Fraudulent Scheme to Deregulate Depends on "Totality of the Circumstances"

Landlord sued to evict tenant for nonpayment of rent. Tenant claimed rent overcharge and improper apartment deregulation, and asked the court to grant discovery beyond the four-year lookback period applicable to her rent overcharge claim based on her claim of a fraudulent scheme to deregulate her apartment.

The court ruled for tenant. Landlord didn't attach a copy of tenant's initial 2005 lease to its opposition, and failed to explain how the rent increased from $652 in 2011 to $2,000 following apartment vacancy in 2012. Landlord also didn't explain how tenant's calculation of what the legal rent should have been was incorrect. And while landlord claimed that tenant failed to set forth facts establishing common-law fraud, the court noted that the elements of common-law fraud weren't required to show an indication of fraud for purposes of invalidating the base date in an overcharge claim. Ch. 96 of the 2024 Session Law modified prior law governing the fraud exception under pre-HSTPA law by rejecting footnote 7 of the Regina Metropolitan Court of Appeals decision in 2020. The new law requires a court to review the "totality of the circumstances" to determine whether a landlord knowingly engaged in a fraudulent scheme to deregulate an apartment.

Bo Hong Realty Inc. v. Butler: Index No. LT-311647-23, NYLJ No. 1729806862 (Civ. Ct. NY; 10/15/24; Chinea, J)