Fighting an MCI Increase: PAR and Article 78 Insights

According to Fact Sheet #24 on the DHCR website,

“Will violations affect the granting of an MCI?

DHCR can deny the application in whole or in part, if the owner is not maintaining all required services, or if there are current immediately hazardous violations outstanding pursuant to any municipal, county, State or Federal law relating to the maintenance of such services. Certain tenant-caused violations may be excepted. An MCI rent increase will not be approved if there is a DHCR finding of harassment outstanding on the building or if there is a DHCR issued building-wide rent reduction order in effect, based upon a decrease in services. DHCR will expedite any owner filed rent restoration applications. A tenant whose apartment has an individual rent reduction order in effect, based upon a decrease in service will be exempt from the MCI rent increase until the rent is restored by DHCR.”

However, it is important to note that, if the HPD violations are issued after the MCI is approved, the violations will not retroactively bar the MCI rent increase such as in the Petition for Administrative Review (PAR) of  900 Riverside Drive: DHCR Adm. Rev. Docket No. XD430030RT.

The decision was as follows:
The landlord applied for MCI rent hikes based on gas and water repiping. The District Rent Administrator (DRA) ruled for the landlord, and tenants filed a PAR. The tenants claimed that the landlord’s costs weren’t sufficiently proven and that a DHCR building-wide rent reduction order barred the MCI increase. The DHCR ruled against tenants. Landlord submitted all required documentation proving the work performed and its cost. The rent reduction order in question wasn’t issued until after the DRA granted the MCI application, so it didn’t bar the MCI rent hikes. So, the date when violations and rent reductions are issued is important.

An Article 78 proceeding is a special proceeding initiated in New York State Supreme Court under Article 78 of the Civil Practice Law and Rules to overturn the determinations of administrative agencies like the DHCR. It is the final venue to object to the MCI rent increase order. This proceeding should be filed by an attorney.

In the matter of Tenants Committee of 36 Gramercy Park v. DHCR: 968 NYS2d 82, 2013 Slip Op 04984 (App. Div. 1 Dept.; 7/2/13; Friedman, JP; Sweeny, DeGrasse, Richter, Feinman, JJ.), the DHCR granted landlord’s application for MCI rent hikes. The building’s tenant association filed an Article 78 appeal, challenging the rent increases. The court and appeals court ruled against tenants. One tenant, who was a member of the association, claimed to represent the association and filed on its behalf  but the tenant wasn’t an attorney and a voluntary association can be represented in court only by an attorney and not by one of its members who wasn’t an attorney licensed to practice law in New York.  So, the tenants’ appeal was summarily dismissed.

Rent Stabilization Code Amendments Approved

On January 8th, 2014, the DHCR officially adopted amendments to the Rent Stabilization Code. The amendments, which are effective immediately, are the same as the proposed version that was released on April 24, 2013.

Below is a brief summary of the most significant amendments that were adopted by the DHCR, as well as a link to a complete summary of all adopted amendments as well as the revised DHCR Fact Sheets and Updated Procedures.

IMPORTANT AMENDMENTS ADOPTED

  1. Tenant Protection Unit:
    The TPU is formally designated as a unit of DHCR “to investigate and prosecute violations” of the rent laws.
  2. Individual Apartment Improvements:
    a. Lease riders are required detailing the calculation of rent, including IAI increases.
    b. Owners are required to provide tenants, upon a tenant’s request, with documentation
    to support the IAI increase.
    c. Rent overcharge proceedings can result from the failure to provide the lease rider and/or the IAI documentation.
  3. Major Capital Improvements:
    a. MCI rent increases will not be allowed for conversions from master metering to individual metering (electrical wiring for the building will remain allowable).
    b. MCI applications will be rejected with leave to renew if the building has one or more immediately hazardous violations.
  4. Statute of Limitations:
    The four-year overcharge period will be pierced where there is an allegation of fraud, an outstanding rent reduction order, a willful overcharge, a vacant or exempt unit on the base date, or a preferential rent.
  5. Rent Registrations:
    To amend a rent registration, owners will be required to commence an administrative proceeding, upon notice to the tenant.
  6. Decrease in Services:
    a. A tenant’s complaint will not be dismissed due to the tenant’s failure to first provide notice of the condition to owner.
    b. Service decrease orders will preclude future MCI and vacancy bonus increases.
    c. An owner will have 20 days to respond to a service decrease complaint where the tenant provides prior notice or if the complaint relates to heat or hot water.
  7. First Deregulated Tenant:
    a. Owners are required to provide the first deregulated tenant with an exit notice stating the basis for the deregulation, the rent computation and the last regulated rent.
    b. The owner is required to provide the first deregulated tenant with a copy of the rent registration indicating the deregulated rent.
  8. Preferential Rents:
    Preferential rents are required to be set forth in the lease.
  9. Deemed Leases:
    Tenants who do not execute renewal leases will be treated as month-to-month tenants and will not be subject to an automatic lease renewal based upon a deemed lease.
  10. Default Formula:
    Where the rent on the base date cannot be determined or was the result of fraud, the lowest rent for a comparable unit in the building will be used to establish the legal rent.
  11. Harassment:
    False filings and false statements by an owner which interfere with a tenant’s rights are included within the definition of harassment.

Rent Stabilization Code Amendment Complete Summary

Revised DHCR Fact Sheets and Updated Procedures

 

How the DHCR Inspector Was Duped

Here is how 85 Columbus Corp at 101 West 85th Street (the Brockholst) tried to push through a $1.755 million MCI rent increase against the tenants.

On the days before (September 27-28, 2009) the DHCR Inspector arrived (September 29,2009) to inspect the exterior pointing, they cosmetically corrected all evidence of inadequate exterior pointing as would have been shown by multiple leaks in public area walls and ceilings. Ari Paul would not allow any tenants to speak with Cambos Kyriakos, the DHCR Inspector.

Approximately one month before the DHCR inspection, apartments 2-4, 3-4, 4-5, 6-1, 6-3, 6-14 had rooms shortened by the addition of Durock cement walls added over the areas of exterior wall leaks. Tenants were threatened with eviction if they did not allow the cosmetic work to be completed. Some tenants had physical injuries and destroyed personal property as result of the inexperience of the workers.

 

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