DHCR Can't Add Guideline Rent Increases After Setting Rent Using Default Method

Tenant complained of rent overcharge. The DHCR ruled for tenant but found no willful overcharge and granted landlord Rent Guidelines Board increases in calculating the rent during the period of overcharge. The DHCR also applied the default method to determine tenant’s base date rent and denied landlord’s claim that tenant waited too long to claim rent overcharge.

Landlord appealed and lost. The court upheld the DHCR’s finding that the inclusion of a fraudulent nonprimary residence rider in tenant’s initial lease was a legal nullity and required that the base date rent, for purposes of calculating a rent overcharge, be set by using the default method.

Landlord appealed and won in part. The appeals court found that the court correctly upheld use of the default method and correctly denied triple damages. Landlord, who bought the building 12 years after tenant moved in, couldn’t reasonably be deemed to have been aware of the overcharge. But the appeals court found that the DHCR improperly added rent increases to the base date rent after using the default method. The DHCR didn’t have the discretion to do this. Rent Stabilization Code Section 2528.4 provides that a landlord who filed an improper rent registration is barred from collecting rent in excess of the base date rent and is retroactively relieved of that penalty upon filing a proper registration only when “increases in the legal regulated rent were lawful except for the failure to file a timely registration.” The case was sent back to the DHCR for further calculation of the rent overcharge.

215 W 88th Street Holdings LLC v. DHCR: 2016 N.Y. Slip Op 07096, 2016 WL 6271042 (App. Div. 1 Dept.; 10/27/16; Friedman, JP, Andrias, Moskowitz, Gische, Gesmer, JJ)