Landlord Didn't Know Apartment Was Rent Stabilized Under 421-a

Tenant complained of rent overcharge. She moved into the apartment in March 2009 under an unregulated lease at a monthly rent of $1,100. The building contained fewer than six apartments but was subject to rent stabilization based on prior landlord’s receipt of Real Property Tax Law Section 421-a tax benefits in 2000. New landlord claimed not to know about the 421-a benefits. The DRA applied the four-year rule to tenant’s complaint. Tenant was paying $1,100 per month on Sept. 8, 2010, and never paid more than that amount. Therefore, there was no rent overcharge.

Tenant appealed and lost. Tenant claimed that there was fraud because her initial lease didn’t contain a rent-stabilized rider. But tenant didn’t claim fraud in her complaint before the DRO, so she can’t raise that claim now for the first time. Tenant offered no proof in her complaint that the base date rent of $1,100 was unreliable due to fraud. Tenant also didn’t claim that landlord charged a higher rent than that set forth in HPD’s 421-a eligibility orders. Tenant also didn’t respond to notice of landlord’s answer filed with the DRO.

The DHCR noted that limiting the scope of review in a PAR proceeding promoted administrative efficiency and prevented the manufacturing of evidence after landlord and tenant had a chance to see the initial administrative determination. And, even if the DHCR considered tenant’s fraud claim, the result would be the same. Here, landlord was operating under the mistaken belief that the building was never subject to rent stabilization because it had fewer than six apartments. There also was no substantial increase between prior tenant’s rent and tenant’s initial rent. No tenant ever paid more than $1,150 per month for the apartment in 15 years. Landlord also amended the building’s rent registrations for 2001 - 2014 in July 2014, before tenant filed her overcharge complaint. And the fact that tenant was given an unregulated lease with no DHCR lease rider, by itself, is insufficient to prove fraud, especially where, as here, landlord submitted a full rent history justifying the base date rent and then gave tenant a two-year rent-stabilized lease.

McNeil: DHCR Adm. Rev. Docket No. DV210038RT (2/23/16) [7-pg. doc.]