There Was No Overcharge for Apartment Properly Deregulated in 2009

Tenant complained of rent overcharge in 2015 and told the DHCR that landlord had illegally deregulated her apartment. Tenant moved into the unit on Nov. 1, 2012, under a one-year, non-regulated lease at $1,870 per month. Her lease included a Deregulation Lease Rider stating that the legal regulated rent was $2,384, exceeding the $2,000 deregulation threshold. Landlord acknowledged that the building received J-51 tax benefits between 1996 and June 2008, and submitted rent history records going back to Dec. 1, 2002. Landlord argued that, after J-51 benefits ended, the apartment was lawfully deregulated. The DRA found that (1) the base rent date was Nov. 27, 2011; (2) the apartment was rent stabilized while landlord received J-51 tax benefits; (3) pre-base date rental events could be considered since the apartment was improperly deregulated while tax benefits were received; (4) the base date rent was $1,559 per month; and (5) tenant was rent stabilized. The DRA relied on a court decision in 72A Realty Assocs. v. Lucas to calculate the base date rent by using the most recent reliable rent of $1,300 from June 30, 2007, plus applicable subsequent lawful rent increases. There was an overcharge of $3,285, offset by $14,639 in rent arrears.

Landlord appealed and won. The apartment had been properly deregulated. The DRA's reliance on the Lucas case to calculate the base date legal regulated rent using pre-base date rent records was in error. Under Regina Metro. Co. v. DHCR, New York's highest court ruled in 2020 that the base date rent should be the rent charged and paid on the four-year base date. The apartment lease in effect on that date was a market rate lease listing rent at $1,600 per month. So the DHCR must consider pre-base date rental events, not to calculate the rent, but to determine whether the apartment was subject to rent stabilization. Reviewing landlord's rent history records, the DHCR found that the apartment was deregulated in 2009 upon the first vacancy after the J-51 benefits expired. 

First Lenox Terrace Associates, LLC: DHCR Adm. Rev. Docket No. HN410024RP (11/17/20)[5-pg. doc.]