Landlord Must Refund $198K for Overcharge Resulting from Rent Reduction Order

The DHCR's Tenant Protection Unit (TPU) completed an audit of an apartment's rent and found that the legal registered rent wasn't fully substantiated. The TPU directed landlord to reset the legal rent, refund any rent overcharge, submit an amended annual registration, and provide an amended lease. When landlord failed to comply with TPU's order, TPU filed a rent overcharge complaint with the DRA in 2017.

The DRA ruled for tenant. Landlord was permitted to increase the 2013 base date rent of $1,065 to $4,465 in 2014 based on a vacancy allowance, longevity increase, and costs for individual apartment improvements (IAIs). However, the collectible rent was frozen at $948 based on rent reduction orders issued in 2014. The total overcharge was $198,350, including interest and triple damages. 

Landlord appealed and lost. Landlord argued that imposition of triple damages in this case, where the overcharge resulted solely from a rent reduction order, violated DHCR policy and precedent. But Rent Stabilization Code Section 2526.1(a)(1) presumes overcharges to be willful unless a landlord can rebut the presumption of willfulness. Landlord didn't meet the requirements of DHCR Policy Statement 89-2 to avoid triple damages. The building wasn't purchased out of bankruptcy, landlord at no time adjusted tenant's rent or made any refund, and there was no proof that the overcharge was the result of a hyper-technical issue. In this case, landlord obtained rent restoration orders for the two rent reduction orders in 2017, seven years after New York's highest court ruled in Cintron v. Calogero that a rent reduction order issue before an overcharge lookback period froze the rent. In this case, landlord continued to collect more than the frozen rent after the rent reduction order was issued and after being put on actual notice by TPU of the resulting overcharge. 

475 4th Ave., LLC: DHCR Adm. Rev. Docket No. JX210028RO (2/25/22)[5-pg. document]