DHCR Must Recalculate Rent Hike for Rent-Controlled Tenant

Facts: In 1993, landlord accused rent-controlled tenant of illegally subletting her apartment. Landlord and tenant signed an agreement. In return for $10,000 and six months' free rent, tenant agreed to move out. Tenant didn't move out when agreed. Landlord and tenant signed a new agreement by which tenant kept the $10,000, remained in the apartment as decontrolled, and paid $600 per month subject to a 10 percent rent increase every year. In 1999, when tenant was paying $726 per month, she filed a rent overcharge complaint, claiming that she signed the agreement under pressure from landlord and without an attorney. Landlord claimed that the agreement was valid and tenant was no longer rent controlled. The DHCR ruled for tenant, finding that the apartment was rent controlled. The DHCR gave landlord an increase in the maximum rent, from $155 to $371, to make up for landlord's not applying for MBR increases while the agreement was in effect. Landlord appealed.

Court: Landlord wins, in part. The apartment is rent controlled. Tenant can't waive the benefit of the law and didn't have an attorney when she signed the agreement. But tenant can't keep the $10,000. The DHCR should recalculate tenant's rent based on unique and peculiar circumstances so landlord recovers the $10,000 over time through a monthly rent increase. The case was sent back to the DHCR for recalculation.

Paniciolli v. DHCR: NYLJ, 4/4/07, p. 24, col. 3 (Sup. Ct. Kings; Lewis, J)