No Triple Damages in Overcharge Case in Light of Refund Made to Tenants

Rent-stabilized tenants complained to the DHCR in 2017 of rent overcharge. The DRA ruled against tenants based on RSC Section 2520.11(r)(5) and the 2018 Court of Appeals ruling in Altman v. 285 W. Fourth LLC. The code and case affirmed an owner's right deregulate an apartment when it became vacant on or after June 24, 2011, with a legal regulated rent (LRR) of $2,500 or more per month.

Tenants appealed and won. They claimed that landlord hadn't proved the claimed cost of individual apartment improvements (IAIs) made within four years before tenants filed their complaint. IAI rent increases at that time were subject to DHCR Policy Statement 90-10, which required IAIs to be supported by at least one of the following: cancelled checks contemporaneous with completion of the work, invoices marked paid in full contemporaneous with the completion of the work, signed contract agreement, or contractor's affidavit. Under the policy statement, the DHCR could request additional documentation if warranted.

In this case, landlord submitted two conflicting affidavits as to the cost breakdown, which required further explanation. There also were discrepancies in the checks submitted, and most of the checks didn't match the suppliers in the cost breakdown. Landlord didn't respond the DRA's Request for Additional Information/Evidence. So the DHCR disallowed all claimed IAI costs totalling $58,364. Landlord failed to explain the $11,000 discrepancy in labor costs claimed in the two affidavits.

As a result of this disallowance, the apartment wasn't deregulated, the rent was recalculated, and there was an overcharge of $169,942, including interest. No triple damages were assessed since landlord had refunded over $173,000 to tenants while the case was pending.

Lew & Rancourt: DHCR Adm. Rev. Docket No. LQ210013RT (4/10/24)[7-pg. document]