Rent-Stabilized Lease Provision for "On-Time Discount" Was Void

Rent-stabilized tenant complained of rent overcharge. The DRA ruled for tenant and ordered landlord to refund $6,021, including triple damages. Landlord appealed and lost. The DHCR found that the DRA correctly determined that an "on-time discount" set forth in tenant's lease and which reduced tenant's legal regulated rent was void. So the discounted rent became the legal regulated rent. The higher rent in effect was an illegal late fee. The DRA correctly relied on revised DHCR Fact Sheet 40, which clarifies DHCR policy that no more than a 5 percent late fee is permitted for rent-stabilized apartments and that an on-time discount isn't permitted. Landlord argued that the on-time discount was a preferential rent, but the DHCR noted that a preferential rent may not be terminated during a lease term, and the DHCR wouldn't permit landlord to enforce a lease clause that permitted landlord to end a preferential or discounted rent by a certain day of the month. Landlord also argued that a DHCR Fact Sheet didn't have the force of law. But the DHCR pointed to several appeals court rulings that an on-time discount provision was "an unconscionable late charge and penalty." 

1560 GC LLC: DHCR Adm. Rev. Docket No. GX610015RO (5/20/19) [4-pg. doc.]