Apartment Was Improperly Deregulated Based on Disallowed IAI Costs
LVT Number: #28655
Former tenant sued landlord, claiming rent overcharge and improper apartment deregulation. Tenant also sued individual officers of the owner entity, the managing agent, and one of landlord's employees, claiming that they were personally responsible. Landlord claimed that tenant's apartment was properly vacancy deregulated before tenant moved in, based on the applicable vacancy increase, longevity increase, and an increase for individual apartment improvements (IAIs). Tenant asked the court to rule without trial based on documentary proof.
The court ruled for tenant in part. In 2014, prior tenant's rent-stabilized rent was $534. Tenant's initial rent was $2,571 in 2015. Landlord claimed that it spent $64,000 for IAIs. But part of the IAI cost was based on a portion of claimed electrical wiring upgrades to some of the building's other apartments. But landlord can't simply assign a pro rata share of the total electrical upgrade cost to tenant's apartment, and landlord didn't prove that tenant's apartment was included in the electrical upgrade. The court therefore disallowed the claimed electrical upgrade costs from the IAI costs. When recalculated, the resulting lawful vacancy increase above prior tenant's $534 rent yielded a legal rent of less than $2,500, which was the vacancy deregulation threshold when tenant moved in. Tenant was therefore rent stabilized, although a trial was needed to otherwise determine facts concerning the rest of the claimed IAI costs.
The court denied landlord's request to dismiss claims against three individual corporate officers of the owner entity, since tenant may have grounds to pierce the corporate veil in this case, and individual officers, including Steve Croman, had agreed in a separate criminal proceeding to fund a tenant restitution fund that covered a number of buildings, including tenant's building. The case was dismissed against an individual who was an employee of the landlord.
Haygood v. Prince Holdings 2012, LLC: Index No. 155091/2016, 2018 NY Slip Op 51182(U) (Sup. Ct. NY; 7/30/18; Freed, J)