Preferential Rent Was Still Less Than Legal Rent After Disallowed IAIs

Rent-stabilized tenant complained of rent overcharge in 2015. She claimed that landlord fraudulently charged her, the first rent-stabilized tenant after rent control, a legal regulated rent of $1,900 per month and a preferential rent of $1,200. Landlord claimed that there was no rent overcharge and submitted proof of individual apartment improvements (IAIs).

The DRA ruled against tenant, finding that the initial rent-stabilized rent was $1,200 because an initial rent-stabilized tenant can't be charged a preferential rent. But tenant's legal regulated rent in 2015 was $1,868 and she paid a preferential rent of $1,800. The DHCR denied tenant's PAR. Tenant then filed an Article 78 court appeal, and the case was sent back to the DHCR for further consideration of the IAI rent increase.

On remand, the DHCR ruled for tenant in part. Landlord proved the IAIs performed. The IAIs in this case were governed by DHCR Policy Statement 90-10, since they were performed before the DHCR changed IAI policies under Operational Bulletin 2016-1. Landlord submitted a signed invoice itemizing renovations for the apartment along with a sworn statement from landlord's contractor. Landlord also verified the cash payment to the contractor by producing a bank statement. But linoleum flooring work, without installation of sub-flooring, and painting weren't IAIs and should've been disallowed from the rent increase. So tenant's initial legal regulated rent was $1,828, which, while less than previously determined, was still more than the preferential rent tenant paid. So, there was no overcharge.

HPD violations that tenant submitted during the remanded proceeding didn't rebut landlord's IAI claims. The fact that rents registered by landlord since 2012 were incorrect didn't warrant freezing the rent for failure to register. And, although landlord collected two months of security deposit from tenant, and had to refund one month, this didn't trigger triple damages.

Rivera: DHCR Adm. Rev. Docket No. IS110001RP (8/11/20) [5-pg. doc.]