Buyer at Foreclosure Not Liable for Past Overcharges

Landlord sued to evict tenant for nonpayment of rent. In defense, tenant claimed a rent overcharge. The court ruled for tenant and awarded her $54,000, which included triple damages for willful overcharge. The only available DHCR records submitted at the trial showed the apartment was registered in 1984 at a monthly rent of $101. Tenant moved into the apartment in 1993 at a monthly rent of $750. Although landlord had bought the building at a foreclosure sale in 1996, the court found landlord was responsible for the overcharge because he was long familiar with the building and the building's managing agent. Landlord appealed and won. The rent stabilization code makes an exception for overcharge liability for judicial sale purchasers ''in the absence of collusion or any relationship'' between the buyer and the prior landlord. This means the sale must have been made in good faith. The phrase ''any relationship'' in the code wasn't meant to mean that if there was a mortgagor-mortgagee relationship, new landlord was responsible for the rent overcharge. Landlord's appointment of one of the prior landlords as the building's managing agent also didn't prove there was collusion between them. New landlord showed there was, in fact, an adversarial relationship between prior landlords and her husband during the foreclosure cases.

Ouziel v. Brito: NYLJ, p. 30, col. 5 (3/11/98) (App. T. 2 Dept.; Kassoff, PJ, Aronin, Chetta, JJ)