New Owner Not Responsible for Triple Damages Chargeable to Net Lessee

Tenants sued landlords in 2013  for rent overcharge and improper deregulation of their apartments. The court found that tenants were rent stabilized, that there were overcharges based on fraud, and that triple damages applied for willful overcharge. Tenants had sued both landlord and a 99-year net lessee that took over the building's nine residential units during a condominium conversion in April 2013. In 2014, another landlord bought the entire building, while the net lessee remained in place. The court granted the net lessee's request to join the new landlord to the case. New landlord argued that it shouldn't be responsible for refunding triple damages. New landlord pointed out that, although it now owned the building, it had no control over the residential part of the building, which had been transferred by prior landlord to the net lessee.

The court agreed, finding that new landlord had no input or culpability to the overcharge, and no authority or involvement as to the rent or tenants in residential portion of the building. Triple damages shouldn't be charged to new landlord since its purchase of the building was subject to the agreements between prior landlord and the net lessee. The net lessee essentially had a fee simple interest in the residential part of the building.

Arnold v. 4-6 Bleecker St. LLC: 2019 NY Slip Op 32683(U) (Sup. Ct. NY; 9/5/19; Chan, J)