TenantNet Forum

Where tenants can seek help and help others



Rent overcharges in New York City

Basic Reference Documents

Moderator: TenantNet

Rent overcharges in New York City

Postby TenantNet » Fri Jul 14, 2006 2:34 pm

Complaining about a rent overcharge in New York City
By Kenneth B. Hawco, Esq.

This article explains the three options available to rent stabilized tenants in New York City who want to complain that the rent they pay is more than the law allows under the rent regulated systems in New York City and suggests that having such complaints decided by a judge is almost always a better option for tenants instead of filing a rent overcharge complaint with the New York State Division of Housing and Community Renewal (DHCR), the state agency that processes and decides such complaints, which, it is suggested, is the least favorable option for tenants.

The law allows tenants three legal options to complain about a possible overcharge in rent. The three options are: (1) starting a lawsuit in court, either in Supreme Court (if the amount in controversy is over $25,000.00), or in Civil Court (if the amount in controversy is under $25,000.00); or (2) withholding rent, thereby forcing the landlord to start a non?payment proceeding in Housing Court, then raising a rent overcharge complaint as a counterclaim (suing the other party who sued you in the same lawsuit is called a counterclaim); or (3) filing a rent overcharge complaint with DHCR.

Supreme Court or Civil Court

The option of starting a lawsuit is a good option (and possibly the best) because the rules of procedure in Supreme Court and Civil Court are much better from a tenant's perspective, than being involved in a lawsuit in Housing Court, because discovery is available in a Supreme Court and Civil Court case, but only available with permission in a Housing Court case, and hard to get in rent overcharge situations. (Discovery is the process whereby one party to a lawsuit can obtain information from another party to that lawsuit before trial.)

Housing Court

The option of withholding rent and forcing a landlord to sue the tenant for non-payment of rent, so that the tenant can raise a rent overcharge complaint as a counterclaim, is a good option. The slight disadvantage of this option is that a tenant counterclaiming in a Housing Court case will be in a defensive posture, rather than an offensive posture, if suing in Supreme Court or Civil Court.

Most residential leases contain a provision that will allow a tenant to recover from the landlord all of the attorney's fees the tenant incurred (but not necessarily paid) in prosecuting a rent overcharge complaint in a Supreme Court or Civil Court lawsuit or winning a non-payment case in Housing Court with a successfully rent overcharge counterclaim. If a residential lease contains a provision that states that only a landlord can be reimbursed its attorney's fees if it is involved in any lawsuit with a tenant, the law in New York implies a reciprocal provision in the lease so that the tenant will be able to recover from the landlord his or her attorney's fees. In other words, if the tenant wins a lawsuit, wherein the tenant successfully raised a rent overcharge complaint, the tenant will likely have his or her attorney's fees paid for by the landlord.

DHCR

The option of filing a rent overcharge complaint with DHCR is the less desirable option, but perhaps because of their unawareness of the pitfalls of filing a rent overcharge complaint with DHCR, it is the option tenants seem to select the most. A rent overcharge complaint filed with DHCR is less desirable because it takes a very long time to have DHCR decide a rent overcharge complaint (literally years), and in the event the tenant wins, the landlord can file an administrative appeal with DHCR for free, because the landlord does not have to put up the overcharge award amount. Also, the administrative appeal will likely take a few more years. In contrast, in a Supreme Court or Civil Court case, the case will probably be resolved in weeks or maybe months. If the landlord loses and wants to appeal, it will have to put up the judgment amount, or post a bond ?? the equivalent of the full money amount awarded to the tenant. Having to put up the full judgment amount as a condition of appealing is certainly a disincentive for a landlord to appeal.

Filing a rent overcharge complaint with DHCR seems like a good option because it can be done for free and without the assistance of a lawyer. This option, however, is actually penny wise and pound foolish, because almost every landlord uses sophisticated lawyers to respond to rent overcharge complaints and DHCR does not give unrepresented tenants any help or special guidance.

Furthermore, tenants should be aware that many tenants who at first win rent overcharge complaints at DHCR at the first level (known as the Rent Administrator level), invariably find out that they ultimately lose after the landlord files an administrative appeal with DHCR (called a Petition for Administrative Review commonly referred to as a PAR). This common result occurs because DHCR, which is a very pro?landlord government agency, strategically put pro?landlord people in the PAR units, so they can overrule the rent overcharge complaints that are decided in a tenant's favor at the Rent Administrator's level.

If a tenant loses at the PAR level, the next step in the appeal process is the tenant can challenge DHCR's unfavorable decision by bringing a lawsuit in Supreme Court called an Article 78 proceeding (which is different from the rent overcharge lawsuit that a tenant can start in Supreme Court ?? which was discussed above as one of the three options for complaining about a possible rent overcharge).

Unfortunately, an unrepresented tenant having lost at the PAR level usually seeks the help of a lawyer for the first time. By then it may be too late to salvage the case, because the Supreme Court judge can only review the evidence and arguments put before DHCR by the parties. If the tenant did not have the help of a lawyer while the rent overcharge complaint was pending before DHCR, it is likely that the record will have been inadequately developed. (All the documents and arguments put before DHCR by the parties is collectively referred to as the record.) Thus, if a lawyer is consulted too late in the case, more time and money might be spent fighting a case that well might have had merit, but because of the tenant's inexperience, the landlords experienced lawyers may have been able to turn into a loser.

Consequently, filing a complaint with DHCR is a cheap way to go, but it will take far longer than the other two options (and the tenant must pay the rent that is believed to be too high while DHCR ponders the rent overcharge complaint for years). Also, the tenant (likely inexperienced in these kinds of matters) will be up against sophisticated lawyers who know how to deal with DHCR very well, which may result in a losing decision for the tenant.

Conclusion

It is suggested that any tenant considering raising a rent overcharge complaint avoid the option of filing such complaint with DHCR. Instead, consult a pro?tenant lawyer, who should be able to determine the potential merits of the case and if it is determined that the case has merit, explain the advantages and disadvantages of either starting a lawsuit in Supreme Court or Civil Court, or withholding rent, so the rent overcharge issue can be raised as a counterclaim in a non?payment proceeding in Housing Court, or filing a rent overcharge complaint with DHCR. (If the lawyer you consult with quickly suggests you file your rent overcharge complaint with DHCR, perhaps that lawyer is unfamiliar with this area of the law and the tenant should seek the advice of a lawyer who has more expertise with this specialized area of the law.)

DISCLAIMER: The opinions expressed are those of the author. This information is offered only for general information purposes. It is not offered and does not constitute legal advice or legal opinions. You should not act or rely upon this information without seeking the advice of a lawyer.

Kenneth B. Hawco is a Tenant Attorney practicing in New York City. He may be reached at (212) 874-7717, email: kbhawco@msn.com and web page: http://www.kbhawco.com
The Tenant Network(tm) for Residential Tenants
Information from TenantNet is from experienced non-attorney tenant
activists and is not considered legal advice.

Subscribe to our Twitter Feed @TenantNet
TenantNet
 
Posts: 10311
Joined: Mon Jan 21, 2002 2:01 am
Location: New York City

Postby Anna » Sun Aug 27, 2006 10:51 am

Rent Stabilization Code

Part 2526. Enforcement

9 NYCRR § 2526.1

§ 2526.1 Determination of legal regulated rents; penalties; fines; assessment of costs; attorney's fees; rent credits


(a)

(1) Any owner who is found by the DHCR, after a reasonable opportunity to be heard, to have collected any rent or other consideration in excess of the legal regulated rent shall be ordered to pay to the tenant a penalty equal to three times the amount of such excess, except as provided under subdivision (f) of this section. In no event shall such treble damage penalty be assessed against an owner based solely upon the owner's failure to file any timely or proper rent registration statement. If the owner establishes by a preponderance of the evidence that the overcharge was not willful, the DHCR shall establish the penalty as the amount of the overcharge plus interest, which interest shall accrue from the date of the first overcharge on or after the base date, at the rate of interest payable on a judgment pursuant to section 5004 of the Civil Practice Law and Rules, and the order shall direct such a payment to be made to the tenant.

