On-Time Rent Payment Clause Held Invalid, Doesn't Create Preferential Rent

Rent-stabilized tenant complained to the DHCR of rent overcharge. The DRA ruled for tenant, finding that landlord's "on-time" lease clause, requiring payment of full rent rather than a preferential rent if tenant paid rent late in any month, was unlawful. The DRA ordered landlord to refund $24,461, including triple damages. Landlord and tenant both appealed. 

Landlord argued that there was no statutory authority authorizing the DHCR to eliminate a properly preserved legal regulated rent in favor of a permanent preferential rent based on an on-time discount clause in a lease. But appeals courts in both the First and Second Departments have upheld DHCR rulings that on-time discount clauses are invalid and that reduced rents charged under such leases were not preferential rents but became the legal regulated rents. The DHCR ruled against landlord.

Tenant argued that landlord had charged two months' security deposit in violation of the Rent Stabilization Code. The DHCR ruled for tenant and noted that landlord had refunded the second month's security deposit. Triple damages are not applied to excess security deposit collection.

120 Avenue P LLC/Rys: DHCR Adm. Rev. Docket Nos. MM210014RO, MM210018RT (4/2/24)[9-pg. document]