No Overcharge Where Landlord Added MCI Increase to Preferential Rent

Rent-stabilized tenant complaint of rent overcharge in 2016. Tenant had lived in the apartment since 1991 and claimed that, at some point, landlord discontinued a preferential rent granted to tenant. Tenant also claimed that landlord improperly added MCI rent hikes to her preferential rent. In response, landlord pointed out that it gave tenant a refund check in the amount of $49,620 in 2017, and agreed to resume the preferential rent.

The DRA ruled for tenant, finding that the base date legal regulated rent was $2,655 while the collectible preferential rent was $1,987 at that time. The DRA also found that the preferential rent continued at all times, that legal increases were applied to both the legal and preferential rent amounts, and that landlord was entitled to collect MCI rent increases even if tenant paid a preferential rent.

Tenant appealed and lost. Tenant claimed that the DRA incorrectly referred to a "settlement" between the parties and that its overcharge calculations were incorrect. The DHCR noted that the DRA's reference to a "settlement" merely referred to the fact that a refund was issued in February 2017 at which time the rent was adjusted to reflect the correct preferential rent, and that a new preferential rent rider was signed in June 2017 reflecting the guarantee to the tenant of a preferential rent for the remainder of her tenancy.

This didn't affect the DRA's rent calculations, which were correct. Standard rent-stabilized renewal leases specifically stated that the rent may be increased or decreased under an order by the DHCR or the Rent Guidelines Board. There was no limitation that MCI increases could only be added to the legal regulated rent and no prohibition in the Rent Stabilization Law against adding MCI increases to the preferential rent during a renewal lease term. And there was no willful overcharge since landlord refunded the excess rent collected plus interest at the time that it answered tenant's complaint. After tenant's rent was adjusted in 2017, no further overcharge occurred. 

Gordon: DHCR Adm. Rev. Docket No. IS410017RK (12/21/21)[5-pg. document]