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Adam Leitman Bailey and Dov Treiman

In the recent decisions, WFCC Realty Corp. v. Huang Hui Zhen, 59 Misc 3d 140 and WFCC Realty Corp. v. Lin, 2018 N.Y. Slip Op. 51402(U), the Appellate Term, First Department forced building owners to completely reconsider their methods for proving a rent-stabilization exempting substantial rehabilitation has taken place in a building. Since 1995, landlords seeking to establish such exempting construction took place in their buildings, relied on whatever forensic data was available to them—bills, receipts, contracts, proofs of payment, and, lacking these, Department of Buildings records and forensic engineers expert estimations of the ages of building systems. However, these WFCC cases expand on concepts of Matter of Pavia v. DHCR, 22 A.D.3d 393, 802 N.Y.S.2d 361 [2005] to deny the use of these non-owner-maintained records to establish the requisite proofs, effectively making it impossible to prove an exemption to which the owner would otherwise be entitled.

“Substantial Rehabilitation” Defined

The laws that establish rent stabilization, particularly the Emergency Tenant Protection Act of 1974 set forth that buildings “substantially rehabilitated as family units on or after January 1, 1974” are not subject to rent stabilization. (Emergency Tenant Protection Act of 1974 or ETPA §5(a)(5)) However, neither the statute, nor its implementing regulation at Rent Stabilization Code (RSC) §2520.11(e)(3) define “substantial” or “rehabilitated” or the phrase.

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