Trial Must Determine If Default Formula Applied to Each Overcharge Claim in Class Action

Tenants sued landlord in a class action, claiming rent overcharges resulting from an alleged scheme to charge market-rate rents for apartments while collecting J-51 tax benefits. Landlord denied tenants' claims and argued that its late filing of DHCR rent registrations didn't constitute rent overcharges if the registered rents were otherwise legal. The court ruled against landlord, finding that its late registrations constituted a scheme to deregulate the apartments, and appointed a referee to compute collectible rents. The calculation of overcharges was stayed in 2022 while landlord appealed the court's decision.

The appeals court ruled for landlord in part, noting that the primary issue in landlord's appeal was how rent overcharge damages should be calculated. The appeals court found that there were triable issues of fact as to whether landlord knowingly engaged in a fraudulent scheme to deregulate an apartment unit under the totality of the circumstances. While tenants ultimately may prove that claim, the default formula may not necessarily be applicable in each individual case. The prior, lower court order was modified by deleting the provisions granting summary judgment for attorneys' fees, application of the default formula, and referral at this time to a court referee for overcharge calculation.

Gomes v. Vermyck, LLC: Index No. 713219/18, App. No. 2022-02763 (App. Div. 2 Dept.; 2/13/25; Connolly, JP, Chambers, Dowling, Voutsinas, JJ)