(2) A complaint pursuant to this section must be filed with the DHCR within four years of the first overcharge alleged, and no determination of an overcharge and no award or calculation of an award of the amount of an overcharge may be based upon an overcharge having occurred more than four years before the complaint is filed; additionally:

(i) a penalty of three times the overcharge may not be based upon an overcharge having occurred more than two years before the complaint is filed or upon an overcharge which occurred prior to April 1, 1984; and

(ii) the rental history of the housing accommodation prior to the four-year period preceding the filing of a complaint pursuant to this section, and section 2522.3 of this Title, shall not be examined. This subparagraph shall preclude examination of a rent registration for any year commencing prior to the base date, as defined in section 2520.6(f) of this Title, whether filed before or after such base date. Except in the case of decontrol pursuant to section 2520.11(r) or (s) of this Title, nothing contained herein shall limit a determination as to whether a housing accommodation is subject to the RSL and this Code, nor shall there be a limit on the continuing eligibility of an owner to collect rent increases pursuant to section 2522.4 of this Title, which may have been subject to deferred implementation, pursuant to section 2522.4(a)(8) in order to protect tenants from excessive rent increases.

(3)

(i) The legal regulated rent for purposes of determining an overcharge shall be deemed to be the rent charged on the base date, plus in each case any subsequent lawful increases and adjustments.

(ii) Where the rent charged on the base date cannot be established, the rent shall be determined by the DHCR in accordance with section 2522.6 of this Title.

(iii) Where a housing accommodation is vacant or temporarily exempt from regulation pursuant to section 2520.11 of this Title on the base date, the legal regulated rent shall be the rent agreed to by the owner and the first rent stabilized tenant taking occupancy after such vacancy or temporary exemption, and reserved in a lease or rental agreement; or, in the event a lesser amount is shown in the first registration for a year commencing after such tenant takes occupancy, the amount shown in such registration, as adjusted pursuant to this Code.

(4) Complaints filed prior to April 1, 1984 shall be determined in accordance with the RSL and Code provisions in effect on March 31, 1984, except that an overcharge collected on or after April 1, 1984 may be subject to treble damages pursuant to this section.

(b) The DHCR shall determine the owner's liability between or among two or more tenants found to have been overcharged during their particular occupancy of a housing accommodation, and at its discretion, may require the owner to make diligent efforts to locate prior tenants who are not parties to the proceeding, and to make refunds to such tenants or pay the amount of such penalty as a fine.

(c)

(1) Any affected tenant shall be given notice of and an opportunity to join in any proceeding commenced by the DHCR pursuant to this section.

(2) Where a complainant pursuant to this section vacates the housing accommodation, and the DHCR continues the proceeding, the DHCR shall give any affected tenant notice of and an opportunity to join in such proceeding.

(d) An owner who is found to have overcharged by the DHCR may be assessed and ordered to pay to the tenant as an additional penalty the reasonable costs and attorney's fees of the proceeding, and except where treble damages are awarded, interest from the date of the overcharge occurring on or after April 1, 1984, at the rate of interest payable on a judgment pursuant to section 5004 of the Civil Practice Law and Rules.

(e) A tenant may recover any overcharge penalty established by the DHCR by deducting it from the rent due to the present owner at a rate not in excess of 20 percent of the amount of the penalty for any one month's rent. If no such rent credit has been taken, the order of the DHCR awarding penalties may be entered, filed and enforced by a tenant in the same manner as a judgment of the Supreme Court, on a form prescribed by the DHCR, provided that the amount of the penalty exceeds $1,000 or the tenant is no longer in possession. Neither of these remedies is available until the expiration of the period in which the owner may institute a proceeding pursuant to Part 2530 of this Title.

(f) Responsibility for overcharges.

(1) For overcharges collected prior to April 1, 1984, an owner will be held responsible only for his or her portion of the overcharges, in the absence of collusion or any relationship between such owner and any prior owners.

(2)

(i) For overcharge complaints filed or overcharges collected on or after April 1, 1984, a current owner shall be responsible for all overcharge penalties, including penalties based upon overcharges collected by any prior owner. However, in the absence of collusion or any relationship between such owner and any prior owner, where no records sufficient to establish the legal regulated rent were provided at a judicial sale, or such other sale effected in connection with, or to resolve, in whole or in part, a bankruptcy proceeding, mortgage foreclosure action or other judicial proceeding, an owner who purchases upon or subsequent to such sale shall not be liable for overcharges collected by any owner prior to such sale, and treble damages upon overcharges that he or she collects which result from overcharges collected by any owner prior to such sale. An owner who did not purchase at such sale, but who purchased subsequent to such sale, shall also not be liable for overcharges collected by any prior owner subsequent to such sale to the extent that such overcharges are the result of overcharges collected prior to such sale.

(ii) Court-appointed receivers. A receiver who is appointed by a court of competent jurisdiction to receive rent for the use or occupation of a housing accommodation shall not, in the absence of collusion or any relationship between such receiver and any owner or other receiver, be liable for overcharges collected by any owner or other receiver, and treble damages upon overcharges that he or she collects which result from overcharges collected by any owner or other receiver, where records sufficient to establish the legal regulated rent have not been made available to such receiver. Penalties pursuant to this paragraph shall be subject to the time limitations set forth in paragraph (a)(2) of this section.

(3) This subdivision shall not be construed to entitle a tenant to more than one refund for the same overcharge.

(g) The provisions of this section shall not apply to a proceeding pursuant to section 2522.3 of this Title.

Statutory Authority:
Civil Practice Law & Rules, § 5004, N.Y.C. Administrative Code, §§ 26-511(b), 26-518(a)
History:
Added § 2526.1 on 5/01/87; amended § 2526.1 heading on 12/20/00; amended § 2526.1(a)(1) on 12/20/00; amended § § 2526.1(a)(2) on 12/20/00; amended § 2526.1(a)(3)(i) on 12/20/00; repealed and added § 2526.1(a)(3)(ii) on 12/20/00; added § 2526.1(a)(3)(iii) on 12/20/00; amended § 2526.1(f)(2) on 12/20/00.

http://www.tenant.net/Rent_Laws/rsc/rsc2526.html
Anna
 
Posts: 2538
Joined: Mon Jul 22, 2002 1:01 am
Location: Manhattan

Postby Anna » Sun Aug 27, 2006 10:53 am

New York State
Division of Housing and Community Renewal

Rent Administration - Fact Sheets

#16 - Collecting Overcharges in Rent Stabilized Apartments in New York City


The Rent Stabilization Law provides two alternate methods for a tenant to collect rent overcharge penalties from an owner. A tenant may begin to use either one of these methods only after the New York State Division of Housing and Community Renewal (DHCR) issues a final order establishing the legal regulated rent and determining a penalty.

The penalty for a rent overcharge is the amount an owner collected above the legal regulated rent, plus accrued interest. For a complaint filed on or after April 1, 1984, in the event of a willful overcharge, the penalty equals three times the amount of the overcharge for two years prior to the filing of the complaint. A final order is a Rent Administrator's order which is not challenged administratively by the filing of a timely Petition for Administrative Review (PAR) with DHCR, or, if challenged, the order issued by the Commissioner determining the PAR.

The filing of a PAR within 35 days of the Rent Administrator's order by the owner or tenant will prevent the tenant from collecting the penalty awarded until the Commissioner rules on the PAR. Following the issuance of the PAR order, an aggrieved party may commence an Article 78 (Civil Practice Law and Rules) court proceeding which will similarly delay the tenant's ability to file the order as a judgment (see Method #2 below) until a final determination is reached by the court.

The timely filing of a PAR against the Rent Administrator's overcharge determination does not affect that part of the order adjusting the tenant's legal regulated rent. Therefore, unless the Commissioner specifically issues a "stay order" delaying the adjustment to the rent, the tenant may begin to pay the lower rent effective on the first rent payment date following the issuance of the order even if the owner files a PAR.

