Rent Overcharge Settlement Agreement Signed Before Regina Upheld on Appeal

Building tenants sued landlord for rent overcharge and improper deregulation of their apartments. In 2018 the court found that landlord engaged in a fraudulent scheme to deregulate by falsely exempting some apartments as condos or co-ops and others for high-rent vacancy, while the allowable rent increases didn't reach the luxury deregulation threshold then in effect. Landlord also had effectively admitted there was a lack of individual apartment improvements (IAIs) to justify rent increases charged. 

Tenants later asked the court to enforce the terms of the settlement agreement reached between the parties in March 2020 on the day of trial to determine the overcharge claims. The court ruled for tenants. The in-court oral stipulation settled the tenants' overcharge claims for $7.5 million, provided for rent-stabilized leases at specific monthly rents for tenants still living in the building, and called for a confidentiality agreement.

Landlord appealed and lost. Landlord argued that the Court of Appeals decision in Regina Metro. Co. LLC v. DHCR in early April 2020 required the settlement agreement to be vacated. The Regina decision held that retroactive application of the HSTPA would violate due process. But a "mistake as to the law" in the settlement agreement was insufficient grounds for vacating that stipulation. It also was common knowledge that the retroactivity issue was under review in the Regina case when landlord agreed to the settlement. It also didn't appear that the settlement agreement was entered into inadvisedly or that it would be unfair to hold the parties to it. The Regina decision didn't obviate the finding that the type of conduct involved in this case was fraudulent. The appeals court also stated that the settlement agreement was an oral stipulation and not simply an agreement to agree. The fact that the agreement called for the parties to exchange general releases and execute a confidentiality agreement also didn't render the agreement invalid. 

Nieborak v. W54-7 LLC: Index No. 157084/14, App. No. 15447, Case No. 2021-00706, 2022 NY Slip Op 01397 (App. Div. 1 Dept.; 3/3/22; Renwick, JP, Gesmer, Moulton, Rodriguez, Pitt, JJ)