Initial Rent Under HDC Regulatory Agreement Couldn't Be Preferential Rent

Tenant complained of rent overcharge in 2015. In 2003, landlord had signed a New York City Housing Development Corporation Regulatory Agreement with the NYC Housing Development Corporation (HDC) that provided that the building would be rent stabilized as long as it received certain tax benefits, that HDFC and the landlord would establish the initial rents for building apartments that wouldn't exceed a Maximum Gross Rent for a Moderate Income Tenant subject to approval of HDC, that the initial rents would be registered with the DHCR, and that the rents wouldn't exceed specified amounts. In 2007 tenant signed a rent-stabilized vacancy lease at $1,287 per month with a preferential rent of $797. The DRA ruled for tenant and found that on the 2011 base date, the collectible rent was $842, which was a lower established rent under the regulatory agreement.

Landlord appealed and lost, claiming that it was entitled to revoke the preferential rent charged when it renewed tenant's lease. But the regulatory agreement that landlord signed in 2003 didn't provide for a preferential rent. The definition of "initial rent" in the agreement was "the rent initially payable by the first tenant to occupy the unit." That amount was $749 per month, which was not a preferential rent. Landlord was only permitted to increase the initial rent in accordance with rent guidelines. Once landlord charged less than the Maximum Gross Rent, the lower rent became the collectible rent upon which future rent increase had to be based. 

745 Gates LP: DHCR Adm. Rev. Docket No. FW210051RO (7/19/18) [4-pg. doc.]