After the 35 days for filing of the PAR have expired, and if neither the owner nor the tenant has filed a PAR, the tenant can collect the rent overcharge penalty. The tenant must choose only one of the two alternate methods described below:

1. Offset Method

The tenant may deduct up to 20% of the penalty from the monthly rent until the penalty is completely offset. If 20% of the penalty exceeds the tenant's monthly rent, the tenant need not pay any rent until the full amount of the refund due is recovered. Before exercising this option, the overcharged tenant must wait 35 days from the issuance of the Rent Administrator's order. As noted above, during this period, any party aggrieved by the order may file a PAR (DHCR Form RAR-2) challenging the correctness of the order. If a PAR is filed, the overcharge penalty cannot be offset until the PAR order affirms that an overcharge occurred and determines the final amount of the penalty.

2. Judgment Method

The filing of a judgment may result in a lien being placed against the owner's real property. If the owner does not satisfy the judgment, the lien may be enforced against the owner's property by a county sheriff or the city sheriff.

To use this option, the penalty must exceed $1,000, or if less, the tenant must have moved from the apartment. Under this option, the tenant must also wait 35 days for the PAR filing period to expire.

After the 35 day PAR filing period expires without the filing of a PAR or 60 days after the determination of the PAR affirming an overcharge award and if no court challenge is commenced within those 60 days, the tenant will be required to file with the County Clerk a Notice to Rent Stabilized Tenant Concerning Payment of Penalties which Landlord Has Been Directed to Pay by an Administrator's Order (DHCR Form RN-14) and the Judgment Form (DHCR Form RN-14.1). Before the tenant may file these forms with the County Clerk, the tenant must first send the Notice (Form RN-14) to DHCR's Overcharge Case Intake Section at Gertz Plaza, 92-31 Union Hall Street, Jamaica, New York, 11433. The tenant should not send to DHCR the Judgment Form (Form RN- 14.1). DHCR will certify that the owner has not filed a PAR or a proceeding for judicial review, or, if filed, that those proceedings have concluded. DHCR will return to the tenant the completed Notice (Form RN-14) with a certified copy of the Rent Administrator's order, and if applicable, a certified copy of the PAR order. The tenant must then complete the affidavit contained in the Notice (Form RN-14) stating that no portion of the overcharge penalty has been OFFSET against the monthly rent (Method #1 above).

The tenant then files the Notice, the Judgment Form and a certified copy of the overcharge order with the County Clerk's office in the county in which the property is located. The County Clerk's office will then docket the judgment.

While prior owners who collected overcharges are jointly and severally liable for the overcharges they collected, the refund of any overcharge, including penalties collected on or after April 1, 1984 is the obligation of the current owner except in certain limited cases, primarily involving judicial sales. In those limited cases, prior owners are solely liable for overcharges actually collected by them. For complaints filed and overcharges collected before April 1, 1984, refunds and penalties are the obligation of the owner who collected the overcharge.

For more information or assistance, call the DHCR Rent InfoLine, or visit your Borough or County Rent Office.

Revised 5/00

Last updated on 04/07/05

http://www.dhcr.state.ny.us/ora/pubs/html/orafac16.htm
Anna
 
Posts: 2538
Joined: Mon Jul 22, 2002 1:01 am
Location: Manhattan

Postby Anna » Sun Aug 27, 2006 11:04 am

Rentovercharge.com is the web guide to rent overcharge cases in New York. It was created by Steven De Castro, an attorney and recognized authority on rent overcharge cases,...

Rentovercharge.com guides you through the basic questions your lawyer will raise as you consider bringing a rent overcharge claim. This site is not meant as a cookbook for tenants to attempt to do their own rent overcharge cases. On the contrary, the entire point of this site is that rent overcharge cases are complicated, and that you don't have to go it alone. Experienced attorneys are available to assist you individually.

Mr. De Castro offers to evaluate your case individually for free. Therefore, you have no excuse not to seek individual advice.

pages/topics:

Why Should I Read This?
Am I Being Overcharged?
How Much Money Is My Case Worth?
Where Do I File My Claim?
Will the Landlord Hire A Lawyer?
The Top Six Defenses Your Landlord Will Use
What Is the Statute of Limitations?
Is There An Appeal?
How Do I Get My Money If I Win?

http://rentovercharge.com/
Anna
 
Posts: 2538
Joined: Mon Jul 22, 2002 1:01 am
Location: Manhattan

Postby Aubergine » Sun Aug 27, 2006 1:07 pm

New York Practice Series - Landlord and Tenant Practice in New York
Daniel Finkelstein; Lucas A. Ferrara
Database updated November 2004

Chapter 11. Rent Regulation
VI. Prohibitions

§ 11:335. Rent overcharge


Landlords of rent-stabilized and rent-controlled housing accommodations are prohibited from charging or collecting sums in excess of the legal regulated rent.[FN1] Not only may a final order determining overcharge be reduced to a money judgment,[FN2] but penalties may include treble damages.[FN3] Rent-overcharge penalties have been upheld as constitutional.[FN4]

[FN1] (Rent & Evict.Regs.) 9 NYCRR § 2105.1; (Local Emergency Housing Rent Control Act) N.Y. Unconsol. Law § 8609(a); (N.Y.C. Rent & Rehab.L.) N.Y.C.Admin. Code § 26-412(a); (ETPR) 9 NYCRR § 2505.1(a); (RSC) 9 NYCRR § 2525.1.

[FN2] See § 11:363.

[FN3] See § 11:348.

[FN4] Brusco v. New York State Div. of Housing and Community Renewal, 181 A.D.2d 514, 580 N.Y.S.2d 360 (1st Dep’t 1992).

§ 11:336. Rent overcharge--Compare: fair-market rent appeals

A rent-stabilized tenant may allege, by way of a timely and appropriate DHCR complaint, that a unit’s initial legal registered rent (i.e., the first rent-stabilized rent), exceeds the “fair-market rent.” If successful, the first stabilized rent is subject to adjustment and a landlord may be required to remit payment of interest on any refund found to be due.[FN1] The resolution of a fair-market rent appeal in tenant’s favor does not result in punitive penalties such as treble damages.[FN2]

[FN1] See § § 11:179 et seq.

[FN2] See, e.g., Matter of MM & I Realty Co., DHCR Admin. Rev. Dckt. No. GC210160-RO (11/21/95).

§ 11:337. Rent overcharge--Procedure

The procedure for pursuing a rent-overcharge claim differs for rent-controlled and rent-stabilized units.

Practice Pointer:

Since rent overcharge awards frequently amount to sizeable sums of money, counsel should exercise care in selecting the best available forum for adjudication of such claim. For example, the maximum monetary jurisdictional limit of the Civil Court of the City of New York is $25,000.[FN1] However, the same court has jurisdiction over counterclaims without regard to amount. [FN2] There are no monetary jurisdictional limits for DHCR overcharge awards.[FN3]

[FN1] CCCA § 202; see 125 Church Street Development Co. v. Grassfield, 170 Misc. 2d 31, 648 N.Y.S.2d 515 (City Civ. Ct. 1996) (court lacked jurisdiction over respondent-undertenant’s $112,500 cross-claim in holdover proceeding).

[FN2] CCCA § § 208(b), 211; see 125 Church Street Development Co. v. Grassfield, 170 Misc. 2d 31, 648 N.Y.S.2d 515 (City Civ. Ct. 1996).

[FN3] See, e.g., Bauer v. New York State Div. of Housing and Community Renewal, 225 A.D.2d 410, 640 N.Y.S.2d 492 (1st Dep’t 1996) ($40,000 overcharge award upheld).

