Legal Rent Limited to Lower Rent Offered by Receiver

After an action was commenced to foreclose on landlord's building mortgage, a temporary receiver was appointed in 2010 to manage the building and collect rent from tenants. In 2012, the receiver signed a one-year vacancy lease with new tenant to rent a rent-stabilized apartment in the building at $1,000 per month. In 2013 and 2014, landlord offered tenant renewal leases at $1,600 per month, based on prior legal rent of $1,834. Tenant refused to sign these renewal leases and complained to the DHCR that landlord offered improper renewal leases. Landlord answered that the receiver made a mistake in 2012 because the rent offered then was a preferential rent.

The DHCR ruled for tenant. Since tenant's vacancy lease didn't state that the rent charged was preferential, it became the legal regulated base rent for determining future rent increases. Landlord filed an Article 78 court appeal, claiming that the DHCR's decision was unreasonable. The court ruled for landlord and annulled the DHCR's decision.

The DHCR appealed and won. Tenant's vacancy lease didn't indicate that the monthly $1,000 rent was a preferential rent or set forth another legal regulated rent amount. Landlord therefore was required to base renewal leases offered to tenant on $1,000 as the base rent. Rent Stabilization Code Section 2522.5(g)(1) required landlord to set forth both the legal regulated rent and preferential rent in a vacancy lease. And Rent Stabilization Law Section 26-511(c)(14) requires that renewal lease rent increases be based on previously established legal rents. It didn't matter that the receiver signed tenant's vacancy lease and made an error.

Rania Mesiskili, LLC v. DHCR: 166 A.D.3d 625, 2018 NY Slip Op 07435 (App. Div. 2 Dept.; 11/7/18; Balkin, JP, Sgroi, Miller, Connolly, JJ)