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09/02/93 SONNA KATES v. DISTRICT COLUMBIA RENTAL

September 2, 1993

SONNA KATES, ET AL, PETITIONERS
v.
DISTRICT OF COLUMBIA RENTAL HOUSING COMMISSION, RESPONDENT; UNITED PROPERTY OWNERS, PETITIONER V. DISTRICT OF COLUMBIA RENTAL HOUSING COMMISSION, RESPONDENT



Petitions for Review of a Decision and Order of the District of Columbia Rental Housing Commission

Before Terry and Sullivan, Associate Judges, and Mack, Senior Judge.

The opinion of the court was delivered by: Sullivan

SULLIVAN, Associate Judge : In these consolidated appeals, a property owner ("the landlord") and two tenants in possession of the premises in question ("the tenants") seek review of the Decision and Order of the District of Columbia Rental Housing Commission ("the Commission") which approved the landlord's hardship petition pursuant to D.C. Code § 45-2522 (1990) and increased the tenants' rent by 107 percent. The landlord contends that the Commission erred by affirming the Decision and Order dated April 7, 1989, of a Rental Accommodations and Conversion Division ("RACD") hearing examiner ("the examiner") which precluded consideration of the prior property owner's equity in the property in determining the landlord's rate of return on its investment. The tenants contend that the Commission erred by affirming the examiner's order because the Commission (1) failed to include an adjustment to the landlord's maximum possible rental income ("MPRI") *fn1 for the year 1985; (2) allowed credit for certain alleged unsubstantiated utility expenses and penalties; and (3) allowed a vacancy loss deduction from the MPRI for a rental unit ("unit #1") which was undergoing renovation and which had not been offered for rent during the relevant reporting period for the landlord's rent increase petition. We agree with the tenants' first and third contentions and, accordingly, reverse the Commission's order authorizing a rent increase and remand the case for further proceedings. As to the parties' remaining contentions, we affirm.

I.

In January 1988, the landlord purchased the subject property, a five-unit, rent-controlled apartment building, for the total consideration of $225,000. To finance the purchase, a mortgage in the amount of $100,000 was placed against the property. On June 13, 1988, the landlord filed a hardship petition ("the petition") with RACD and sought a 244 percent increase in the tenants' rents, contending that it was not receiving a twelve percent rate of return on its equity in the rental property. A hearing was held before the examiner, who ordered an increase in the rent ceiling not to exceed 48.38 percent.

The examiner ruled that the landlord could not use the former property owner's equity for purposes of determining the landlord's rate of return. In support of his ruling, the examiner reasoned that:

With respect to the treatment of equity, . . . the "plain meaning" of equity or the treatment of equity in § 45-2522 (b)(2) is controlling. Here, the drafters of the legislation, as well as the Rental Housing Commission . . . in promulgating the regulations in 14 D.C.M.R. 4209.6 intended the equity to be used in determining the rate of return be that of the housing provider. A housing provider as defined means a landlord, an owner . . . or any other person receiving or entitled to receive rents or benefits for the use or occupancy of any rental unit within a housing accommodation with the District of Columbia, see D.C. Code . . . § 45-2503 (15). Given this definition, a former owner[']s equity is clearly precluded in determining the rate of return for this housing accommodation.

The examiner also found that the landlord was entitled to a "vacancy loss" *fn2 in the amount of $2,748 to be deducted from the MPRI, notwithstanding his finding that:

Based on the fact that #1 was being renovated in January and February 1988 . . . one could reasonably assume, based on the nature of the renovation and cost, the unit was not habitable, thus not offered for rent.

(Emphasis added).

In its notice of appeal to the Commission, the landlord challenged the adverse equity ruling as well as four additional rulings of the examiner, relating to: the maximum rental income calculation; certain utility expenses claimed by the landlord but not credited by the examiner; mortgage interest claimed by the landlord but not credited by the examiner; and the examiner's ruling that the landlord had not met its burden of proof regarding expenses claimed for trash removal. The tenants' notice of appeal to the Commission challenged only the vacancy loss ruling. Specifically, the tenants' notice stated that "the tenants are submitting this appeal only with respect to the 'Vacancy Losses' section in the Order. . . . Everything else in the Order of the RACD appears to be correct."

II.

Generally, when an agency interprets its own regulations or the statute which it administers, this court will defer to that interpretation as long as it is not inconsistent with the applicable statute. See Columbia Realty Venture v. District of Columbia Rental Hous. Comm'n, 590 A.2d 1043, 1046 (D.C. 1991); McCulloch v. District of Columbia Rental Hous. Comm'n, 584 A.2d 1244, 1248 (D.C. 1991); James Parreco & Son v. District of Columbia Rental Hous. ...


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