Apartment Improperly Deregulated Based on Landlord's Fraud

Tenant sued landlord for rent overcharge and improper deregulation of a rent-stabilized apartment. Landlord asked the court to dismiss the complaint because the first claimed overcharge occurred more than four years before tenant complained, while tenant sought a finding of rent overcharge without trial that included triple damages. The court ruled against landlord and ruled for tenant in part, although it denied triple damages because any willful overcharge occurred more than two years before the complaint was filed.

Landlord appealed and lost. The appeals court found that the lower court properly looked back more than four years to establish the proper base rent because there was sufficient indicia of fraud.  Neither an increase in rent alone nor tenant's skepticism about individual apartment improvements (IAIs) was enough to look back more than four years. But in this case landlord increased the prior rent of $949 to tenant's initial rent of $1,600, stopped filing annual apartment registrations between 2007 and 2012, and included a deregulation rider for first unregulated rent with tenant's initial lease. This rider left blank spaces that would have indicated either that the last legal regulated rent or the new legal rent was more than the $2,000 deregulation threshold. This appeared to be an attempt to hide the apartment's regulatory status while the rent hadn't reached the $2,000 deregulation threshold. 

Butterworth v. 281 St. Nicholas Partners, LLC: 160 A.D.3d 434, 2018 NY Slip Op 02395 (App. Div. 1 Dept.; 4/5/18; Acosta, PJ, Tom, Oing, Moulton, JJ)