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Dorchester House Associates Limited Partnership v. District of Columbia Rental Housing Commission

December 20, 2007

DORCHESTER HOUSE ASSOCIATES LIMITED PARTNERSHIP, PETITIONER,
v.
DISTRICT OF COLUMBIA RENTAL HOUSING COMMISSION, RESPONDENT.



Petition for Review of a Decision of the District of Columbia Rental Housing Commission (CI20-768-04).

The opinion of the court was delivered by: Thompson, Associate Judge

Argued June 7, 2007

Before RUIZ, FISHER and THOMPSON,Associate Judges.

On November 2, 2001, Dorchester House Associates Limited Partnership ("Dorchester") filed a capital improvement petition with the Rent Administrator of the Department of Consumer and Regulatory Affairs ("DCRA"), seeking an increase in the rent ceiling for units in Dorchester House, a rent-controlled apartment building owned by Dorchester and located at 2480 16th Street, N.W. A DCRA administrative law judge ("ALJ") approved the petition, but the District of Columbia Rental Housing Commission (the "RHC" or the "Commission") reversed the ALJ's ruling and denied Dorchester's request for approval of a capital improvement surcharge.*fn1 Dorchester petitioned this court for review of the RHC decision, contending that the decision was inconsistent with the Rental Housing Act insofar as it required a pre-petition inspection of all rental units in Dorchester House -- the basis for a statutory presumption that the building was in substantial compliance with the housing code -- as a condition of approval of Dorchester's capital improvement petition. Dorchester also contends that the RHC decision should not be given effect because it upset Dorchester's expectations based on the Rent Administrator's customary practice in reviewing and approving capital improvement petitions.

We reject Dorchester's argument that the RHC was without authority to require a showing of Dorchester House's presumptive or actual substantial compliance with the housing code as a condition of approval of Dorchester's capital improvement petition.However, we agree with Dorchester that the RHC too narrowly applied the applicable statute and regulation (i.e., by requiring an inspection of the housing accommodation within the 30-day pre-petition period as a condition of petition approval, rather than recognizing that such a pre-petition inspection was an option available to the housing provider, to take advantage of a statutory presumption of housing code compliance in connection with the filing of a petition for a rent ceiling adjustment). We also are persuaded that the RHC's decision upset Dorchester's reasonable expectations based on the Rent Administrator's past practice with respect to what documentation is required in connection with capital improvement petitions. We conclude that this matter must be remanded so that Dorchester will have an opportunity to present evidence bearing on whether Dorchester House is, presumptively or actually, in substantial compliance with the housing code.

Statutory and Regulatory Background

In our opinion in Sawyer Prop. Mgmt. of Md., Inc. v. District of Columbia Rental Hous. Comm'n, 877 A.2d 96 (D.C. 2005), we described as follows the rent-control scheme established by the version ofthe Rental Housing Act (the "Act") in effect during the period in issue here:

A large proportion of rental housing in the District of Columbia is subject to the comprehensive regulatory scheme commonly known as rent control. . . . Briefly put, the goal of this scheme, born of a perceived severe housing shortage in the District, is to ensure that decent, affordable housing is available for the various sectors of the population, while at the same time landlords are allowed a fair rate of return on their investments. . . . Under the rent control laws, the principal protections for tenants are the imposition of a rent ceiling and the prohibition against upward adjustment of that ceiling except on specifically enumerated grounds. . . . The rent ceiling operates as an upper bound on the amount of rent that a housing provider is allowed to charge a tenant. A rent ceiling is established for each rental unit by starting with a "base rent," . . . and adding any "duly authorized" upward adjustments that are permitted from time to time . . . . In order to obtain one of the several upward rent ceiling adjustments authorized by law, a housing provider . . . must either petition for, or report its election to take, the rent ceiling adjustment in a timely and appropriate manner, and it must provide appropriate notification to tenants who may be affected by the adjustment.

Sawyer, 877 A.2d at 103 (internal quotation marks and citations omitted); see also D.C. Code § 42-3501.01 (2001) (legislative findings).

The provisions of the Act that govern the matter before us are set out in the 2001 edition of the D.C. Code (and, unless otherwise indicated, all references in this opinion to the D.C. Code are to the 2001 edition).*fn2 D.C. Code § 42-3502.08, entitled "Increases above base rent," provided in pertinent part that, (a) (1) Notwithstanding any provision of this chapter, the rent for any rental unit shall not be increased above the base rent unless:

(A) The rental unit and the common elements are in substantial compliance with the housing regulations. . . . .

(b) A housing accommodation and each of the rental units in the housing accommodation shall be considered to be in substantial compliance with the housing regulations if:

(1) For purposes of the adjustments made in the rent ceiling in §§ 42-3502.06 and 42-3502.07, all substantial violations cited at the time of the last inspection of the housing accommodation by the Department of Consumer and Regulatory Affairs before the effective date of the increase were abated within a 45-day period following the issuance of the citations or that time granted by the Department of Consumer and Regulatory Affairs, and the Department of Consumer and Regulatory Affairs has certified the abatement, or the housing provider or the tenant has certified the abatement and has presented evidence to substantiate the certification. No certification of abatement shall establish compliance with the housing regulations unless the tenants have been given a 10-day notice and an opportunity to contest the certification; and

(2) For purposes of the filing of petitions for adjustments in the rent ceiling as prescribed in § 42-3502.16, the housing accommodation and each of the rental units in the housing accommodation shall have been inspected at the request of each housing provider by the Department of Consumer and Regulatory Affairs within the 30 days immediately preceding the filing of a petition for adjustment.

D.C. Code § 42-3502.08 (a)(1)(A) and (b)(1)-(2) (2001).*fn3

D.C. Code § 42-3502.10 provided in pertinent part that:

(a) On petition by the housing provider, the Rent Administrator may approve a rent adjustment to cover the cost of capital improvements to a ...


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