§ 11:338. Rent overcharge--Procedure--Under rent control

Generally, rent-controlled tenants should pursue the issue of rent overcharge through a court action within two years of the overcharge’s occurrence. Rent-control statutes also indicate that the agency has the authority to enjoin unlawful acts or practices, including a rent overcharge.[FN1] Generally, a rent-controlled tenant (or landlord) may only file only a “Request for Calculation of Maximum Collectible Rent,”[FN2] to obtain information concerning the maximum collectible rent, services, or equipment for the tenant’s apartment. If the rent collected exceeds the MCR, the DHCR may direct the tenant to bring a court action to obtain any overcharge refund due.[FN3]

For a discussion of the availability of Request for Calculation of Maximum Collectible Rent, see: § 11:491.[FN4]

[FN1] See (Emergency Housing Rent Control Law) N.Y. Unconsol. Law § § 8590(1), 8591(1), (5); (Rent & Evict.Regs.) 9 NYCRR § 2105.1; 2106.1(b); (Local Emergency Housing Rent Control Act) N.Y. Unconsol. Law § § 8609(a), 8610(a), (e); (N.Y.C. Rent & Rehab.L.) N.Y.C. Admin. Code § § 26-412(a), 26-413(b)(1), 26-413(d)(2); (N.Y.C. Rent & Evict.Regs.) 9 NYCRR § § 2205.1(a), 2206.4, 2206.8(a)(1).

[FN2] DHCR Form RA-1 (2/96).

[FN3] See, e.g., Matter of P.P.W. Corp., DHCR Admin. Rev. Dckt. No. FI220165RO (8/6/96).

[FN4] DHCR Form RA-1 (2/96).

§ 11:339. Rent overcharge--Procedure--Under rent stabilization

Rent-stabilized tenants may commence an administrative proceeding before the DHCR based on rent overcharge within four years after the occurrence of the overcharge.[FN1] A rent-stabilized tenant may also commence a plenary action or raise a defense or counterclaim, based on rent overcharge.[FN2] If tenant has a prior pending DHCR complaint, an action or counterclaim based on rent overcharge may not be maintained unless the tenant withdraws the DHCR complaint.[FN3]

For a discussion of the availability of Tenant’s Complaint of Rent and/or Other Specific Overcharges In Rent Stabilized Apartments in New York City, see: § 11:491[FN4]

For a discussion of the availability of Rent Overcharge Complaint-Information, see: § 11:491[FN5]

[FN1] See § 11:342.

[FN2] See, e.g., Greer v. Koppel, N.Y.L.J., 6/12/96, p. 31, col. 6 (Sup.Ct., N.Y. County) (tenant successfully sued landlord in Supreme Court for alleged $41,000 overcharge); see also Ch 14.

[FN3] (ETPA) N.Y. Unconsol. Law § 8632(a)(1); see § § 11:20 et seq.

[FN4] DHCR Form RA-89 (4/96).

[FN5] DHCR Form RA-89.1 (4/96).

§ 11:340. Rent overcharge--Statute of limitations

The statute of limitations for rent-overcharge complaints differs for rent-controlled and rent-stabilized housing accommodations. Under rent stabilization, there may be further distinctions depending on when a complaint was filed.[FN1]

[FN1] See § § 11:344 et seq.

§ 11:341. Rent overcharge--Statute of limitations--Two year statute of limitations under rent control

A rent-controlled tenant should make a rent-overcharge claim within two years of the overcharge’s occurrence.[FN1]

Practice Pointer:

When compared with complaints made under rent stabilization, rent overcharge claims concerning rent-controlled housing accommodations are relatively unusual. This disparity reflects the longer history of rent-registration and diminishing number of units that remain subject to rent control.

[FN1] (Emergency Housing Rent Control Law) N.Y. Unconsol. Law § 8591(1); (Rent & Evict.Regs.) 9 NYCRR § 2106.1(b); (Local Emergency Housing Rent Control Law) N.Y. Unconsol. Law § 8610(e); (N.Y.C. Rent & Rehab.L.) N.Y.C.Admin. Code § 26-413(d)(2); (N.Y.C. Rent & Evict.Regs.) 9 NYCRR § 2206.8(a)(1); see de Minicis v. 148 East 83rd St., Inc., 20 A.D.2d 236, 246 N.Y.S.2d 333 (1st Dep’t 1964), order rev’d on other grounds, 15 N.Y.2d 432, 261 N.Y.S.2d 1, 209 N.E.2d 63 (1965) (Recovery of rent overcharge was barred when overcharge payments were made more than two years prior to commencement of court action.); Kabala v. Smigielsky, N.Y.L.J., 10/18/95, p. 29, col. 2 (Civ.Ct., Kings County) (Tenant entitled to refund of rent overcharge paid for two year period immediately preceding last overpayment.).

§ 11:342. Rent overcharge--Statute of limitations--Four year statute of limitations under rent stabilization

When a rent-stabilized unit has been properly registered with the DHCR,[FN1] liability for rent overcharge is limited to a four-year period.[FN2] For example, if a tenant filed a complaint on June 1, 2004, and the landlord had properly filed the initial DHCR rent-registration and all annual registration statements then potential rent overcharge liability extends back to May 31, 2000.[FN3]

[FN1] See generally § § 11:153 et seq.

[FN2] (ETPA) N.Y. Unconsol. Law § 8632(a)(1), 8632(a)(1)(b)(i); (ETPR) 9 NYCRR 2506.1(a)(2), (3); (RSL) N.Y.C.Admin. Code § 26-516(a)(2); (RSC) 9 NYCRR § 2526.1(a)(2); McCarthy v. New York State Div. of Housing & Community Renewal, 290 A.D.2d 313, 736 N.Y.S.2d 353 (1st Dep’t 2002) (“Pursuant to RSL ... the rental history prior to the four-year period preceding the filing of the complaint may not be considered.”); Zafra v. Pilkes, 245 A.D.2d 218, 666 N.Y.S.2d 633 (1st Dep’t 1997); 2612 Hotel Corp. v. Silver, N.Y.L.J., 1/8/98, p. 24, col. 6 (Civ.Ct., N.Y. County) (It is “crystal clear that this statutory change was specifically intended to close the door to an examination of missing, incomplete, substantively erroneous and/or unserved initial and/or annual registration statements preceding a four year period of continuously filed and unchallenged rent-registration statements.”); see also Avner v. Trump Mgmt., Inc., N.Y.L.J. 5/19/95, p. 24, col. 5 (App.Term, 2d and 11th Jud.Dists.) (pre-amendment) (statute precluded examination of proof of any alleged overcharge accruing prior to the four-year period).

[FN3] See, e.g., 78/79 York Associates v. Rand, 180 Misc. 2d 316, 691 N.Y.S.2d 875 (App. Term 1999) (When tenant’s rent overcharge counterclaim was interposed in October 1995: “The rent-registration in effect four years prior to the interposition of tenant’s claim set forth a legal rent of $267.45. Accordingly, tenant is entitled to recover any overcharges paid within four years of its October 1995 claim.”).

§ 11:343. Rent overcharge--Statute of limitations--Four year statute of limitations under rent stabilization--Effect of failure to register rents on statute of limitations for rent-overcharge liability

The failure to file a proper and timely initial or annual rent-registration statement will, until such time as the registration is filed, bar a landlord from applying for or collecting any rent in excess of the legal-regulated rent in effect on the date of the last preceding registration statement or, if no such statements have been filed, the legal regulated rent in effect on the date that the unit became subject to registration requirements.[FN1]

[FN1] (ETPA) N.Y. Unconsol. Law § 8632-a(e); (ETPR) 9 NYCRR § 2509.3; (RSL) N.Y.C.Admin. Code § 26-517(e); (RSC) 9 NYCRR § 2528.4; Myers v. Frankel, 184 Misc. 2d 608, 708 N.Y.S.2d 566 (App. Term 2000), order modified, 292 A.D.2d 575, 740 N.Y.S.2d 366 (2d Dep’t 2002); Ridges & Sports Realty Corp. v. Edwards, N.Y.L.J., 6/15/04, p. 24, col. 3 (App.Term, 1st Dep’t) (“[A]lthough the challenged rent had been paid by the tenant for more than four years prior to the interposition of the claim, it was not registered four years prior to the imposition of the claim. However, since tenant interposed his counterclaim on August 16, 2001, the court was precluded from examining any rental history prior to August 16, 1997.”); see also § § 11:159 et seq.

