Overcharge Claim Based on Rent Concessions Given at Time of Initial 421-a Rentals

Tenants in a 421-a building sued landlord, claiming rent overcharge. Tenants argued that landlord engaged in a "preferential rent" ruse by charging initial 421-a program rents at rates lower than the permissible legal rents and then claiming the higher rents were the legal regulated rents. Landlord had given initial tenants a two-month rent concession under their initial leases at the time they moved in. Tenants argued that this was in effect a preferential rent. Under the 421-a program, there can be no preferential rent charged as an initial program rent. The base rent for future rent-stabilized rent increases is the initial rent charged for a given apartment. Tenants also claimed that landlord applied a "double" preferential rent, based on giving tenants a two-month rent concession. Landlord asked the court to dismiss the case, pointing out that DHCR Fact Sheet #40 made a distinction between a one-time rent concession such as landlord gave tenants and a preferential rent, which must now be continued by law under rent-stabilized renewal leases. 

The court ruled against landlord. Tenants had successfully set forth a cause of action for rent overcharge that couldn't yet be decided. Among other things, landlord had marketed the apartments online as having a "net effective rent." A hearing would be needed to determine the facts and law of the case.

Burrows v. 75-25 153rd St., LLC: Index No. 160082/2020, 2021 NY Slip Op 32360(U)(Sup. Ct. NY; 11/18/21; Kelly, J)