Agency’s Failure to Follow Its Own Regulations Renders Determination Arbitrary and Capricious

The Second Department, over a partial dissent, in a rent-overcharge proceeding, affirmed Supreme Court’s review of the propriety of rent regulated by the NYC Rent Stabilization Code. The court explained the extent of the courts’ review powers of the administrative rulings, noting that the Deputy Commissioner’s failure to calculate the appropriate rent in the manner dictated by the controlling regulations rendered that particular aspect of the Commissioner’s ruling arbitrary and capricious:

“[I]n a CPLR article 78 proceeding to review a determination of the DHCR [NYC Department of Housing and Community Renewal], the court is limited to . . . the question of whether its determination was arbitrary and capricious and without a rational basis” … . In reviewing a determination of the DHCR, “[t]he court may not substitute its judgment for that of the DHCR” … . “The DHCR’s interpretation of the statutes and regulations it administers, if reasonable, must be upheld” … . * * *

In determining that the [landlord was] entitled to a rental increase of $204.01 per month pursuant to Rent Stabilization Code (9 NYCRR) § 2522.4(a)(1), the Deputy Commissioner deviated from the statutory calculations set forth in Rent Stabilization Code (9 NYCRR) § 2522.4(a)(4). Accordingly, the determination to recalculate the legal regulated rent to be $1,200 per month, by including a rental increase of $204.01 per month, was arbitrary and capricious and did not have a rational basis in the record … . Matter of Velasquez v New York State Div. of Hous. & Community Renewal, 2015 NY Slip Op 06353, 2nd Dept 7-29-15