July 2024 Insights
By Eileen O’Toole, Esq., Contributing Editor
New York’s highest court recently issued two decisions concerning landlord-tenant issues. In Liggett v. Lew Realty LLC (LVT #33305), the Court of Appeals reversed an appellate ruling and held that a prior tenant’s waiver of the right to file a fair market rent appeal challenging an apartment’s initial rent-stabilized rent was void as against public policy.
In Matter of Elizabeth St. Garden, Inc. v. City of New York (LVT #33292), the Court of Appeals upheld NYC’s approval of an affordable housing development at a community garden site that had been opposed by petitioners who claimed that the city hadn’t conducted a sufficient environmental impact review of the proposed project.
A number of recent court decisions involve the question of whether rent fraud contributed to improper apartment deregulation and apply, or at least discuss, the most recent changes to the Rent Stabilization Law’s provisions concerning the applicable standard of review.
In St. Nicholas 24 LLC v. Chavez-Lujan (LVT #33283), the Appellate Term, First Department upheld a trial court’s award to the tenant of $195,000 in rent overcharges based on the owner’s fraudulent scheme to deregulate an apartment. The owner’s claim that the tenant failed to prove all the elements of fraud wasn’t raised before the trial court and therefore wasn’t considered by the appeals court. The appeals court also found that it need not consider whether the December 2024 amendments to the Rent Stabilization Law (RSL), which stated that there need not be a finding that all of the elements of common law fraud were satisfied before determining whether there had been a fraudulent scheme to deregulate a unit, applied in this case.
In Buffo v. 208-10 East 7th LLC (LVT #33297), a Manhattan Court found insufficient grounds for a tenant’s fraudulent deregulation claim under either pre-HSTPA law or the RSL as amended in 2023. The tenant’s 2023 lawsuit, where the tenant questioned individual apartment improvements (IAIs) made more than 20 years previously, was based on the apartment’s 2001 vacancy deregulation. While noting that, since the relevant allegations in the case all occurred before June 14, 2019, pre-HSTPA law applied, the court also found that the tenant’s claim was insufficient under the new, more lenient rent fraud standard that became law in December 2023.
In 309E75 Stone LLC v. Ramos (LVT #33290), a Manhattan Housing Court granted a tenant’s motion for pre-trial discovery where the tenant claimed that the owner had engaged in a fraudulent scheme to deregulate the apartment. Given multiple rent registration inconsistencies, overlapping tenancies, and re-registrations of the apartment, the court found that, under the “totality of the circumstances” standard found in December 2023 amendments to the RSL, the tenant had shown sufficient facts to raise a colorable claim of fraud. The court also cited the amended law’s provision that that, “nothing in this act, or the HSTPA, or prior law, shall be construed as restricting, impeding or diminishing the use of records of any age or type going back to any date that may be relevant, for purposes of determining the status of any apartment under the rent stabilization law.”
Two additional Housing Court decisions discussed at length the recent RSL rent fraud amendments and came to opposite conclusions as to whether indications of rent fraud warranted pre-trial discovery. In 41-47 Nick LLC v. Odumosu (LVT #33303), the court found no indicia of fraud that would permit questions concerning the apartment’s rent history back to 1993 that a rent-stabilized tenant first raised in 2022. The tenant had lived in the apartment since 1997 and based his fraud claim on DHCR registration records and other publicly available records. The court noted that, whether it adhered to the heightened “common law” fraud standard for pleading and proving fraud purportedly espoused in the 2020 Court of Appeals Regina decision, or whether it considered the “totality of the circumstances” applied in recent RSL amendments when determining whether tenant had raised a colorable claim of fraud, the court found that in this case, the tenant hadn’t raised a colorable claim of a fraudulent strategy to remove his apartment from RSL protections. And the tenant’s apartment rent had never been close to any deregulation threshold at the time when vacancy deregulation was permitted under the RSL.
In contrast, in 1532-1609 Ocean Ave LLC v. Herizan (LVT #33304), the Housing Court found that the tenant had properly raised a colorable claim of a fraudulent scheme to deregulate the apartment where she showed that the owner had failed to file registrations consistent with the lease in effect at the time of the registration, failed to accurately reflect when the apartment was deregulated, and, by failing to provide a prior tenant with a lease rider explaining the first rent after deregulation and by charging that tenant a rent that was half the amount of the claimed legal regulated rent, had discouraged any challenge to the unit’s deregulation. The complaining tenant also had submitted a credible, detailed statement that disputed a contractor’s claim as to the scope of IAI work.