Landlord Claimed It Misunderstood J-51 Law

Facts: Landlord rented tenant an apartment at free market rent in early 1989. Landlord claimed that the building's ``J-51'' tax benefits expired in June 1989, a few months after tenant moved in, and so the apartment was no longer subject to rent stabilization. Tenant complained of a rent overcharge. Landlord then claimed it thought the J-51 benefits had expired in June 1988, before tenant moved in. The DHCR ruled for tenant, finding that there was a rent overcharge. The DHCR found that the overcharge wasn't willful based on landlord's claim that it misunderstood the J-51 law. Tenant appealed and lost, and appealed again. Court: Tenant wins. The appeals court found that the DHCR's ruling on the issue of a willful rent overcharge was unreasonable. Landlord only changed its position, stating that it thought the J-51 benefits expired in June 1988, when it learned that if the benefits expired in 1989, tenant would have remained rent stabilized. Also, landlord's claim that it first learned of the 1989 J-51 expiration in 1995 wasn't believable. Landlord also didn't refund the entire overcharge to tenant after it answered tenant's complaint.

Hargrove v. DHCR: NYLJ, p. 26, col. 3 (11/24/97) (App. Div. 1 Dept.; Murphy, PJ, Milonas, Ellerin, Rubin, Tom, JJ)