§ 11:344. Rent overcharge--Statute of limitations--Four year statute of limitations under rent stabilization--Statute of limitations for rent-overcharge complaints filed before April 1, 1984

Overcharge complaints interposed by rent-stabilized tenants prior to April 1, 1984 are governed by prior law which extended overcharge liability back to the date the unit became subject to regulation, (i.e. May 31, 1968, June 30, 1974, or upon subsequent stabilization following vacancy decontrol).[FN1]

[FN1] See, e.g., Miller v. Division of Housing and Community Renewal, 289 A.D.2d 20, 733 N.Y.S.2d 860 (1st Dep’t 2001) (“The four-year limitation on DHCR’s review of rental history contained in RSL ... is inapplicable to the instant complaint filed prior to April 1, 1984.”); Jemrock Realty Co. v. Department of Housing and Community Renewal, 166 A.D.2d 222, 564 N.Y.S.2d 87 (1st Dep’t 1990); see generally § § 11:50 et seq..

§ 11:345. Rent overcharge--Production of rent-history records

In response to a rent-overcharge complaint, the DHCR may require the landlord to produce copies of all relevant vacancy and renewal leases to prove the base-date rent and subsequent rental history. Proof of the base-date rent may also be established via rent ledgers.[FN1]

[FN1] See, e.g., Matter of 440 West 34th St. Co., DHCR Admin. Rev. Dckt. No. JK410223RO (5/24/96) (No overcharge found when landlord’s rent ledger covering two months prior and two months after date of decontrol of apartment evinced name of prior rent-controlled tenant and amount of rent paid, information consistent with DHCR’s rent-control records.).

§ 11:346. Rent overcharge--Rent determined by “default formula” when rent-history incomplete

If a landlord fails to submit a complete rent history in response to tenant’s proper and timely rent-overcharge complaint, the DHCR may establish the lowest possible rent for the unit by way of a “default formula” utilizing:

• the lowest rent for the same-sized apartment in the same line;[FN1] or
• the complaining tenant’s vacancy rent minus the guidelines and vacancy increases applicable to that vacancy lease; or

• the prior tenant’s last rent, if known.[FN2]

[FN1] See, e.g., Miller v. Division of Housing and Community Renewal, 289 A.D.2d 20, 733 N.Y.S.2d 860 (1st Dep’t 2001) (“DHCR’s default calculation for determining the legal rent was rationally based on the lowest rent for an apartment in the same line.”); Sharon Towers Realty v. New York State Div. of Housing and Community Renewal, 201 A.D.2d 976, 607 N.Y.S.2d 833 (4th Dep’t 1994).

[FN2] Mansions v. Higgins, 189 A.D.2d 713, 593 N.Y.S.2d 5 (1st Dep’t 1993); 61 Jane Street Associates v. New York City Conciliation and Appeals Bd., 108 A.D.2d 636, 486 N.Y.S.2d 694 (1st Dep’t 1985), order aff’d, 65 N.Y.2d 898, 493 N.Y.S.2d 455, 483 N.E.2d 130 (1985).

§ 11:347. Rent overcharge--Penalties for rent-overcharge

Penalties for rent overcharge may include treble damages, interest, and attorneys’ fees.[FN1]

[FN1] See, e.g., Application of Dattoma v. New York State Div. of Housing and Community Renewal, 262 A.D.2d 54, 689 N.Y.S.2d 634 (1st Dep’t 1999) (Upholding “rent administrator’s determination setting the legal regulated rent for the subject apartment at $1115.25 and assessing a total of $31,369.43 in overcharges and treble damages against respondent landlord ... .”); Bauer v. New York State Div. of Housing and Community Renewal, 225 A.D.2d 410, 640 N.Y.S.2d 492 (1st Dep’t 1996) (when landlord never registered unit and submitted no rent history, DHCR properly assessed treble damages, applied default method to establish rent, imposed rent freeze until apartment was registered, and determined a total of $40,000 in overcharges.); 134-38 Maple St. Realty Corp. v. Medina, N.Y.L.J., 3/10/04, p. 25. col. 6 (App.Term, 2d and 11th Jud.Dists.) (“The only counterclaim asserted in the answer was for rent overcharge. Punitive damages are not available for this statutory cause of action.”).

§ 11:348. Rent overcharge--Penalties for rent-overcharge--Treble damages applied to “willful” rent-overcharge

Treble damages may be assessed for the “willful” rent-overcharge of a rent-controlled tenant.[FN1] For rent-stabilized tenants, overcharges determined to have been collected on or after April 1, 1984 are subject to treble damages. [FN2]

Practice Pointer:

It is DHCR’s policy to apply the treble damages penalty to overcharges occurring on or after April 1, 1984 even when the tenant’s complaint was filed prior to April 1, 1984.[FN3] In order to obviate any due process objections, DHCR may notify landlords prior to the issuance of a ruling that if an overcharge is determined they may be liable for treble damages for overcharges occurring on or after April 1, 1984. If such notice is not provided, a treble-damage penalty may be revoked on administrative appeal.[FN4]

[FN1] (Emergency Housing Rent Control Law) N.Y. Unconsol. Law § 8591(1); (Local Emergency Housing Rent Control Law) N.Y. Unconsol. Law § 8610(e); (N.Y.C. Rent & Rehab.L.) N.Y.C.Admin. Code § 26-413(d)(2); (N.Y.C. Rent & Evict.Regs.) 9 NYCRR § 2206.8(b)(1); see, e.g., Kabala v. Smigielsky, N.Y.L.J., 10/18/95, p. 29, col. 2 (Civ.Ct., Kings County).

[FN2] (ETPA) N.Y. Unconsol. Law § 8632(a)(1); (ETPR) 9 NYCRR § 2506.1(a)(1); (RSL) N.Y.C.Admin. Code § 26-516.a; (RSC) 9 NYCRR § 2526.1(a)(1); see also (RSC) 9 NYCRR § 2526.1(a)(4); DHCR Policy Statement 89-2 (New York City regulations further provide that treble-damages apply to overcharges collected on or after April 1, 1984 whether tenant’s complaint was made before or after that date).

[FN3] DHCR Policy Statement 89-2; cf. Blodgette v. Melohn, 124 Misc. 2d 736, 477 N.Y.S.2d 587 (City Civ. Ct. 1984) (no treble damages imposed on overcharges collected prior to April 1, 1984).

[FN4] DHCR Policy Statement 89-2.

§ 11:349. Rent overcharge--Penalties for rent-overcharge--Treble damages applied to “willful” rent-overcharge -- “Willful” overcharge, defined

A rent overcharge is presumed willful unless a landlord proves “by a preponderance of the evidence” that it was not.[FN1] The DHCR interprets this to mean that “when an owner submits no evidence or when the evidence is equally balanced, the overcharge is deemed to be willful.”[FN2]

[FN1] See (ETPR) 9 NYCRR § 2506.1; (RSC) 9 NYCRR § 2526.1(a)(1); Miller v. Division of Housing and Community Renewal, 289 A.D.2d 20, 733 N.Y.S.2d 860 (1st Dep’t 2001) (There is a “presumption of willfulness inherent in DHCR’s finding of an overcharge ... .”); Hargrove v. Division of Housing and Community Renewal, 244 A.D.2d 241, 664 N.Y.S.2d 767 (1st Dep’t 1997).

[FN2] DHCR Policy Statement 89-2; cf. Goldstein v. New York State Div. of Housing and Community Renewal, Office of Rent Admin., 226 A.D.2d 722, 642 N.Y.S.2d 530 (2d Dep’t 1996) (Landlord’s extensive connections with building and prior owner supported DHCR’s finding of willful overcharge.); Round Hill Management v. Higgins, 177 A.D.2d 256, 575 N.Y.S.2d 842 (1st Dep’t 1991) (Treble damages not assessed when landlord had reason to believe that rents charged at time of building transfer were legal.); see also Heights Associates v. Bautista, 178 Misc. 2d 669, 683 N.Y.S.2d 372 (App. Term 1998) (Court refused to assess treble damages against current owner for overcharges collected by predecessor: “To the extent that the Rent Stabilization Code extends liability for treble damages for such overcharges to current owners. ... it is out of harmony with the statute that it is designed to implement and with established principles of law and cannot be applied. ...”).

