No Rent Overcharge Where J-51 Apartment Was Registered After Roberts and DHCR Guidance

Tenants complained to the DHCR in 2018 of rent overcharge, claiming that from July 1, 1998, through June 30, 2015, landlord received J-51 tax benefits but had improperly deregulated their apartment. They had moved into the apartment in 2014 under a market lease at a rent of $3,800 per month. Landlord gave them a rent-stabilized renewal lease in 2018 at $3,800 per month. Tenants argued that landlord had failed to register their unit until 2016 and only did so as the result of a lawsuit filed against landlord by a number of building tenants. They also claimed that rent increases for their unit were fraudulent and that the rent should be set using the default formula. Landlord admitted that the apartment was rent stabilized and had adjusted rents after it bought the building in 2016. Landlord also argued there was no overcharge because the prior tenant's rent was $3,600 per month. The DRA ruled against tenants, finding no rent overcharge.

Tenants appealed and lost. Tenants pointed out that in the lawsuit by other building tenants against landlord there was a finding of fraud and rent overcharges. But the tenants who complained here to the DHCR weren't parties to the court case and, in the court case, individual assessments were made concerning each tenant's rent history and circumstances. Also, in Regina Metropolitan v. DHCR, New York's highest court ruled in 2020 that the fraud exception to the rent history lookback rule generally didn't apply in this type of case. In addition, prior landlord had registered the apartment as deregulated in 2001, eight years before New York's highest court ruled in Roberts v. Tishman Speyers Properties (2009), that landlord couldn't deregulate apartments in buildings receiving J-51 tax benefits. In this case, landlord's delay in registering tenant's apartment until 2016 wasn't fraudulent because the DHCR didn't issue guidance on registering J-51 units until 2016. [Download a PDF of the decision here.]

Funk & Hecht: DHCR Adm. Rev. Docket No. KX410028RT (3/16/23)[4-pg. document]