No Willful Overcharge Where J-51 Deregulation Policy Followed

Landlord gave tenant a free-market lease in December 2007 and charged tenant an unregulated rent of $10,000 per month. At the time, the building was receiving J-51 tax benefits. In 2009, tenant sued landlord, claiming that he was rent stabilized and that he was being overcharged. Landlord admitted that tenant was rent stabilized in light of the Court of Appeals decision in Roberts v. Tishman Speyer Properties LP, and that the legal regulated rent was $9,797. Tenant disputed landlord’s calculation of the legal rent and how the legal rent should be calculated. Tenant also claimed that the overcharge was willful and that triple damages should apply. The court ruled that in the absence of fraud or willfulness, the legal rent was the base rent charged four years before tenant filed his overcharge claim plus any subsequent lawful rent increases. The last registered rent was undisputed and vacancy increases and long-term prior vacancy increases could easily be calculated. But a trial was needed to determine the facts concerning permissible rent increases. There were conflicting documents and statements concerning individual apartment improvements that landlord claimed were made to the apartment. The court refused to award triple damages, finding that any overcharge wasn’t willful. Landlord had relied on the DHCR’s regulations and interpretation of the law in setting tenant’s initial rent and subsequent increases. There also was no proof that, after Roberts, landlord was attempting to evade the law. The court also denied tenant’s request for attorney’s fees. Since landlord would have no right under the lease to collect attorney’s fees in connection with the claims involved, tenant had no reciprocal right to attorney’s fees.

Rosenzweig v. 305 Riverside Corp.: 2012 NY Slip Op 51103(U), 2012 WL 2295535 (Sup. Ct. NY; 6/7/12; Gische, J)