Landlord Must Refund $132,000 Overcharge Based on Fraudulent Deregulation

(Decision submitted by David Hershey-Webb, Esq. of the Manhattan law firm of Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP, attorneys for the tenant.)

Tenants complained of rent overcharge and claimed that landlord had fraudulently deregulated their apartment. The DRA ruled for tenants and directed landlord to refund $132,175, including interest and triple damages. Landlord appealed, and the DHCR denied its PAR. Landlord then filed an Article 78 court appeal, and the case was sent back to the DHCR for further consideration. Among other things, landlord disputed inspection findings by the DHCR that put landlord's claims for individual apartment improvements (IAIs) into question.

The DHCR again ruled against landlord. There was sufficient proof of a fraudulent scheme in this case. The apartment rent had increased from $430 to $1,300 between 2000 and 2001, landlord had failed to offer tenants a rent-stabilized lease and rider, there were discrepancies between the rent registration history and the leases, and landlord had amended registrations six years after IAIs were supposedly performed between 2000 and 2001. The DHCR gave no weight to a consent form signed by a prior tenant for an IAI rent increase because the document didn't identify a specific monthly rent increase associated with the IAIs. DHCR inspection in 2015 also found that a significant portion of items listed in the consent form weren't done, including kitchen flooring, stove, bathtub, carpeting, vanity, and closet doors. There was no reason to perform another inspection, as requested by landlord. Landlord's claim that additional IAIs were done in 2006 also didn't justify the 2001 rent increase. The DHCR properly applied its default formula in this case by using the lowest rent registered for a comparable apartment in the building in effect on the date the complaining tenants first occupied the apartment. The use of the default formula also results in a freezing of the rent and triple damages.

Bergen Realty & Mgmt. LLC: DHCR Adm. Rev. Docket No. EP210003RP (9/6/17) [11-pg. doc.]