Tenant Can Proceed with Claim that Apartment Was Fraudulently Deregulated

Tenant sued landlord in 2020 for rent overcharge and fraudulent deregulation of her apartment due to landlord's claimed high-rent vacancy deregulation. Tenant also claimed violation of General Business Law (GBL) Section 349 and sought an injunction and attorneys' fees. Tenant had moved into the unit in March 2015 at an unregulated rent of $2,500 per month. Tenant said that the prior tenant was rent stabilized and paid $1,153 per month. Tenant argued that to increase the rent as landlord indicated, he'd have to have spent at least $45,000 on individual apartment improvements (IAIs) to achieve high-rent vacancy deregulation. But tenant claimed that the apartment was largely unrenovated when she moved in and that the only work done was maintenance and repair work such as floor refinishing and painting.

Landlord asked the court to dismiss the case without trial. For the most part, the court denied landlord's request. Landlord claimed that tenant's overcharge claim was subject to a four-year statute of limitations. But prior to HSTPA's enactment on June 14, 2019, a rental history prior to the four-year period could be examined for the limited purpose of determining whether a fraudulent scheme to destabilize the apartment tainted the reliability of the rent on the base date. If the reliability of the base date rent was tainted by fraud, the legal regulated base date rent could be established using the default method set by the Rent Stabilization Code. In Regina v. DHCR (2020), New York's highest court reiterated this principle. In this case the court found that tenant had adequately pleaded that a fraudulent scheme by landlord to deregulate the apartment had taken place. So the overcharge claim wasn't limited to a four-year lookback period. And the court could review the rent history beyond the four-year lookback period to determine whether the apartment was subject to rent stabilization. 

But the court granted landlord's request to dismiss tenant's claim under GBL Section 349. That law prohibits "deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service" and gives a right of action to "any person who has been injured by reason of any violation of this section." But this law has a three-year statute of limitations and the advertising for the apartment that tenant claimed was a deceptive act that she relied on occurred in 2015, more than three years before she filed her 2022 lawsuit.

Lloyd v. Malloy: Index No. 509847/2020, 2022 NY Slip Op 32658(U)(Sup. Ct. Kings; 7/26/22; Landicino, J)