cost affidavit, construction work contracts, invoices, cancelled checks, environmental and appraisal reports, work photographs, engineer's affidavit, and DOB letters of completion. Tenant argued that any substantial rehab shouldn't have a retroactive effect and should affect only those leases that commenced after the DRA's Sept. 13, 2016, order. But the determination was retroactive to the date the substantial rehab work was completed in July 2011. The building actually becomes exempt when the work is completed even if a landlord files an application with the DHCR years later or the DHCR otherwise doesn't render a decision until months or years after the work is finished.

SME Capital Ventures LLC: DHCR Adm. Rev. Docket No. EV410065RT (4/10/17) [3-pg. doc.]