March 2025 Insights
By Eileen O’Toole, Esq., Contributing Editor
Several appellate court decisions were issued recently that again considered the question of how “on-time” rent discounts affect the legal regulated rent under rent stabilization. Typically, in such cases, tenants have complained of rent overcharges where they signed a lease with a landlord that listed a legal regulated rent along with a lower preferential rent that was contingent upon a tenant’s timely payment of monthly rent. The “discounted” rent would apply if the on-time rent payments were made but, if the tenant made a late monthly payment, the preferential rent could be discontinued and the higher legal regulated rent would take effect.
The DHCR has ruled repeatedly that, where challenged, the result of this practice is a reduction of the legal regulated rent to the discounted rent applicable under the on-time lease provision. In each of the cases reported this month, the Second Department upheld lower court rulings in Article 78 proceedings brought by landlords that unsuccessfully challenged DHCR decisions. See Jamaica Seven, LLC v. DHCR (LVT #33593); Kings Park 148, LLC v. DHCR (LVT #33595); and 166 St. LLC v. DHCR (LVT #33604).
Another recurring theme under rent stabilization was addressed recently by the First Department appeals court in 305 Riverside Corp. v. DHCR (LVT #33606). A landlord had filed timely high-rent/high-income deregulation applications in connection with one apartment in 2017 and 2018. Despite statutory requirements to decide such applications within 60 days, the DHCR had issued no decisions as of June 14, 2019, when the HSTPA abolished so called luxury deregulation of rent-regulated apartments. The DHCR then dismissed the landlord’s applications because deregulation was no longer an available option under the law. The DHCR’s decisions, like many other similar rulings, were challenged by the landlord in an Article 78 proceeding that claimed the agency rulings were arbitrary and unreasonable.
The court’s response was unusual in that it criticized the DHCR for its delays (see LVT #32575) and sent the landlord’s case back to the agency for rulings on the merits of its luxury deregulation applications. The DHCR appealed rather than reconsider its decision, and won before the Appellate Division. The court held that the DHCR rationally concluded that the HSTPA stripped the agency of its authority to issue deregulation orders and that there was no proof that the DHCR’s “significant delay” was caused by the agency’s negligence or willfulness.
In an unusual case, Kamal v. DHCR (LVT #33604), the Manhattan Supreme Court dismissed tenants’ lawsuit against the DHCR for allegedly violating their rights by “negligently allowing” a landlord to fraudulently amend DHCR rent registrations. While indicating that it saw no grounds for the tenants’ claim, the court pointed out that only New York’s Court of Claims can consider a claim made against a state agency for money damages.
Finally, in a case perhaps warranting a “#check-your-math” hashtag, the First Department noted that a lower court had mistakenly awarded a tenant quadruple, rather than the statutory maximum of triple, damages for willful rent overcharge. See Ruggerino v. Prince Holdings 2012, LLC (LVT #33608).