Owner Didn't Submit Rent History Records

After the DHCR's Tenant Protection Unit (TPU) investigated claimed individual apartment improvements (IAIs), it referred the case to the DRA to commence rent overcharge proceedings. The DRA ruled for tenants, finding overcharges based on prior rent reduction orders issued for the apartment based on a reduction in services and other absent rent history documentation. Landlord appealed, and the DHCR denied landlord's PAR. Landlord then filed an Article 78 court appeal, claiming that the DHCR's decision was arbitrary and capricious.

The court ruled against landlord, who appealed and lost. Under the Rent Stabilization Code, the current owner was responsible for all overcharge penalties, including penalties based on overcharges collected by any prior owner. Carryover liability is the rule, not the exception, because a purchaser is expected to do its due diligence and discover what there is to be known at the time title is acquired. It was rational for the DHCR to find that the previous owner collected rent overcharges, based on the nonstabilized vacancy leases, the registrations claiming high-rent deregulation, and the then-applicable service reduction order. Landlord's failure to obtain a full rental history from the prior owner when it took title to the building didn't excuse its failure to submit a full rental history in response to the rent overcharge proceedings. The DHCR wasn't required to do the landlord's work of assembling the necessary documentation, including the rent ledgers that landlord claimed it had no reason to receive from the prior owner. 

197 Madison Holdings LLC v. DHCR: Index No. 154462/22, 154402/22, App. No. 2675-2576, Case No. 2023-05628, 2023-05625 (App. Div. 1 Dept.; 10/3/24; Kern, JP, Oing, Kapnick, Kennedy, Shulman, JJ)