Landlord Proved That Building Was Substantially Rehabilitated

Landlord asked the DHCR for a ruling that its building was exempt from rent regulation based on substantial rehabilitation of the building after Jan. 1, 1974. The DRA ruled for landlord, finding that it had replaced 14 of the 15 relevant building and apartment systems set forth in DHCR Operational Bulletin 95-2. This meant that landlord had replaced 93.3 percent of the systems, which was more than the 75 percent requirement of OB 95-2. Landlord also showed that common area ceilings, floors, and walls were replaced, and that no new Certificate of Occupancy was required for the work at issue. However, the DRA also ruled that three of the building's tenants, who were in occupancy before completion of the sub rehab, remained rent stabilized for as long as they remained at the building. 

Another tenant appealed and lost. He claimed that landlord failed to prove that it had replaced 75 percent of the building/apartment systems. The DHCR disagreed, and pointed out that limited exceptions to the extent of the rehab work may apply where the landlord demonstrates that a particular component of a building or system has recently been installed or upgraded so that it's structurally sound and doesn't require replacement, or that the preservation of a particular component is desirable or required by law due to its aesthetic or historical merit. 

Also, since two of the 17 building systems that OB 95-2 listed didn't exist at the building, landlord only had to show that it replaced 12 out of 15 systems to reach the 75 percent threshold. In its decision, the DHCR described in detail the work performed by landlord and noted that, although landlord didn't submit any proof from subcontractors who performed a portion of the work at issue, it did submit proof that the work was performed and paid for and an engineer's affidavit affirming that the work was done. The fact that the sub rehab was done after a fire had rendered the building uninhabitable and substandard didn't mean the building didn't qualify for a substantial rehabilitation exemption.

Hunt: DHCR Adm. Rev. Docket No. LV410028RT (3/14/24)[9-pg. document]