TPU Can Sue Landlord for Claimed Violations of Rent Stabilization Law

The DHCR's Tenant Protection Unit (TPU) sued landlord LLC entities of 38 buildings containing more than 2,500 rent-stabilized apartments, along with individuals who were connected with the landlord entities. The TPU claimed that landlord violated the Rent Stabilization Law and Code and, among other things, charged illegal key fees to tenants.

Landlord asked the court to dismiss the case for a number of reasons, but the court ruled against landlord. First, landlord sought dismissal of the case against individual defendants, but the court found that, since the named individuals received or were entitled to receive rent for the apartments owned by landlord LLCs, it was proper to name them in the court action. New York law also permitted an action against "any person" based on fraudulent or illegal business activity.

Second, landlord claimed that, since they had filed pending PARs against DRO orders reducing rents based on landlord's failure to issue additional entrance door keys after the lock was transitioned to a non-duplicable metal key door lock system, the DHCR must first exhaust administrative remedies before suing landlord. But the DHCR had the authority to commence court actions and didn't have to exhaust its own administrative remedies before doing so.

Third, landlord argued that the DHCR was barred from claiming that the on-time discount rent provisions in tenant leases violated the RSC. But the court found that nothing prevented the TPU from claiming that the on-time discount provisions here qualified as excessive illegal fees. An on-time discount rent clause is not a fixed preferential rent but an excessive late fee.

The court directed the parties to appear for a preliminary conference in September 2020.

DHCR v. Zara Realty Holding Corp.: Index No. 450245/2019, 2020 NY Slip Op 31113(U)(Sup. Ct. NY; 4/29/20; Freed, J)