§ 11:350. Rent overcharge--Penalties for rent-overcharge--Treble damages applied to “willful” rent-overcharge--Treble damages also applied to negligent rent overcharge

Treble damages may be assessed when an overcharge was negligent.[FN1]

[FN1] (Emergency Housing Rent Control Law) N.Y. Unconsol. Law § 8591(5); (Rent & Evict.Regs.) 9 NYCRR § 2106.1; (N.Y.C. Rent & Rehab.L.) N.Y.C.Admin. Code § 26-413(d)(2); (N.Y.C.Rent & Evict.Regs.) 9 NYCRR § 2206.1.

§ 11:351. Rent overcharge--Penalties for rent-overcharge--Treble damages applied to “willful” rent-overcharge--Treble damages also applied to negligent rent overcharge--Exception: New York City rent-stabilized units

Neither the Rent Stabilization Law nor Code makes any provision for treble damages on any basis other than willful rent overcharge.[FN1]

[FN1] See (ETPA) N.Y. Unconsol. Law § 8632(a)(1); (ETPR) 9 NYCRR § 2506.1(a)(1) (RSL) N.Y.C.Admin. Code § 26-516.a; (RSC) 9 NYCRR § 2526.1(a)(1).

§ 11:352. Rent overcharge--Penalties for rent-overcharge--Treble damages applied to “willful” rent-overcharge--Two year limit on treble damages

Treble damages awards are limited to two years prior to filing of the rent-overcharge complaint even when, in the case of rent stabilization, the overcharge previously spanned a longer time period.[FN1] Treble damages also continue to accrue after a complaint is filed, if the overcharge is not corrected.

[FN1] (ETPA) N.Y. Unconsol. Law § 8632(a)(1)(b)(ii); (ETPR) 9 NYCRR § 2506.1(a)(2)(i); (RSL) N.Y.C.Admin. Code § 26-516.a(2)(i); (RSC) 9 NYCRR § 2526.1(a)(2)(i); see also DHCR Policy Statement 89-2.

§ 11:353. Rent overcharge--Penalties for rent-overcharge--Treble damages applied to “willful” rent-overcharge--No treble damages for technical error

Treble damages may be avoided if a “hypertechnical” error caused the overcharge.[FN1] However, continuing the same technical error after a DHCR order correcting the irregularity may result in a finding of willful rent overcharge.[FN2]

Caveat:

A landlord, who miscalculates a renewal-lease increase after the DHCR’s “Notice of Lease Renewal Form,” went into effect in the City of New York, may not be excused from treble damages when DHCR decides an overcharge complaint involving a renewal lease commencing on or after October 1, 1988, since the form demonstrates the proper method of computing such increases.[FN3]

[FN1] See, e.g., Two Lincoln Square Associates v. New York State Div. of Housing and Community Renewal, 191 A.D.2d 281, 594 N.Y.S.2d 755 (1st Dep’t 1993) (No treble damages for compounding RGB increases within the same guideline years when DHCR policy statement designated such action a “hypertechnical” violation.).

[FN2] DHCR Policy Statement 89-2.

[FN3] DHCR Policy Statement 89-2; see Renewal Lease Form (DHCR Form RTP-8 ).

§ 11:354. Rent overcharge--Penalties for rent-overcharge--Treble damages applied to “willful” rent-overcharge--No treble damages when refund offered in response to complaint

The DHCR may not impose treble damages if a landlord adjusts a tenant’s rent and tenders a full refund of all excess rent collected, plus interest, within the time afforded to answer a tenant’s overcharge complaint.[FN1]

[FN1] DHCR Policy Statement 89-2.

§ 11:355. Rent overcharge--Penalties for rent-overcharge--Treble damages applied to “willful” rent-overcharge--No treble damages for failure to register rent

The failure to register stabilized rents with the DHCR is not, in and of itself, grounds for a willful overcharge determination.[FN1]

[FN1] (ETPA) N.Y. Unconsol. Law § 8632(a)(1); (ETPR) 9 NYCRR § 2506.1(a)(1); (RSL) N.Y.C.Admin. Code § 26-516(a); see § 11:360; (RSC) 9 NYCRR § 2526.1(a)(1).

§ 11:356. Rent overcharge--Penalties for rent-overcharge--Interest on overcharge refund

Under rent stabilization, when a landlord proves “by a preponderance of the evidence” that an overcharge was not willful (or, when applicable, negligent), interest may be assessed on the overcharge amount.[FN1] In New York City, a landlord may be directed to refund an overcharge to a rent-controlled tenant with interest.[FN2]

[FN1] (ETPA) N.Y. Unconsol. Law § 8632(a)(1); (ETPR) 9 NYCRR § 2506.1(a)(1); (RSL) N.Y.C.Admin. Code § 26-516.a; (RSC) 9 NYCRR § 2526.1(a)(1).

[FN2] (N.Y.C. Rent & Rehab.L.) N.Y.C.Admin. Code § 26-413(c)(3).

§ 11:357. Rent overcharge--Penalties for rent-overcharge--Interest on overcharge refund--Interest rate

Under rent stabilization, the interest rate payable on rent overcharges is determined by reference to N.Y.C.P.L.R. 5004.[FN1] The current interest rate of interest is nine percent.[FN2]

[FN1] (ETPA) N.Y. Unconsol. Law § 8632(a)(1); (ETPR) 9 NYCRR § 2506.1(a)(1); (RSL) N.Y.C.Admin. Code § 26-516.a; (RSC) 9 NYCRR § 2526.1(a)(1).

[FN2] N.Y.C.P.L.R. 5004.

§ 11:358. Rent overcharge--Penalties for rent-overcharge--Attorneys’ fees and costs

The various rent regulations are inconsistent as to whether attorneys’ fees and costs may be awarded to a tenant upon a rent overcharge determination. All rent-control laws and regulations state that a landlord “shall be liable for reasonable attorney’s fees and costs as determined by the court.”[FN1] Outside New York City, rent-stabilization rules provide that landlords “shall, in all cases be assessed the reasonable costs and attorney’s fees of the proceeding”[FN2] In New York City, when a rent-stabilized tenant has been overcharged, a landlord “may” be assessed reasonable costs and attorneys’ fees. [FN3] Regulations further stipulate that such attorneys’ fees and costs are treated “as an additional penalty.”[FN4]

[FN1] Emergency Housing Rent Control Law) N.Y. Unconsol. Law § 8591(5); (Local Emergency Housing Rent Control Law) N.Y. Unconsol. Law § 8610(e); (N.Y.C. Rent & Rehab.L.) N.Y.C.Admin. Code § 26-413(d)(2); (N.Y.C. Rent & Evict.Regs.) 9 NYCRR § 2206.8(b).

[FN2] (ETPA) N.Y. Unconsol. Law § 8632(a)(1)(d); see also (ETPR) 9 NYCRR § 2506.1(d).

[FN3] (RSL) N.Y.C.Admin. Code § 26-516.a(4).

[FN4] (RSC) 9 NYCRR § 2526.1(d).

§ 11:359. Rent overcharge--Penalties for rent-overcharge--Attorneys’ fees and costs--DHCR standard to determine discretionary attorneys’ fees award

The fact that a tenant has incurred legal fees as a result of a landlord’s bad faith throughout an entire proceeding may trigger an award of the tenant’s attorneys’ fees.[FN1]

[FN1] Matter of Herman/Schreiber, DHCR Admin. Rev. Dckt. Nos. JJ410015RP/IL410022RP (8/9/96) (award of attorneys’ fees to tenant was unwarranted).

