Tenants Didn't Prove Formerly Rent-Controlled Units Weren't Properly Deregulated

Tenants sued landlord in a class action, claiming that they were rent controlled or rent stabilized. Former landlord bought the building in 1989 and listed the apartments in DHCR rent registrations as "temporarily exempt." Before 1989, the apartments had been registered as either rent controlled or rent stabilized. Former landlord later sold the building to a school for use as dormitories, again temporarily exempting some units from rent stabilization. The building was then sold to current landlord. Tenants claimed that, despite transfer of the property, which ended the temporary exemption and made the building rent stabilized, landlord failed to register the apartments or offer tenants rent-stabilized leases. In response to the lawsuit, landlord registered the apartments with the DHCR, reduced rents, and refunded overcharges. Tenants argued that the court should apply the default formula to determine what the legal rents should be. The court ruled against tenants. Use of the default formula would equal a penalty for landlord's allegedly improper use of market-rate leases and overcharge that wasn't permitted in a class action. The court also found that tenants failed to show that the formerly rent-controlled units weren't properly deregulated. 

Fabo v. Kushner Cos., LLC: Index No. 515806/17, 2023 NY Slip Op 30764(U), NYLJ No. 1679495628 (Sup. Ct. Kings; 3/15/23; Garson, J)