Long-Standing Rent Reduction Order Resulted in $87,000 Overcharge

Tenants complained of rent overcharge in 2017 and claimed that landlord had fraudulently deregulated their apartment in 2004. Although landlord failed to submit proof that the apartment was vacancy-deregulated in 2004, the DRA applied the default method to calculate the base date rent by calculating the average of the registered legal regulated rents for three-room apartments located within the same Zip code as the apartment. Under the default formula, in 2016 when tenants moved in, the legal rent was $4,208. Since this exceeded the high-rent vacancy deregulation threshold, the DRA found the apartment was deregulated in 2004. Tenants then requested reconsideration, and the DRA discovered that a prior rent reduction order was in effect, which froze the apartment rent at $440 per month. The DRA recalculated the legal rent to $2,222 and, as a result of the rent freeze order, directed landlord to refund to tenants $87,000, including interest.

Tenants and landlord both appealed. Tenants claimed miscalculation of the legal rent, fraud, and willful overcharge. The DHCR found no fraud and no willful overcharge. Landlord had refunded the overcharge within the time allotted by DHCR notice. Based on its own calculations, landlord claimed that the legal rent should have been $2,752, not $2,222. The DHCR acknowledged some error in the DRA's calculation and adjusted the legal rent to $2,271.

Giordano/Mathis/722-724 10th Ave LLC: DHCR Adm. Rev. Docket Nos. HS410009RT, HS410011RO (11/30/20) [7-pg. doc.]