On-Time Rent Provision in Lease Resulted in Willful Rent Overcharge

February 8, 2021

LVT Number: #31207

Rent-stabilized tenant complained of rent overcharge in 2016. The DHCR ruled for tenant based on the inclusion of an "on-time" provision in tenant's lease. Landlord registered the legal regulated rent as $2,447 per month in 2015 but provided an "early payment discount" that reduced tenant's monthly rent to $1,025 if tenant paid by the fifth of the month. The DHCR found that tenant's lease clause was unenforceable and found a rent overcharge of $12,220, including triple damages.

Rent-stabilized tenant complained of rent overcharge in 2016. The DHCR ruled for tenant based on the inclusion of an "on-time" provision in tenant's lease. Landlord registered the legal regulated rent as $2,447 per month in 2015 but provided an "early payment discount" that reduced tenant's monthly rent to $1,025 if tenant paid by the fifth of the month. The DHCR found that tenant's lease clause was unenforceable and found a rent overcharge of $12,220, including triple damages. Landlord filed an Article 78 court appeal and argued that the DHCR's ruling was arbitrary and unreasonable.

The court and appeals court ruled against landlord. The lease provisions for an on-time payment discount wasn't a preferential rent. The DHCR acted within its authority under RSL Section 26-511(c)(14) and RSC Section 2521.2 by setting the discounted rate as the lowest legal rent on the base rent date.

Bandil Farms, Inc. v. DHCR: App. No. 12569, Case No. 2019-05408, 2021 NY Slip Op 00002 (App. Div. 1 Dept.; 1/5/21; Acosta, PJ, Gische, Oing, Gonzalez, Kennedy, JJ)

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