Interesting Case re: Renting

Landlord Denied Rent Hike For Renovation After Fire
Daniel Wise
07-10-2008


The owner of a Brooklyn apartment cannot claim a nearly three-fold increase in rent for repairs and renovations made after a fire for which the tenant took responsibility, a Housing Court judge in Brooklyn has ruled.

R.D.S.O. Associates, the building owner, could not use a provision of the Rent Stabilization Code to raise the rent to recoup the cost of the improvements because they had never been authorized by the tenant, Judge Marc Finkelstein (See Profile) ruled in R.D.S.O. Associates v. Moore, 085910/06.

The decision will be published Friday.

Moreover, as a threshold matter, Judge Finkelstein questioned whether repairs made in the wake of a fire, even when the tenant was responsible, could qualify for a rent increase under the Rent Stabilization Code provision, RSC §2522.4(a)(1).

To rule otherwise, Judge Finkelstein concluded, could "turn a fire or other catastrophic event into an unintended opportunity for obtaining enormous rent increases for an otherwise affordable apartment."

With the exception of a single administrative ruling, Judge Finkelstein's 11-page decision appears to be one of first impression.

Josh Rosenblum, whose firm, Rubel, Rosenblum & Bianco, represented R.D.S.O., said no decision has yet been made on an appeal.

"The end result," Mr. Rosenblum said, is that a tenant who was responsible for a fire "ends up with a wonderful, brand-new apartment without having to pay" any additional rent.

Kathleen Brennan, an attorney with the Legal Aid Society who represented the tenant, Brenda Moore, said that under the Rent Stabilization Code, "it is immaterial whether a tenant was innocent or at fault. Judge Finkelstein's ruling was critically needed to provide protection from exorbitant rent increases for all tenants, including innocent ones."

Ms. Moore had lived in her rent-stabilized apartment at 349 St. John's Place, one block from the Brooklyn Botanical Gardens, for close to 20 years when a fire broke out on May 14, 2004.

A fire marshal's report, which both sides stipulated to, concluded that the blaze had been started by a child "playing [with] matches/lighter."

R.D.S.O., the owner, claimed it repaired the fire damage and made additional improvements. To recover the cost, R.D.S.O. invoked RSC §2522.4(a)(1), which allows an owner to raise the monthly rent by an amount equal to one-fortieth of the cost of the improvements.

Claiming to have applied that formula, R.D.S.O. raised Ms. Moore's monthly rent to $1,315 from $543, an increase of 255 percent. As of January, Ms. Moore owed approximately $50,000 in rent at the higher rate, according to the opinion.

As a result of the fire, the city Department of Housing Preservation and Development issued a vacate order, and Ms. Moore lived elsewhere for nearly a year.

She was not permitted to reoccupy her apartment until after she brought a legal proceeding to regain possession. R.D.S.O. acknowledged denying her permission to live in the apartment until after her suit was filed but said the only reason it refused to readmit her was that it was unaware the vacate order had been lifted.

As a threshold matter, Judge Finkelstein wrote, he had "his doubts" as to whether R.D.S.O. could qualify for a rent increase under RSC §2522.4(a)(1), which allows owners to recover the cost of the "installation of new equipment or improvements."

The judge said he found no basis to determine that the renovations and additional work done while a tenant is temporarily out of an apartment due to a fire or other damage is what is meant by "Individual Apartment Improvements" under RSC §2522.4(a)(1).

R.D.S.O. has other remedies, Judge Finkelstein noted, such as suing Ms. Moore for damages not covered by insurance. Also, he wrote, it may sue to evict her upon grounds that she had endangered the well being of other tenants.

Rejects Administrative Ruling

A finding that RSC §2522.4(a)(1) does not apply to repairs made in the aftermath of a fire, Judge Finkelstein acknowledged, runs counter to an administrative decision issued by the Division of Housing and Community Renewal in Matter of Campbell, TC 12004RT (2003).

In that ruling, the state agency concluded that "regardless of who might be deemed civilly liable" for a fire, a landlord may get a rent increase to recover any "restoration work and the cost of any individual apartment improvements installed in connection with the restoration work."

Judge Finkelstein discounted the precedential value of the administrative ruling, noting that "nowhere" does it "cite any provision of the Rent Stabilization Code, Rent Stabilization Law, any other statute, regulation or procedure, a single administrative decision, nor a single judicial determination in support of its findings and conclusions."

In any event, Judge Finkelstein ruled that RSC §2522.4(a)(1), by its own terms, does not allow a landlord to charge a rent increase unless the tenant in advance has agreed to the work. The only exception to the prior-consent requirement, he wrote, is in the situation of a vacant unit.

Ms. Moore's absence from the apartment for nearly one year after the fire - from May 14, 2004, to May 2, 2005 - did not render it vacant for purposes of the statute, Judge Finkelstein concluded.

R.D.S.O's claim that the unit was vacant, he noted, was based on Ms. Moore's absence stemming from "a temporary vacate order issued by [the Department of Housing Preservation and Development] as a result of the fire."

During the period of the claimed vacancy, he wrote, Ms. Moore maintained an ongoing connection with the apartment by leaving many of her family's belongings there; making rent payments and receiving rent credits while she was "temporarily and involuntarily out of possession."

Judge Finkelstein addressed the fact that Ms. Moore had acknowledged responsibility for the fire by noting that a ruling allowing R.D.S.O to recover the cost of its improvement from her would apply with equal force "to other tenants who had absolutely nothing to do with causing a fire or other hazardous conditions."

"Sanctioning" a result that permits "enormous rent increases" for all tenants regardless of fault is not "a proper exercise of the equitable powers given to [the Division of Housing and Community Renewal]" and does not "compor[t] with the provisions of RSC §2522.4(a)(1)."

R.D.S.O. was represented by John Bianco of Rubel Rosenblum in Rockville Centre.

- Daniel Wise can be reached at [email protected]