§ 11.359.50. Rent overcharge--Penalties for rent-overcharge--Attorneys’ fees and costs--Attorneys’ fees recovery against DHCR

The Equal Access to Justice Act (N.Y.C.P.L.R. § 8601(a)) provides that a prevailing party may recover fees and other expenses incurred by such party in any civil action brought against the state, unless the court finds that the state’s position was “substantially justified” or that special circumstances render an award unjust.[FN1]

[FN1] N.Y.C.P.L.R § 8601(a); In re Application of Crabtree v. DHCR, N.Y.L.J., 6/3/02, p. 18, col. 1 (App.Term, 1st Dep’t) (“[T]he court concluded that DHCR’s position was substantially justified and that the tenant was not entitled to recover attorney’s fees under the statute.”).

§ 11:360. Rent overcharge--Penalties for rent-overcharge--Compare: rent freeze for failure to register rent

The failure to file a proper and timely initial or annual rent-registration statement will, until such time as the registration is filed, bar a landlord from collecting any rent in excess of the legal regulated rent in effect on the date of the last preceding registration statement or, if no such statements have been filed, the legal regulated rent in effect on the date that the unit became subject to registration requirements.[FN1]

[FN1] See § § 11:173 et seq.

§ 11:361. Rent overcharge--Recovery of rent overcharge

Generally, upon final determination of a rent overcharge, a landlord should refund to tenant the full amount owed, either in a lump sum or as credits against future monthly rent payments.

§ 11:362. Rent overcharge--Recovery of rent overcharge--Offset method

Under rent stabilization, a tenant may recover a rent-overcharge penalty established by the DHCR by deducting the overcharge from rent “at a rate not in excess of 20 percent of the amount of the penalty for any one month’s rent.” [FN1] If twenty percent of the overcharge exceeds the monthly rent, the tenant does not have to pay any rent until the overcharge is recouped.[FN2]

[FN1] (ETPA) N.Y. Unconsol. Law § 8632(a)(1)(e); (ETPR) 9 NYCRR § 2506.1(e); (RSL) N.Y.C.Admin. Code § 26-516.a(5); (RSC) 9 NYCRR § 2526.1(e); see, e.g., 120 E. 34th St. Co. LLC v. Quick, N.Y.L.J., 8/5/03, p. 18, col. 1 (App.Term, 1st Dep’t) (“Tenants elected to recover the overcharge by deducting it from rent due.”); East 7th Street Development Corp. v. Miller, 138 Misc. 2d 345, 524 N.Y.S.2d 636 (City Civ. Ct. 1988).

[FN2] (RSC) 9 NYCRR § 2526.2(e).

§ 11:363. Rent overcharge--Recovery of rent overcharge--Judgment method

Under rent stabilization, a tenant may opt to enforce a final rent-overcharge determination by filing a judgment.[FN1] The filing of a judgment creates a lien against the landlord’s real property and, if not satisfied, may be enforced by a County Sheriff or the City Marshall. A landlord may give a tenant rent credits for up to six months before the tenant may demand that any remaining balance be paid in a lump sum. Alternatively, the tenant may continue to offset the refund against rent owed.[FN2]

[FN1] (ETPA) N.Y. Unconsol. Law § 8632(a)(1)(e); (ETPR) 9 NYCRR § 2506.1(e); (RSL) N.Y.C.Admin. Code § 26-516.a(5); (RSC) 9 NYCRR § 2526.1(e).

[FN2] (RSC) 9 NYCRR § 2522.3(d).

§ 11:364. Rent overcharge--Recovery of rent overcharge--Effect of reduction of overcharge award

If, upon reconsideration pursuant to a PAR, the DHCR reduces an overcharge award and raises the rent, the tenant should be given a “reasonable” time to remit the differential.[FN1]

Practice Pointer:

If a tenant should owe rent arrears, this fact should be asserted in the landlord’s answer or appeal. While its assertion is no guarantee of success, its omission may surely result in an overcharge determination that does not reflect accurate calculations.[FN2]

[FN1] See, e.g., Meyer v. New York State Div. of Housing and Community Renewal, 192 A.D.2d 375, 596 N.Y.S.2d 358 (1st Dep’t 1993) (DHCR’s order which directed tenant to cure underpayment within twelve months, was replaced with forty-eight month repayment period when original overcharge finding was the result of DHCR’s miscalculations and when underpayment spanned a five year period due to the agency’s “untenable” delay in deciding the administrative appeal.).

[FN2] See, e.g., Matter of Halmoni Realty Corp., DHCR Admin. Rev. Dckt. No. CF510023RO (1/26/96) (In response to landlord’s PAR, DHCR modified rent-overcharge finding to reflect that tenant vacated owing over $10,000 in rent arrears.).

§ 11:365. Rent overcharge--Recovery of rent overcharge--Disposition of overcharge awards when tenant vacates and leaves no forwarding address

At present, the DHCR takes no action when a tenant is entitled to a refund under a final administrative determination of rent overcharge, but has vacated the apartment and left no forwarding address with either the DHCR or the U.S. Post Office.[FN1] Under a former, short-lived policy, the DHCR directed landlords to deposit the entire refund amount under such orders into a DHCR escrow account within thirty-five days from the final order’s issuance.[FN2] Funds remitted to the DHCR’s overcharge escrow account under the prior policy remain on deposit with the agency until claimed by the tenant or “disposed of pursuant to the appropriate provisions of State law.”[FN3]

[FN1] See DHCR Policy Statement 95-1, superseding and prospectively rescinding DHCR Policy Statement 93-4.

[FN2] DHCR Policy Statement 93-4.

[FN3] DHCR Policy Statement 95-1.

§ 11:366. Rent overcharge--Recovery of rent overcharge--Effect of change in building ownership

The obligation to refund an overcharge collected on or after April 1, 1984, including the payment of penalties, belongs to the present owner in a rent-overcharge proceeding. This is to be distinguished from a FMRA case in which a current owner may not be liable for a prior owner’s overcharges.[FN1]

[FN1] (ETPR) 9 NYCRR § 2506.1(f)(1); (RSC) 9 NYCRR § 2526.1(f)(2)(i); Fullan v. 142 East 27th Street Associates, 282 A.D.2d 275, 723 N.Y.S.2d 179 (1st Dep’t 2001), leave to appeal granted, 99 N.Y.2d 511, 760 N.Y.S.2d 102, 790 N.E.2d 276 (2003) and rev’d, 1 N.Y.3d 211, 770 N.Y.S.2d 707, 802 N.E.2d 1105 (2003); Sanford Avenue Realty Co., LLC v. Reynoso, N.Y.L.J., 7/17/03, p. 23, col. 4 (App.Term, 2d and 11th Dep’t) (“Insomuch as the DHCR award. . . is only against the prior owner, and the current owner was neither named in the order nor made a party to the DHCR overcharge proceeding, the order is not enforceable against the current owner by way of entry and filing, and tenant’s counterclaim seeking to enforce the order should properly have been dismissed.”).

§ 11:367. Rent overcharge--Recovery of rent overcharge--Effect of judicial sale of building

Generally, when property changes hands at a judicial sale and insufficient records were provided at closing to ascertain the legal rents, the purchaser is not liable for prior rent overcharges in the absence of collusion or a relationship with the prior landlord. Liability is limited to any overcharge actually collected after the sale date.[FN1] A landlord who thereafter purchases the building may also be subject to the exception from liability for prior overcharges.[FN2] If tenants are not made parties to the foreclosure, their rights to recover overcharges from the purchaser at a judicial sale are not extinguished.[FN3]

[FN1] (ETPR) 9 NYCRR § 2506.1(f)(1); (RSC) 9 NYCRR § 2526.1(f)(2); Gerard v. Supreme Co., 277 A.D.2d 154, 717 N.Y.S.2d 106 (1st Dep’t 2000) Ouziel v. Brito, 176 Misc. 2d 216, 673 N.Y.S.2d 531 (App. Term 1998) (“So long as the purchasing mortgagee was not on notice of the rent overcharge ... he should not be liable for the overcharges by the prior owner.”); but see Hollis Gardens Realty Corp. v. Charles, N.Y.L.J., 5/8/96, p. 32, col. 2 (Civ.Ct., Queens County) (judicial sale purchaser held liable for prior owner’s overcharges when pre-ownership rent monies were sought pursuant to assignment agreement with receiver); cf. 36 Plaza Corp. v. Marshall, 168 Misc. 2d 333, 644 N.Y.S.2d 457 (City Civ. Ct. 1996) (DHCR order determining rent overcharge was available to purchaser at time of judicial sale and when building was transferred directly to purchaser under prior landlord’s reorganization plan, rather than through actual foreclosure sale, judicial sale exception held inapplicable and did not prevent liability for rent overcharge).

