Rent Overcharge Calculations in 421-g Case Must Follow Rule Set by Regina

Building tenants sued landlord and claimed that, since the building received tax benefits under RPTL Section 421-g, they were subject to rent stabilization and had been overcharged. Issues raised in the case went to New York's highest court, which ruled that tenants were rent stabilized. The case was sent back to the lower court to set the proper methodology to be used for calculating any rent overcharges. The court found that the DHCR's "default method" should be applied. Landlord later asked for leave to renew based on a change in the law concerning any overcharge calculation methodology.

The court agreed, based on the April 2020 decision of the Court of Appeals in Regina Metropolitan Co., LLC v. DHCR. Since tenants hadn't claimed any fraudulent scheme by landlord,  the legal rents were the base date rents in effect four years prior to the filing of tenants' court action,  plus any increases legally available under formulas set by the Rent Stabilization Law and regulations. This formula must apply even if the base date rents were market rents.

The court held off ruling on landlord's additional argument that triple damages also were limited in this case as a result of the Regina ruling. The question of triple damages was premature since no calculations had yet been done. The court denied tenants' request that their rents be frozen until correct rent registrations were filed. The Regina decision rejected the applicability of the rent-freezing provision to Roberts-type cases where the failure to file proper rent registrations resulted from a misunderstanding of the law rather than from any fraudulent scheme.

West v. BCRE 90 W. St. LLC: 2020 NY Slip Op 20111, NYLJ No. 1592242011 (Sup. Ct. NY; 5/15/20; Reed, J)