IN RE: 160 EAST 84TH STREET ASSOCIATES LLC (2018)

Order and judgment (one paper), Supreme Court, New York County (Barbara Jaffe, J.), entered March 1, 2017, granting the petition to modify an order of respondent New York State Division of Housing and Community Renewal (DHCR), issued February 23, 2016, to the extent of vacating the order and remanding the matter to DHCR to determine the base date rent consistent with the standard set forth in Thornton v. Baron, 5 N.Y.3d 175, 800 N.Y.S.2d 118, 833 N.E.2d 261 (2005), and denying DHCR's cross motion to remand the matter for the correction of mathematical errors therein, unanimously reversed, on the law, without costs, the petition denied, and the cross motion granted.

DHCR's use of a sampling method to determine the legal regulated rent on intervenor tenant's apartment based on the average stabilized rents for studio apartments in the 2006 registration of the subject building is rationally based in the record and not arbitrary and capricious (see Matter of Tockwotten Assoc. v. New York State Div. of Hous. & Community Renewal, 7 A.D.3d 453, 454, 777 N.Y.S.2d 465 [1st Dept. 2004] ).  DHCR providently exercised its broad equity discretion to fashion an equitable solution to the question of the appropriate rent for an apartment that was improperly treated as deregulated for years (see Rent Stabilization Code [RSC] [9 NYCRR] § 2522.7;  RSC former § 2522.6[b][2];  Matter of W 54–7 LLC v. New York State Div. of Hous. & Community Renewal, 39 A.D.3d 312, 313, 835 N.Y.S.2d 38 [1st Dept. 2007] ).

The market rent of $2,200 per month, established by lease, in effect on the “base date” (RSC § 2520.6[f][1] ) was the result of improper deregulation by petitioner and thus may not be adopted as the proper base date rent (see 72A Realty Assoc. v. Lucas, 101 A.D.3d 401, 955 N.Y.S.2d 19 [1st Dept. 2012];  Gordon v. 305 Riverside Corp., 93 A.D.3d 590, 592, 941 N.Y.S.2d 93 [1st Dept. 2012] ).  However, because petitioner's actions were based upon a mistaken pre-Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d 270, 890 N.Y.S.2d 388, 918 N.E.2d 900 (2009) belief that the apartment had been deregulated, and there is no evidence of fraud, resort to the punitive default formula set forth in Thornton v. Baron, 5 N.Y.3d 175, 800 N.Y.S.2d 118, 833 N.E.2d 261 (2005) is inappropriate (see Taylor v. 72A Realty Assoc., L.P., 151 A.D.3d 95, 105, 53 N.Y.S.3d 309 [1st Dept. 2017];  Matter of Park v. New York State Div. of Hous. & Community Renewal, 150 A.D.3d 105, 115, 50 N.Y.S.3d 377 [1st Dept. 2017], lv dismissed 30 N.Y.3d 961, 64 N.Y.S.3d 662, 86 N.E.3d 555 [2017] ).

DHCR's order shows conflicting amounts for the legal regulated rent.  Thus, we remand the matter to DHCR to correct the order.