Court Reopens Case Where 421-a Tenants Claim Improper Preferential Rents

Tenants of a 421-a building sued landlord for rent overcharge and sought injunctive relief. They claimed that landlord violated the Rent Stabilization Law and Code in 2014 when initial legal regulated rents were charged and registered with the DHCR. A landlord cannot register a lower, preferential, rent as an initial legal rent in a 421-a building. But tenants claimed that landlord fraudulently used rent concessions to create "net effective" rents that were lower than the rents registered as the initial legal regulated rents.

The court granted landlord's request to dismiss tenants' complaint in 2021, relying on DHCR Fact Sheet #40 that differentiated preferential rents from rent concessions for specific months. Rent concesssions offered for limited months were not considered by the DHCR to be preferential rents.

Following the court's decision, an appeals court ruled on the same issue in two similar cases that tenants pointed out in a motion to renew consideration of the issue. In one case involving the same issue, a court denied a landlord's request to dismiss tenants' claims without discovery. In another case, an appeals court found that a landlord had presented a justifiable reason for a rent concession. 

The court ruled for tenants since one of the cited cases reflected a change in, or clarification of, the law that warranted reexamination of tenants' arguments regarding the use of rent concessions as a means to avoid registering a lower preferential rent. The court vacated its prior 2021 decision. 

Marantz v. MD CBD 180 Franklin LLC: Index No. 521055/2020, 2023 NY Slip Op 30141(U)(Sup. Ct. Kings; 1/12/23; Joseph, J)