Court Will Reconsider Whether Rent Concessions for Initial 421-a Tenants Were Improper

Rent-stabilized tenants of landlord's building together sued landlord claiming rent overcharge. Their building was constructed between 2014 and 2016 and was enrolled in the RPTL 421-a tax benefit program. Tenants claimed that landlord fraudulently used rent concessions when the units were initially rented, while registering higher legal regulated rents with the DHCR. Tenants argued that lower, preferential rents resulting from the rent concessions were in fact the initial legal regulated rents. The court ruled against tenants based on DHCR Fact Sheet #40, which differentiated between rent concessions and preferential rents.

Tenants later renewed their argument to the court based on some new appeals court rulings. In one case, an appellate court ruled that tenants had a viable claim of rent overcharge where the landlord used rent concessions when setting that building's initial legal regulated rents. In another appellate case, the court found no fraud in a landlord's use of rent concessions when setting initial rents in a 421-a building. Tenants argued that these decisions showed that, unless a landlord can present a justifiable reason for rent concessions, a tenant's complaint shouldn't simply be dismissed without pretrial fact-finding and a trial. The court agreed and reopened the case. 

Small v. 544 Union De LLC: Index No.502045/2021, 2023 NY Slip Op 30507(U)(Sup. Ct. Kings; 2/10/23; Joseph, J)