As part of the amendments to the Rent Stabilization Code issued in January 2014, the DHCR changed the way it treats “immediately hazardous” violations, also known as Class “C” violations, that are in effect during the processing of an owner’s application for rent increases based on major capital improvements (MCIs). Immediately hazardous violations typically reflect conditions that pose a threat to life, health, safety, property, the public interest, or a significant number of persons so as to warrant immediate corrective action. Examples include the presence of lead-based paint, inadequate supply of heat or hot water, broken or defective plumbing fixtures, and rodents.

Under the amended code, the DHCR will initiate its own search when the MCI application is filed to determine if there’s an immediately hazardous violation on record for the building. If such a violation is found on DOB or HPD databases, the owner’s MCI application will be rejected with leave to resubmit once the violation is remedied [RSC §2522.4(a)(13)].

DHCR policy prior to January 2014 required tenants to raise the issue of immediately hazardous violations while the MCI proceeding was pending before the Rent Administrator (RA). Landlords also were given a chance to correct a violation or submit proof that the violation had already been corrected before the RA would decide whether to grant the MCI application. If no proof was submitted, the MCI increases would be denied.

The code change raises questions as to which rule applies if the RA decided an MCI application before January 2014, but tenants then appeal and a Petition for Administrative Review (PAR) is not decided until after the processing procedures were changed by the code amendment. In at least several recent cases, the DHCR has applied the old rule to preserve the previously granted MCI increases.

In one case, the RA granted the landlord’s MCI rent increase application based on adequate wiring. The tenant appealed and pointed out that there were 10 open Class “C” immediately hazardous violations on record with HPD. But only one tenant had responded to the RA’s notice of the landlord’s MCI application, and that tenant didn’t raise any issue concerning Class “C” violations. So the DHCR ruled that it couldn’t consider this issue for the first time on appeal. In addition, the tenant didn’t submit a violation printout with his PAR [37-51 to 37-55 79th Street: DHCR Adm. Rev. Docket No. YI110068RT (11/14/14); LvT #25950].

In another case, the RA granted the landlord’s MCI application based on the installation of a new burner. The tenant appealed, claiming that HPD had issued multiple violations for failure to maintain required services in the tenant’s apartment. Although most of the violations were issued after the date of the order approving the MCI increases, one immediately hazardous DOB violation predated the MCI. The DHCR ruled against the tenant because the tenant didn’t raise the DOB violation before the RA and couldn’t raise it now for the first time in his PAR. The DHCR specifically pointed out that the RA’s order was issued before the 2014 code amendment changed the way that the DHCR processed MCI applications [Stoner: DHCR Adm. Rev. Docket No. BV430024RT (3/4/15); LvT #26157].

The DHCR reached a similar result in another recent case where tenants claimed in their PAR that there were 61 open HPD violations on record against the building, including some Class “C” violations. But, again, tenants hadn’t raised this issue before the RA and didn’t explain why they failed to do so [Various Tenants of 2707 Sedgwick Avenue: DHCR Adm. Rev. Docket No. YC630048RT (8/12/15); LvT #26576].

For MCI applications filed after January 2014, landlords will have no opportunity to correct immediately hazardous violations while the MCI application is pending. Instead, the application will be rejected by the RA after filing. And, although landlords will be given the opportunity to refile with proof of correction of any Class “C” violations, any refiling must still be completed within two years after the work is completed.