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Preventing rent reductions from complaints.

Unleveled elevators, roach remains in the compactor room, and soil spots on carpets may be common maintenance items for a typical building, but they are also grounds for rent reductions issued by the Division of Housing and Community Renewal (DHCR). In the past year the DHCR has proven to be one of the biggest barriers to maintaining rent levels in buildings. While water rates escalate, taxes are steep, salaries are rising, as well as vacancies, the DHCR continues to issue these financially disastrous rulings.

How does an owner take preventive steps to avoid dramatic reductions in the rent roll? In the past, service reductions were not considered to be major obstacles and owners would reply with evidence that they were properly maintaining their buildings. Nowadays you must seriously address any service complaint, particularly building-wide in nature. Document everything that the tenants complain about. It is critical that you address such service allegations at once informing your maintenance staff that these items receive top priority. You should submit contracts for extermination and boiler maintenance, as well as, affidavits from the superintendent indicating his regular cleaning schedule. If tenants are amenable to withdrawing their complaints then you should get work orders with tenant sign-offs and submit same to the agency.

The big news is that the DHCR recently declared it will no longer hear elevator complaints, i.e. leveling, wiring complaints and water quality complaints. The agency in Various vs. Eilat Management Corp., Dkt. ZDC-130035-B stated:

[I]n view of the availability of the well developed procedures and elevator inspection programs administered by the City, the tenants are advised to refer their complaints regarding elevators safety, maintenance and operations to the New York City Department of Buildings.

It is very difficult to reverse a finding of rent reduction even though the findings often relate to minor maintenance items. In the recent case handled by Horing & Welikson, Attorneys at Law., Matter of Savco Realty Co., DHCR Dkt No. CA-130284-RO, the agency modified an Order which had granted a building-wide rent reductions based upon a patch of peeling paint on the top floor of the building, limiting the finding to solely the apartments on the sixth floor of the building. The owner, previously forced to post a bond of $55,000, was only required to post monies in the sum of $14,000 reflecting the 15 tenants who were actually affected by the so called "service defect."

Therefore, it is critical that you go over these complaints and orders with a fine-tooth comb to find out whether or not the service reduction actually affects all of the tenants who have signed the complaint. Furthermore, you should be on the looking for findings that were not even raised by the tenants. There is ample caselaw to support a reversal of a rent reduction order based upon the agency making a finding outside the parameters of the tenants' original complaint.

The next important step is to obtain a copy of the inspection report conducted by the DHCR inspector. While it is well settled that the agency does not have a duty to inform an owner when it inspects, the owner does have the right to review the findings and have an opportunity to repair same. However, if you still suffer a rent reduction despite or due to the agency's failure to put you on notice of the results of the inspection, then when you file your Petition for Administrative Review (PAR) seek a copy of the inspection report as well. In Matter of David Eisenstein Realty, Admin. Rev. Dkt. EF-530274-RO (5/29/92) a recent case handled by Horing & Welikson, Esqs., the agency held that the inspector's report was too vague and did not support the tenants' allegations.

Landlords should assert that most problems are items of routine maintenance. In the Matter of Various Tenants & Richard Albert, Admin. Rev. Dkt. BB-130149-RT handled by Horing & Welikson, Esqs., the agency found in favor of an owner on appeal regarding complaints alleging "dirty mailboxes and front door windows." The agency held that such items did not warrant a rent reduction.

In the event that you do get a rent reduction, a common occurrence, then you must switch into gear and take two administrative routes:

(1) File a Petition for Administrative Review (PAR) and

(2) file your Rent Restoration Application

When you file your Petition for Administrative Review (PAR) you should also seek, in separate letter form, a stay of the prospective rent reduction. The filing of the PAR puts the retroactive refund on automatic hold. However, you still have to suffer the prospective reduction. The agency will issue an order granting or denying a stay of the prospective rent reduction, which is appealable in Supreme Court. Therefore, this is an opportune time to seek reversal of the denial of the stay as well as expedited treatment of your PAR.

An administrative appeal can take three years to be decided therefore, the second step, filing a Rent Restoration Application, is critical. It is important that you staple every last invoice or bill expended to restore the services. Furthermore, the form itself contains a portion where the tenant can acknowledge that the repairs have been completed. In most cases, the agency will still conduct an inspection to determine whether or not the condition has been cured but tenants' approval should help to expedite such application.

The problem with the rent reduction orders is that they become more confusing as renewal leases come due because the tenants are required to sign new renewal leases but they are not required to pay said increases. Owner's are often forced to commence holdover proceedings in Housing Court just to get the tenants to sign said renewals so owners can collect the highest rent when the rents are restored.

In the event that your Rent Restoration Application lingers over a period of months, and you are losing significant sums of money keep in mind that you have the right to go to Supreme Court in an Article 78 mandamus proceeding to seek expeditious treatment of your Rent Restoration Application.

Karen Schwartz-Sidrane, Horing & Welikson Attorneys at Law
COPYRIGHT 1992 Hagedorn Publication
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Title Annotation:advice on avoiding rent reductions in view of guidelines issued by Division of Housing and Community Renewal
Author:Schwartz-Sidrane, Karen
Publication:Real Estate Weekly
Date:Sep 30, 1992
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