The District of Columbia government has ordered the managers of a 392-unit apartment building in the Meridian Hill neighborhood of 16th Street NW to pay tenants more than $1 million to compensate them for being charged illegally high rents in the past.

D.C. Rent Administrator Dorothy J. Kennison ruled that Hagner Management Co. must pay $1,075,855 to tenants of the Dorchester House because the firm violated the city's rent control law by including the cost of air conditioning in the tenants' "base rent" -- a technical term for an amount that under D.C. law can contain only certain costs.

Kennison said the refund was one of the largest ever mandated by the city. It represents triple the actual overcharge, plus more than $15,000 in interest charges.

Richard Luchs, Hagner Management's attorney, said the firm would appeal the ruling to the D.C. Rental Accommodations Commission, which has twice declined to hear the case and instead sent it to Kennison for a final decision. If the commission once again declines to hear the matter, the firm's only recourse would be to file an appeal in D.C. Superior Court.

Thomas Word, the examiner who heard testimony on which Kennison based her decision, said he found that Hagner's violations of the rent control law went back to 1973, when air conditioning costs were illegally included in the "base rent" of Dorchester House tenants. The base figure was subsequently used to compute a series of rent increases. Word said he found all the subsequent increases to be illegal, since they were founded on an illegal base rent.

Word said, however, that the damages were assessed only back to 1976, because of a statute of limitations on such actions.

In addition, he said, Hagner is ordered to roll back rents at Dorchester House, located at 2480 16th St. NW, to their levels before the illegal rent increases were applied. This means, he said, that current rents that range from $400 to $500 for each apartment must be rolled back to an average of about $250.

The case was initiated two years ago when tenants of the building filed a series of petitions against Hagner Management, alleging that the firm overcharged tenants and harassed guests and that there were housing code violations at the building.

Mayor Marion Barry once told the tenants, "I commend you for hanging in, not giving up, not being pushed out.... Don't get discouraged if everyone is not involved because great movements are started by a few people."

However, Kennison and her staff said that all the charges were unfounded except the allegation concerning the rent overcharges. In July 1980, Kennison ruled that Hagner had overcharged the tenants for the air conditioning.

Hagner appealed, but last October the Rental Accommodations Commission declined to hear the matter and sent it back to Kennison, who issued a slightly amended order last Feb. 25.

Once again, the commission declined to hear an appeal. And yesterday, Kennison issued a third and final ruling in the case.

Throughout the dispute, there was a side issue: The tenants charged that the management firm was trying to force them out in order to convert the building into condominiums. Tenant leaders have said they intend to try to buy the building.

Dorchester House was described by columnist Drew Pearson in 1942 as "Washington's newest and most swank apartment house." The nine-story building, still a prestigious address, commands from one of the highest points in the District sweeping views of the city.