DHCR Applies Regina Case Four-Year Rule to Set Base Date Rent and Calculate $64K Overcharge

Tenant complained of rent overcharge and fraudulent deregulation in 2017. He moved into the apartment at an unregulated rent of $3,995 in 2009. By the time he filed his complaint his monthly rent was $6,052. Tenant pointed out that the building had received J-51 tax benefits since 1981. Landlord argued that, when the prior tenant moved out in 1995, the DHCR agreed that the apartment became deregulated because the rent exceeded the deregulation threshold then in effect, and the Roberts case hadn't yet been decided by New York's highest court. The DRA ruled for tenant and ordered landlord to refund $64, 390, including interest. The DRA set the four-year base rent at $4,500, the rent actually paid on the base date.

Landlord and tenant both appealed and lost. Landlord argued in its PAR that the DRA should have reconstructed the rent history by looking back more than four years to the actual rents charged before tenant moved in. But the rent reconstruction method proposed by landlord was rejected by the Court of Appeals in 2020 in Regina Metropolitan Co. v. DHCR. Regina called for using the actual rent paid on the four-year base date as the base legal regulated rent. It didn't matter whether landlord had waived a higher claimed legal regulated rent. Landlord also claimed that an on-time rent discount given to tenant in his lease yielded a preferential rent. But appeals courts in the First and Second Departments have upheld DHCR rulings that on-time discount clauses are invalid and don't create preferential rents. The DRA also correctly omitted an MCI rent increase from tenant's rent when calculating the rent overcharge because landlord didn't list tenant's apartment in the MCI application landlord pointed to.

Tenant argued in his PAR that the DRA should have investigated pre-base date rental events and assessed triple damages because landlord committed fraud. This argument also was rejected in Regina. The Court of Appeals noted that rent freezing under Rent Stabilization Law Section 26-517(e) wouldn't apply in Roberts-type cases where there were registration irregularities that stemmed from a misunderstanding of the law. There also was no proof that landlord attempted to deregulate the unit fraudulently independent of its misunderstanding of the law concerning J-51 tax benefits and deregulation.

81st Realty Corp./Yaffa: DHCR Adm. Rev. Docket Nos. JV410048RO, JV410040RT (1/19/22)[4-pg. document]