Legal Rent Reduced Based on Improper Conditional Rent Concession Clause

Rent-stabilized tenant complained of rent overcharge. The DRA ruled for tenant and ordered landlord to refund $12,220, including interest and triple damages. The DRA found that landlord offered tenant a temporary conditional rent concession provided tenant's monthly rent payment was received on time. If the rent was paid late, the lease required tenant to pay well more than 5 percent of the rent as a late fee. The DRA found that the conditional rent concession violated the Rent Stabilization Law, Rent Stabilization Code, public policy, and DHCR Fact Sheet 40. The DRA then ruled that the discounted rent became the legal regulated rent on the base date.

Landlord appealed and lost. Landlord argued that the DHCR had no authority to reset the legal regulated rent to the discounted rent. But DHCR Fact Sheet #40 states the DHCR's policy. Landlords can only demand a late fee of up to 5 percent of the rent, preferential rents cannot be terminated during a lease term, and landlords can't enforce a lease clause that permits landlords to end a preferential or discounted rent if tenant fails to pay that rent by a certain day of the month. The Fact Sheet also states that tenants can challenge the collection of higher rents in violation of DHCR policy. The DHCR also noted that courts had upheld the DHCR's interpretation of the illegal lease clause and the use of the discounted rent as the legal regulated rent. In Kings Park 8809 LLC v. DHCR, a Queens Court upheld the DHCR's invalidation of the on-time discount in the lease and the setting of the base date rent as the discounted rent charged on the base date.

Bandil Farms Inc.: DHCR Adm. Rev. Docket No. GM610034RO (3/4/19) [3-pg. doc.]