HSTPA Amendments Properly Applied to MCI Application Filed After June 14, 2019

Landlord applied to the DHCR for MCI rent hikes based on gas and water repiping. The DRA ruled for landlord in June 2021 and applied all amendments to the MCI program that went into effect on June 14, 2019, under HSTPA. These included an updated amortization rate, new provisions related to the collectibility of MCI rent increases, and the application of the Reasonable Cost Schedule published by the DHCR as required by HSTPA.

Landlord appealed and lost. Landlord argued that, because its MCI installation was completed before HSTPA was enacted, the restrictions placed on the granted MCI increase were impermissibly retroactive. Landlord claimed that the retroactive application of HSTPA violated its right to due process under the federal and NY State constitutions. 

The DHCR noted that, although landlord reported the MCI as installed between April 2017 and November 2018, landlord didn't file its MCI application until July 16, 2020. So its application wasn't pending before HSTPA took effect. Landlord also relied on the 2020 decision of New York's highest court in Regina Metropolitan Co, LLC v. DHCR. In that case, the Court of Appeals held that HSTPA's overcharge calculation provisions couldn't constitutionally be applied to overcharges alleged to have been collected before HSTPA amendments were enacted. But, contrary to the reasoning in Regina concerning rent overcharges, when landlord completed the MCI work in November 2018, it did not: (a) possess a legal right to an MCI rent increase not yet even applied for; (b) bear any increase in liability for past conduct as a result of HSTPA's MCI amendments; or (c) have any new duties imposed with respect to transactions already completed because landlord's duties under the already executed MCI contract remained unchanged. The DHCR went on to list a number of court decisions that agreed with the DHCR's application of HSTPA Part K to MCI rulings after HSTPA's June 14, 2019, effective date.  The DHCR pointed out that in one case where a court agreed with landlord's position here, the MCI and all necessary application paperwork had been completed before HSTPA went into effect. [Download decision here.]

411-413 Park Avenue South Realty LLC: DHCR Adm. Rev. Docket No. JT410020RO (11/21/23)[3-pg. document]