Landlord Can't Charge Preferential Rent

Rent-stabilized tenant filed a fair market rent appeal (FMRA) in 2016, stating that she was the first rent-stabilized tenant of the apartment after vacancy decontrol, and that landlord impermissibly charged a preferential rent. Landlord claimed that tenant's FMRA of the initial 2002 rent was untimely, and that there was no overcharge. The DRA ruled in 2018 that a FMRA was untimely since it was filed more than four years after the prior rent-controlled tenant moved out. But the DRA converted the complaint to a rent overcharge claim, found that the rent paid on the August 2012 base date was the legal regulated rent rather than a preferential rent, and the resulting overcharge wasn't willful.

Tenant and landlord both appealed. The DHCR ruled against both landlord and tenant. The DRA correctly determined that tenant's fair market rent appeal was time-barred. It didn't matter whether landlord sent tenant an RR-1 form when she first moved in because any right to file an FMRA expired after four years. Tenant also failed to show any proof of fraud that would make the four-year base date unreliable. Also, the initial rent after rent control exit is the agreed-upon rent by the parties and can't be affected by fraud. And landlord didn't remove the apartment from rent stabilization. The apartment also had been registered every year since it became rent stabilized in 2002. But the DHCR rejected landlord's claim that the DRA's reliance on pre-base date leases and rent records was improper. Under RSC Section 2526.1(a)(2)(viii), the DRA was entitled to review pre-base date rent history to review the existence, terms, or conditions of a preferential rent. Since tenant's 2002 initial rent-stabilized rent was the first rent following rent control, there was no basis in the rent laws to support setting a preferential rent. So the 2002 ILRR was the rent charged by landlord and no initial preferential rent could be established. All overcharges found after the base date resulted from landlord's inability to establish a higher legal regulated rent.

Henshaw/680 Ft. Washington Avenue Realty LLC: DHCR Adm. Rev. Docket Nos. IS410007RK, IS410008RK (12/30/20) [8-pg. doc.]