Landlord Didn't Reregulate Deregulated J-51 Apartment Post-Roberts

Tenant complained of improper apartment deregulation and rent overcharge. Tenant moved into the apartment in 2012 at an initial rent of $2,100 per month. The building was subject to a J-51 tax benefit from July 1, 2003, to June 30, 2017. Landlord pointed out that the DHCR had issued a deregulation order for the apartment in 2006, before the building received the J-51 benefits.

The DRA ruled for tenant and ordered landlord to refund $38,800, including triple damages and interest. The DRA also ruled that, since landlord didn't give tenant J-51 lease riders notifying tenant when the building's J-51 status would end, tenant remained rent stabilized after the J-51 benefits expired.

Landlord appealed and lost. Landlord argued there was no overcharge because the apartment had been lawfully deregulated by the DHCR in 2006, while the building was under J-51. Landlord also claimed there was no willful overcharge.

The DHCR ruled against landlord. Although the apartment was legally deregulated in 1999, it was reregulated upon receipt of the J-51 benefits, and tenant didn't receive the required notices that the unit would become subject to deregulation upon the expiration of the tax benefits. So the apartment correctly remained regulated until tenant moved out. The DRA also accurately determined that landlord didn't register the apartment and increased the tenant's rent above the allowable guideline increases.

Landlord also objected to the assessment of triple damages. But a landlord's incorrect assumptions regarding the regulatory status of an apartment may amount to "willful ignorance." In 2016, the DHCR notified landlord that buildings and units receiving a J-51 tax benefit must be registered as rent regulated. And, after the 2009 Roberts decision affirmed that deregulation couldn't take place while a building received J-51 tax benefits, landlord didn't have carte blanche to willfully disregard the law by failing to reregister improperly deregulated apartments and misrepresenting their regulatory status. The DHCR also denied tenant's PAR of the DRA's decision [see LVT #31803]. [Download PDF]

308 West 49 LLC/Klein/Pazmino: DHCR Adm. Rev. Docket Nos. JP410059RT, JQ410004RO (12/29/21)[8-pg. document]