Landlord's Request to Dismiss Tenants' Fraudulent Deregulation Claim Was Premature

Tenants sued landlord, claiming that prior landlord had deregulated their apartments in 2007 and 2008 based on alleged individual apartment improvements (IAIs) that were never performed. Landlord asked the court to dismiss the case before filing an answer. The court ruled against landlord, who appealed and lost. The appeals court found that the complaint alleged sufficient indicia of a prior landlord's fraudulent deregulation scheme. If proven, these claims, which are presumed true at the pleading stage, would establish that the landlord was engaged in a fraudulent scheme to deregulate. The tenants' allegations also supported their claim that their rents were improperly increased based on false IAI representations. Landlord claimed that it didn't have carryover liability for any fraud committed by prior landlord because it performed due diligence when it bought the building in 2022 and reasonably relied on DHCR records. The court found that landlord's dismissal request depended on facts that do not warrant dismissal of tenants' complaint in response to a pre-answer motion to dismiss. 

Barros v. Bokonos, LLC: Index No. 160560/22, App. No. 3205, Case No. 2024-01573 (App. Div. 1 Dept.; 12/10/24; Manzanet-Daniels, JP, Singh, Gesmer, Rodriguez, Michael, JJ)