Rent Overcharge Determined Using Sampling Method Default Formula

Rent-stabilized tenant complained to the DHCR of rent overcharge. The DRA ruled for tenant and directed landlord to refund $7,640, including triple damages. Tenant appealed, claiming that the pre-base date rent history should've been examined due to fraud by the landlord. The DHCR ruled for tenant in part, finding no fraud but finding some errors in the DRA's calculations and thus increasing the total overcharge award.

Tenant then filed an Article 78 court appeal, and the case was sent back to the DHCR for further consideration. The DHCR then found that, although there was no rent fraud involved, landlord couldn't produce the base date lease and therefore a default formula must be applied to determine the legal rent. The DHCR applied the default formula that used the lowest stabilized rent for the same sized apartment in the building as the base date rent. Landlord was then ordered to refund $165,288 plus triple damages to the tenant.

Landlord then filed an Article 78 court appeal of the new decision, and the court again sent the case back to the DHCR for reconsideration. This time, the DHCR modified its overcharge calculation and applied a different default formula, based on data compiled by the DHCR using sampling methods determined by the agency. The DHCR did this because the base-date tenant was a nonprofit organization and landlord may have had a reasonable belief that the unit was temporarily exempt from rent regulation on the base date and was entitled to set a first rent for the next rent-stabilized tenant. So the total resulting rent overcharge was $38,674.

Goldstein: DHCR Adm. Rev. Docket No. LQ410001RP (4/16/24)[12-pg. document]