DHCR Finds Fraud in Landlord's Deregulation of Apartment Rent

Tenant complained of rent overcharge. Landlord argued that the apartment was vacancy deregulated as of the base rent date four years before tenant filed her complaint. The DRA ruled for tenant, found that tenant was rent stabilized, found that there was fraud by the landlord, and ordered landlord to refund $45,000, including triple damages and interest.

Landlord appealed and lost. To apply the Grimm decision concerning fraud, there must be a violation of the Rent Stabilization Law other than a bump in the rent. The lease history must vary from the registration history, and there must be a fraudulent scheme to deregulate the apartment. In this case, landlord registered the apartment as exempt on April 1, 2010, due to high-rent vacancy, claiming that the prior legal rent was $1,550 although the 2009 registered rent was $1,433, not $1,550. And tenant at that time received a rent-stabilized lease stating that the rent was $1,720 per month. These two discrepancies between the lease history and the registration history were enough to satisfy the first two factors required under Grimm to indicate fraud.

The combined circumstances of the rent history also showed a fraudulent scheme. There were overlapping leases for different tenants with short tenancies. The DRA also had asked landlord to submit Con Ed and National Grid records for the periods in question to show who lived in the apartment. Landlord incorrectly claimed that it could not obtain these utility records. Since the leases, including the base date lease, were unreliable, there was no reliable base date information in the record, and the DRA properly used the default method to set the rent.

Vargas: DHCR Adm. Rev. Docket No. EW210065RO (10/18/17) [5-pg. doc.]