This post-argument petition, initially assigned to a different judge, was reassigned by administrative order to this court in March 2016. This court finds that additional oral argument is not necessary.

This Article 78 proceeding, in the nature of mandamus, is brought under CPLR 7803 (3). Petitioners challenge those portions of the Division of Housing and Community Renewal's ("DHCR") Order and Opinion, dated October 2, 2014, that denied petitioners' Petition for Administrative Review on Remit ("PAR").

Petitioners are tenants of the building currently owned by Ordway Holdings, LLC ("Owner"), located at 305 West 90th Street. In December 29, 2009, the previous owner applied for a rent adjustment pursuant to section 2522.4 of the Rent Stabilization Code on the basis of a major capital improvement ("MCI") a new roof that was installed in 2007. The Rent Administrator ("RA") granted the MCI rent modification May 23, 2011. Petitioners' PAR of that decision was subsequently denied. Thereafter, petitioners brought an Article 78 proceeding that resulted in a May 20, 2014, order by Justice Peter H. Moulton to remit the case to DHCR with special instructions to augment and reconsider the record as necessary to resolve the issues raised in that petition. (Pet, Exh 2.) The court's review in this matter is limited to whether DHCR's determinations on remittal were arbitrary and capricious or without a rational basis in the record. (See P'ship 92 LP v State Div. of Hous. & Cmty. Renewal, 46 AD3d 425, 429 [1st Dept 2008].)

Petitioners allege that the previous owner misrepresented or wrongfully inflated the cost of the MCI and that DHCR erred in ignoring the existence of "irregularities" during the approval [*2]process. These alleged "irregularities" refer to conflicting characterizations of the MCI's nature and scope. On the one hand, line items in the contractor's proposal tracked verbatim the language of section 101-14 of the Rules of the City of New York, indicating that an NYC Department of Buildings ("DOB") permit may have been required before the roof was installed. (Return 2, Exh A-1.) DHCR did not require proof of compliance with any permits, DOB issued or otherwise, before it approved the application, however. This determination was based on the statements of at least one DOB inspector and the January 2, 2012, affidavit of Martin Kera, an attorney and ex-managing agent of the building, who opined that permits were not required to install a "liquid roof." (Return 2, Exh B-22.) Petitioners provided some evidence that a "liquid roof" would never have been as costly as the previous owner claimed and that post-approval the previous owner was required to obtain a retroactive New York City Landmarks Preservation Commission ("LPC") permit. (Return 1, Exh B-22.)

On remittal, DHCR upheld its prior determination that the roof was a qualifying MCI based on the contractor's description of the work performed and the agency's own March 2011 detailed inspection report, which confirmed the nature of the work and the veracity of Owner's claimed expenditures. (Return 1, Exh A-18.) It further upheld that petitioners' allegations with respect to any "irregularities" in characterizing the MCI were insufficient to prove that DOB permits were required or that the previous owner misrepresented or inflated the cost of the work. DHCR's determination on this matter finds a rational basis in the record, and the existence of other alternative and rational conclusions will not warrant annulling its determination that the MCI was both qualifying and properly substantiated. (See P'ship 92 LP, 46 AD3d at 429.)

Petitioners further argue that DHCR should have denied the MCI application on the basis of the previous owner's failure to file an Initial Rent Registration for their individual unit. On remittal, DHCR determined that the proper course of action with respect to petitioners' proof that an initial registration had not been filed on their unit was to file an overcharge complaint with DHCR. DHCR maintains that in accordance with section 2522.4 and current policy, the failure to register an individual unit impacts only the effective date of the MCI increase, not whether the application is approved. (Respondent's Memo, p 11.) DHCR's interpretation of its governing statutes and regulations is entitled to deference (P'ship 92 LP, 46 AD3d at 429), and given the discretionary nature of the MCI modification process, nothing indicates that this interpretation is unreasonable.

Finally, petitioners contend that DHCR should have denied the MCI application in the first instance on the basis of various "immediately hazardous violations" on record with the Department of Housing Preservation and Development ("HPD") and the Environmental Control Board ("ECB"). DHCR maintains that in accordance with section 2522.4 (a)(13), the existence of immediately hazardous violations or a rent-reduction order respecting an individual unit does not affect the approval of the MCI application, although it may impact the effective date of those increases. (Respondent's Memo, p 10.) (See also Policy Statement 90-8.) Indeed, "DHCR is supposed to grant a rent modification if an MCI project inures to the benefit of every tenant in a building" (Terrace Court, LLC v NYS Div. of Hous. & Cmty. Renewal, 18 NY3d 446, 454 [2012]), but it nevertheless retains the discretion to grant the MCI rent-modification application outright, condition its approval upon certain undertakings, or, under circumstances not present in [*3]this case, to exempt permanently select tenants from the increase. (See id.) On remittal, DHCR determined that the application did not warrant revocation, because "all of the conditions which formed the bases for each of the [immediately hazardous] violations [had] been remediated." The basis for this determination was the September 3, 2014, letter by an independent architect stating that all HPD violations had been cured (Pet, Exh 6) and the September 24, 2014, letter by an independent plumber stating that an open violation with the ECB had also been rectified. (Return 2, Exh C-9.) DHCR also modified the effective date of the MCI rent increase to October 1, 2014, in accordance with its policy that MCI increases may be taken while there are open hazardous violations. DHCR's determination that a revocation was not warranted under the circumstances finds a rational basis in the record.

However, with respect to the modification of the effective date of the MCI rent increase, the court finds no rational basis in the record for the agency's determination that the effective date should be October 1, 2014. Alhough DHCR has the discretion to determine what constitutes required services as well as whether services have been lawfully maintained (see 230 E. 52nd St. Assoc. v State Div. of Hous. & Cmty. Renewal, 131 AD2d 349, 350 [1st Dept 1987]), the architect's report concerning the HPD hot-water violations states only that the "water fixtures in the [cited units] were tested and hot water flowed from the faucets." This unsworn-to letter is too vague with respect to temperature to permit any rational determination by the agency that the water flow met the exacting requirements (minimum 120 degrees Fahrenheit) set forth in section 27-2031 of the New York City Administrative Code. Moreover, the August 22, 2014, Rent Reduction Order was issued because of Owner's alleged failure to maintain hot water in petitioners' unit. The confounding effect of the October 2 determination is illustrated by DHCR's November 18, 2014, Order Denying Owner's Application To Restore Rent, on the ground that the hot-water violation subject of that August 22 Order, contrary to the architect's statement, had not yet been remediated. (Reply, Exh 12.) Remittance is proper in this case in light of the agency's reliance on the architect's conclusory letter, not in affirmation or affidavit format, which does not demonstrate the basis for DHCR's conclusion that the hot-water violations were remediated as of the October 1, 2014, effective date. (See Montauk Imp., Inc. v Proccacino, 41 NY2d 913, 914 [1977].)

Accordingly, it is hereby ORDERED and ADJUDGED, that the petition is granted only to the extent that the instant proceeding is remitted to the agency to reconsider the evidence pertaining to the HPD hot-water violations and the effective date for the MCI rent increase, in accordance with this opinion.

The Clerk of the Court is directed to enter judgment as written.

This constitutes the decision and order of the court.