Landlord Challenges Application of Default Formula to Rent Overcharge Claims

Tenants lived in a building that was subject to HUD oversight until April 12, 2011, when the building became subject to the Rent Stabilization Law. Under landlord’s Use Agreement with HUD, tenants who had been found ineligible for HUD subsidies paid a higher “market” rent. In March 2001, these tenants were permitted to undergo a recertification process to qualify for the lower “contract” rent under the Use Agreement. In 2016, tenants sued landlord, claiming that landlord tampered with the recertification process, and pressured and misled tenants for the purpose of improperly raising rents to “market” rates. Tenants argued that, because their HUD rents in effect on April 12, 2011, were illegal, they shouldn’t have been used as the initial legal regulated rents.

In 2019, landlord asked the court to rule that the rent overcharge fraud exception to the four-year lookback rule, along with the Rent Stabilization Code’s default formula, shouldn't apply in this case because landlord hadn’t engaged in a fraudulent scheme to deregulate tenants’ apartments.

The court and appeals court ruled against landlord. The appeals court agreed with landlord that the law as it existed before enactment of the HSTPA effective June 14, 2019, applied to this case. But tenants had raised a triable issue of fact as to whether the landlord engaged in a fraudulent scheme. In April 2023, landlord asked the court for permission to renew its argument based on the 2023 Court of Appeals decision in Casey v. Whitehouse Estates. The court denied landlord's request to renew.

Landlord appealed and won. The appeals court noted that the lower court that first heard the case could entertain a motion for leave to renew based on an alleged change in or clarification of the law “even after an appellate court had rendered a decision” on the prior order.

435 Central Park West Tenant Ass’n v. Park Front Apts, LLC: Index No. 452296/16, App. No. 3198, Case No. 2024-01894, 2025 NY Slip Op 0157 (App. Div. 1 Dept.; 2/27/25; Manzanet-Daniels, JP Singh, Gesmer, Rodriguez, Michael, JJ)