DHCR Rejects Landlord's Claim That New Apartment Was Lawfully Created and Deregulated

Tenant complained in 2015 of rent overcharge and improper apartment deregulation. The DRA ruled for tenant and ordered landlord to refund $11,494, including interest. The DRA disallowed landlord's claimed $45,000 cost for individual apartment improvements (IAIs) in calculating the legal rent, finding that landlord failed to document the cost.

Landlord appealed and lost. Landlord argued that a prior DHCR decision had approved the same IAI cost and granted a 1/40th rent increase. That decision wasn't appealed and therefore landlord said it was a final administrative order. Landlord also pointed out that after prior tenant moved out, it created a legal duplex apartment by adding a stairway to the interior of the subject apartment leading to the basement. This created a new apartment, which entitled landlord to an unchallengeable first rent. Landlord charged tenant a first rent of $2,600, which landlord claimed was an unregulated rent.

The DHCR disagreed. A 2015 housing court decision dismissed landlord's nonpayment petition, finding that a rent-impairing violation issued by DOB determined that combining the old apartment with a portion of the cellar created an illegal duplex in violation of the building's 1972 Certificate of Occupancy (C of O). A later 2018 nonpayment proceeding decision found that landlord alleged that the apartment was rent stabilized, that the violation was certified as corrected in June 2018, but that landlord presented no proof that DOB had issued an amended C of O or determined that no new or amended C of O was needed. The prior DHCR order was overturned by the court. 

145 Driggs, LLC: DHCR Adm. Rev. Docket No. IS210031RK (6/7/21)[3-pg. document]