No Proof of Fraud Warranting Rent Overcharge Lookback Beyond Four Years

Tenant sued landlord in 2014, claiming that his apartment was unlawfully deregulated and that he had been overcharged. Tenant claimed that his legal monthly rent was $628 based on the last amount validly registered with the DHCR. Tenant also claimed that he was entitled to a rent-stabilized lease.

The court ruled for tenant. Since tenant was the first nonstabilized tenant of the unit, he was entitled to notice as required by Rent Stabilization Law (RSL) Section 26-504.2(b) and Rent Stabilization Code (RSC) Section 2522.5(c)(3). The required notice would have indicated the last regulated rent and how the rent was computed. Under the RSC, where landlord failed to provide the rent stabilization rider or requested documentation, landlord wasn't entitled to collect any adjustments in excess of the rent set forth in the prior lease unless it could prove that the rent collected was otherwise legal.

Landlord appealed and won, in part. Although the lower court correctly cited the applicable RSL and RSC provisions, it improperly referred the matter in December 2019 to a referee to determine damages going back six years. There was insufficient indicia of fraud that would warrant consideration of the apartment rent history going back more than four years. The lower court improperly found that landlord's failure to maintain records of claimed individual apartment improvements (IAIs) and its failure to provide notices to tenant relating to the last legal regulated rent was proof of "an attempt to circumvent the Rent Stabilization Law." Landlord had registered the apartment with the DHCR, and there was no legal requirement that landlord maintain IAI records indefinitely. In this case, rental history could be examined beyond four years only to determine the apartment's rent-stabilized status, not for the purpose of calculating an overcharge.

Fuentes v. Kwik Realty LLC: Index Nos. 9163, 450153/14, 2020 NY Slip Op 04626 (App. Div. 1 Dept.; 8/20/20; Manzanet-Daniels, JP, Gische, Webber, Moulton, JJ)