Improperly Deregulated Tenant in J-51 Building Can Raise Rent Fraud Claim

Tenant in a rent-stabilized building that received J-51 tax benefits until 2013 sued landlord, claiming rent overcharge and improper deregulation. Landlord gave tenant an unregulated lease when tenant moved into the building in 2010 and several unregulated renewal leases. Tenant claimed that landlord engaged in a fraudulent scheme to deregulate his apartment. Landlord asked the court to dismiss the case.

The court ruled against landlord, and agreed that tenant made a colorable claim of fraud, thereby permitting review of rent history going back more than four years.

Landlord appealed and lost. The appeals court found that there was sufficient indicia of fraud by landlord to illegally deregulate 32 apartments in the building despite receiving J-51 benefits. Landlord treated tenant's apartment as deregulated after court rulings in Roberts v. Tishman Speyer Props. LP and Gersten v. 56 7th Ave. LLC barred deregulation while receiving J-51 benefits, were decided, and continued not to register tenant's apartment with the DHCR. 

Montera v. KMR Amsterdam LLC: App. No. 12046, Case No. 2019-5143, 2021 NY Slip Op 00805, NYLJ No. 1612958444 (App. Div. 1 Dept.; 2/9/21; Singh, PJ, Kennedy, Mendez, Gische [dissenting], JJ)