Landlord, Tenant LLC, and LLC Member All Responsible for Overcharge Refund to Subtenant

Subtenant complained of illusory prime tenancy and rent overcharge by tenant. Tenant had rented more than one apartment from landlord since 1995. The DRA ruled for subtenant and found an overcharge totaling $201,593. The DRA ordered landlord to give subtenant a vacancy lease. And the DRA ruled that tenant, an LLC, as well as an individual who was a member of the LLC were jointly and severally liable for refund of the overcharge. There was no proof that landlord had collected more than the legal rent from tenant. Tenant appealed, the case was sent back to the DRA, and the DRA ruled that only the tenant LLC entity was responsible for the overcharge.

Subtenant then appealed, the case was again sent back to the DRA, and the individual LLC member was added back as a party responsible for the overcharge refund. The DRA also ruled that landlord and the prime tenant were jointly and severally responsible for the overcharge refund. The DRA found that it wasn't necessary to prove collusion or profit by landlord to find landlord responsible. The overcharge was increased to $263,942, including triple damages and interest.

Landlord then filed an Article 78 court appeal of the DHCR's decision. The appeals court found landlord, tenant, and the tenant LLC's individual member all responsible for the overcharge. But the court found that the DHCR incorrectly applied a default formula to calculate the rent overcharge. The case was sent back to the DHCR, which recalculated the total overcharge to be $196,163.

333 East 49th Partnership, LP et al.: DHCR Adm. Rev. Docket No. GW410004RP (2/28/19) [5-pg. doc.]