Rent Overcharge Must Be Calculated Using Default Method

Tenant sued landlord, claiming rent overcharge and fraud because his apartment was improperly deregulated while the building received J-51 tax benefits. The court ruled for tenant, finding that landlord engaged in a fraudulent scheme to remove the apartment from rent regulation, and directed a referee to calculate the legal regulated rent by using the default formula set forth under Rent Stabilization Code Section 2522.6. The court denied landlord's request to dismiss the case based on lack of subject matter jurisdiction.

Landlord appealed and lost. Because landlord had engaged in fraud in initially setting the rent or removing the apartment from rent regulation, the court can examine the apartment's rent history beyond the four-year statutory period allowed by CPLR Section 213-a. The court also properly retained jurisdiction over the rent overcharge issues rather than referring them to the DHCR. The court rejected landlord's claimed reliance on DHCR policy predating the Court of Appeals' decision in Roberts v. Tishman Speyer Props. LP because the wrongdoing in this case occurred in 2010, after Roberts was decided. Proof of other court cases involving other tenants and the same landlord was also relevant to whether there was a fraudulent scheme in this case.

Kreisler v. B-U Realty Corp.: 2018 NY Slip Op 06054, 2018 WL 4353869 (App. Div. 1 Dept.; 9/13/18; Acosta, PJ, Manzanet-Daniels, Tom, Mazzarelli, Moulton, JJ)