On-Time Rent Payment Discount Wasn't Preferential Rent

Rent-stabilized tenant complained of rent overcharge resulting from an on-time rent discount provision in her lease. The lease rider gave tenant a preferential rent but stated that, if the preferential rent wasn't paid by the 15th day of the month, the legal regulated rent would be due. The LRR was $2,256 and the preferential rent was $1,200.

The DRA ruled for tenant and ordered landlord to refund $1,429, including interest. The DRA also ruled that $1,200 became the legal regulated rent.

Landlord appealed and lost. Recent Appellate Division appeals court decisions in both the First and Second Departments have upheld DHCR determinations that on-time discount clauses are invalid, that the discounted rents didn't constitute preferential rents, and that the "preferential" rent amounts set forth in the lease became the legal regulated rent. One court noted that such rent concession wasn't interchangeable with a preferential rent, and was instead "an unconscionable late fee."

Maple 10, LLC: DHCR Adm. Rev. Docket No. IS210011RK (1/18/22)[5-pg. document]