IN RE: Application of Jeffrey SCHAPER (2002)

Order and judgment (one paper), Supreme Court, New York County (Leland DeGrasse, J.), entered May 29, 2001, which, in a proceeding brought pursuant to CPLR article 78, granted the petition to annul a determination, dated June 21, 2000, by respondent State Division of Housing and Community Renewal (DHCR) of petitioner's fair market rent appeal, to the extent of remanding the matter for recalculation of the applicable fair market rent, unanimously modified, on the law, to deny the petition in its entirety, and to dismiss the proceeding, and otherwise affirmed, without costs.

 Inasmuch as the administrative record contains evidence rationally supportive of so much of the challenged DHCR determination as allowed respondent landlord a rent increase based upon the landlord's improvements to the subject premises, that part of challenged determination was properly left undisturbed by the IAS court (see Matter of Pell v. Bd. of Educ., 34 N.Y.2d 222, 230-232, 356 N.Y.S.2d 833, 313 N.E.2d 321). The IAS court, however, erred when it found that DHCR's interpretation of Rent Guidelines Board Special Guideline No. 26 was contrary to law and on that ground remanded the matter to DHCR for recalculation of the applicable fair market rent.   Contrary to the view of the IAS court, there is no presently relevant conflict between DHCR's reading of Special Guideline No. 26 and the Rent Control Law. The rental unit at issue, which was voluntarily vacated subsequent to June 30, 1971, is not rent controlled, but rent-stabilized (see e.g. Matter of McKenzie v. Mirabal, 155 A.D.2d 194, 196, 553 N.Y.S.2d 699), and, under rent stabilization, there exists no statutory impediment to setting the initial fair market rent without consideration of whether the rent increase eligibility requirements applicable under the rent control scheme have been previously met.   This being the case, and bearing in mind the deference to be accorded DHCR's construction of enactments administered by it within its area of special expertise (see Matter of Toys “R” Us v. Silva, 89 N.Y.2d 411, 418-419, 654 N.Y.S.2d 100, 676 N.E.2d 862), we perceive no ground upon which DHCR's application of Special Guideline 26 in the instant fair market rent appeal would be susceptible of judicial disturbance.   Finally, since DHCR's position in this litigation was substantially justified-and, indeed, has now been vindicated in its entirety-petitioners were properly denied reimbursement for the counsel fees and expenses incurred by them in pursuing this matter (see CPLR 8601 [a] ).