Landlord v. Tenant: September 2020

MAJOR CAPITAL IMPROVEMENTS

Landlord Gets MCI Rent Hike for Building-Wide Carpet Installation

Landlord applied for MCI rent hikes based on new carpeting installed throughout the building. The DRA ruled for landlord. Tenants appealed, and the DHCR denied their petition for administrative review (PAR). Tenants then filed an Article 78 court appeal and argued that the DHCR’s decision was arbitrary and unreasonable. The court ruled against tenants, who then appealed to a higher court.

The appeals court again ruled against tenants. The DHCR’s decision had a rational basis. Tenants didn’t claim that landlord’s MCI application failed to satisfy any of the criteria set forth in Rent Stabilization Code Section 2522.4(a)(2)(i). And tenants didn’t claim that building-wide carpeting couldn’t qualify as an MCI until they raised that issue in their reply. Landlord’s misstatement of the age of the old carpeting in its application didn’t matter in this case. And tenants didn’t raise any claim before the DHCR that landlord didn’t obtain a waiver of the useful life requirement applied to MCIs. 

• Wages v. DHCR: Index Nos. 11780, 101186/16, 2020 NY Slip Op 03851 (App. Div. 1 Dept.; 7/9/20)

MAJOR CAPITAL IMPROVEMENTS

No MCI Increase for Lobby Renovations

Landlord of the LeFrak City housing complex applied for MCI rent increases for four buildings with a separate connecting lobby structure based on lobby renovations. The DRA ruled for landlord in part but disallowed some claimed costs for lobby renovations, sidewalk work, and work not directly related to driveway and walkway work. The DRA found that these costs were "not MCI eligible." Landlord then filed an Article 78 court appeal, claiming that the DHCR’s ruling was arbitrary and unreasonable.

The court ruled against landlord, who appealed further. The appeals court again ruled against landlord, finding the DHCR’s decision had a rational basis. It was the DHCR’s long-standing policy that renovation or modernization of a lobby is considered an ordinary repair, maintenance, and/or a cosmetic upgrade, rather than a building-wide MCI. Landlord’s decision to demolish and rebuild the entire lobby as part of the subject repair and modernization project didn’t transform the work into an MCI. And the fact that the lobby was a separate structure connected to four residential buildings didn’t render the DHCR’s determination to deny costs for what remained lobby renovation work unreasonable.

• Sydney Leasing, LP v. DHCR: Index No. 2019-03462, 2020 NY Slip Op 04172 (App. Div. 2 Dept.; 7/22/20)