Judge Rejects Bid to Credit Tenants for Utility Bills

, New York Law Journal

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The owner of an Upper West Side apartment building must reduce the rents of rent-regulated tenants after it stopped paying for their electricity, even though it offered to credit the tenants for the electric bills, a Manhattan state judge recently ruled.

Manhattan Supreme Court Justice Cynthia Kern (See Profile) ruled in a Dec. 2 order in 98 Riverside Drive v. New York State Division of Housing and Community Renewal, 101285/13, that the landlord had violated the rent laws by changing its electric meters to allow for individual billing without first getting permission from the Division of Housing and Community Renewal (DHCR). Its proposed remedy of crediting each month's electric bill toward the following month's rent was too burdensome to the tenants, she said.

The ruling denied an Article 78 petition filed by the owner against DHCR, seeking to overturn a rent reduction ordered by the agency.

Around March 2011, tenants in the building, located at 98 Riverside Dr., began receiving electric bills from Consolidated Edison Inc. Before that time, the building owner used a single electric meter for the entire premises and paid the electric bill to Con Ed itself.

In May 2011, the owner filed an application with DHCR to stop including electricity in tenants' rents. If such an application is approved, a landlord can stop including electricity, but must reduce rents. However, the owner withdrew that application that July.

Later that month, 69 rent-regulated tenants—46 rent-stabilized and 23 rent-controlled—filed an application with DHCR to reduce their rent in light of the new electric bills.

In response, the owner admitted that it had installed a new meter system. However, it said that Con Ed was billing tenants in error, and that it was trying to get Con Ed to stop billing them. The owner said that, in the meantime, it would reimburse tenants for each month's electric bill by crediting the amount of the bill toward the next month's rent, but the tenants rejected that offer as unduly burdensome.

In October 2012, DHCR ordered a $12 per room reduction in rent, plus a 7.5 percent reduction for certain rent-controlled apartments. The owner subsequently filed a petition for administrative review with DHCR, along with a new application to stop including electricity in rents.

In August 2013, the administrative review board upheld DHCR's original rent reduction. The agency's commissioner also found that the owner's offer of reimbursing tenants for their electric bills was an "inadequate stop gap measure."

The owner sought reconsideration, which was denied. It then filed its Article 78 case.

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