[FN2] Gaines v. New York State Div. of Housing and Community Renewal, 90 N.Y.2d 545, 664 N.Y.S.2d 249, 686 N.E.2d 1343 (1997); 247 West 11th Street Realty Assocs., L.P. v. Houser, 177 Misc. 2d 938, 678 N.Y.S.2d 854 (App. Term 1998) (exemption applies to successor purchasers).

[FN3] Nationwide Associates, Inc. v. Brunne, 216 A.D.2d 547, 629 N.Y.S.2d 769 (2d Dep’t 1995) (“It is well settled that ‘the interest of an occupant of the mortgaged premises who is not served remains unaffected by the foreclosure.”); Empire Sav. Bank v. Towers Co., 54 A.D.2d 574, 387 N.Y.S.2d 138 (2d Dep’t 1976); Krochta v. Green, 121 Misc. 2d 471, 467 N.Y.S.2d 995 (City Ct. 1983).

§ 11:368. Rent overcharge--Recovery of rent overcharge--Effect of judicial sale of building -- “In rem” building

When a building is purchased from the City of New York at an in rem sale, the new owner may not be required to refund any overcharges collected prior to the date of the conveyance. The DHCR has determined that the acquisition of an in rem building falls within the judicial-sale exception.[FN1]

[FN1] Matter of Graham Court Owners Corp., DHCR Admin. Rev. Dckt. No. BJ430192RO (3/7/96).

§ 11:369. Rent overcharge--Recovery of rent overcharge--Effect of judicial sale of building--Receiver treated as judicial-sale purchaser

While a “receiver” qualifies as an owner for purposes of rent stabilization, [FN1] equitable considerations mandate that a receiver be placed in the same position as a judicial sale purchaser and is thus only liable for rent overcharges actually collected.[FN2]

[FN1] See (ETPR) 9 NYCRR § 2500.2(g); (RSC) 9 NYCRR § 2520.6(i).

[FN2] Matter of Tulip, DHCR Admin. Rev. Dckt. No. JB410189RO (4/12/96); see (ETPR) 9 NYCRR § § 2502.3(a)(2), (3), 2506.1(f)(2); (RSC) 9 NYCRR § 2526.1(f)(2)(ii); (RSC) 9 NYCRR § 2522.7 (in setting any legal regulated rent, “the DHCR shall take into consideration all factors bearing upon the equities involved”).
Aubergine
 

Four-Year Rule on Rent Overcharges

Postby TenantNet » Sun Feb 03, 2008 7:51 pm

Rent Overcharges
After 24 Years, Four-Year Rule Still Vexing
By Warren A. Estis and Jeffrey Turkel
NYLJ, November 7, 2007

In a recent decision in H.O. Realty Corp. v. New York State Division of Housing and Community Renewal,1 the Appellate Division, First Department, ruled that for purposes of determining whether an owner has rebutted the presumption that an overcharge is willful, DHCR or a court may look at evidence relating to a time that predates the four-year overcharge look-back period. The two-justice dissent in H.O. Realty establishes that the precise application of the four-year rule remains as contentious as ever.

Omnibus Housing Act

In 1983, the New York State Legislature passed the Omnibus Housing Act ("OHA") (L. 1983, ch. 403). Section 14 of the OHA added §26-516(a) to the RSL to provide that for purposes of determining rent overcharge complaints, the "base date" would be the "rent indicated in the annual registration statement filed four years prior to the most recent registration statement." Thus, the four-year statute of limitations for rent overcharge complaints was born.

Thereafter, however, confusion reigned. DHCR strictly construed the four-year rule; the agency accepted the base rent as legal, and then determined whether there had been an overcharge thereafter. Some courts, however, would examine the entire rental history of the apartment (in some cases, going back two decades or more) to determine the proper legal rent, but would only award a refund based on overcharges collected during the four-year period prior to the complaint. See, e.g., Zafra v. Pilkes, 661 N.Y.S.2d 515 (1st Dept. 1997), op. recalled and vacated on reargument 245 AD2d 218, 666 N.Y.S.2d 633 (1st Dept. 1997).

The 1997 Reform

In an effort to clarify matters, in 1997 the Legislature amended RSL §26-516(a) pursuant to the Rent Regulation Reform Act ("RRRA") (L. 1997, ch. 116). Section 33 of the RRRA amended RSL §26-516(a) to provide as follows:

Except as provided under clauses (i) and (ii) of this paragraph, a complaint under this subdivision shall be filed with the state division of housing and community renewal within four years of the first overcharge alleged and no determination of an overcharge and no award or calculation of an award of the amount of an overcharge may be based upon an overcharge having occurred more than four years before the complaint is filed.

This paragraph shall preclude examination of the rental history of the housing accommodation prior to the four-year period preceding the filing of a complaint pursuant to this subdivision" (material added by the RRRA emphasized).

More Confusion

The 1997 amendment, unfortunately, did not settle the issue of how the four-year rule was to be applied in all instances. For example, in Mengoni v. New York State Division of Housing and Community Renewal, 97 NY2d 630, 735 N.Y.S.2d 863 (2001), the Court of Appeals, resolving a split between the First and Second Departments, held that the four year statute of limitations on rent overcharges did not apply to overcharge complaints filed before April 1, 1984. In Myers v. Frankel, 295 AD2d 575, 740 N.Y.S.2d 366 (2d Dept. 2002), the Second Department, modifying Appellate Term, ruled that the four-year limitation period starts to run with the first overcharge alleged, and cannot be enlarged by subsequent "overcharges."

Two additional disputes concerning the four-year rule emerged in 2005. In East West Renovating Co. v. New York State Division of Housing and Community Renewal, 16 AD3d 166, 791 N.Y.S.2d 88 (1st Dept. 2005), the First Department ruled that DHCR can review rent records beyond the four-year period to determine whether an apartment is stabilized. In Ador Realty v. New York State Division of Housing and Community Renewal, 25 AD3d 128, 802 N.Y.S.2d 190 (2d Dep't 2005), the Second Department held that in order to determine whether an owner was entitled to collect a vacancy bonus under RSL §26-511(c)(5-a), DHCR or a court may look at the rental history beyond the four year look-back period.

'H.O. Realty'

In H.O. Realty, the tenant filed an overcharge complaint on July 17, 2002, thus establishing the base date as July 17, 1998. The owner claimed that there was no rent overcharge because he had substantially improved the apartment in 1997-98. DHCR found that the owner had, as claimed, made the improvements, and had believed in good faith that it could pass those costs on to the tenant in the form of rent increases.

After an Article 78 proceeding, DHCR took the case back and ruled that the overcharge had indeed been willful. DHCR concluded that the statute of limitations precluded the agency from looking at exculpatory evidence beyond the four-year period when determining whether an owner has intentionally overcharged the tenant. DHCR then imposed substantial treble damages. In a subsequent Article 78 proceeding, Supreme Court (Kornreich J.) affirmed DHCR's order.

The Appellate Division, by a 3-2 majority, modified Justice Kornreich's order, holding that the agency could, and should, review all of the owner's exculpatory evidence on the issue of willfulness.

Justice E. Michael Kavanagh, in an opinion joined by Justices Joseph P. Sullivan and Bernard J. Malone, Jr., wrote that the mechanical calculation of what the rent should be - to which the four-year statute of limitation clearly applies - is fundamentally different from the factual issue of whether an overcharge was willful:

Initially, it must be noted that the Rent Stabilization Law, by its terms, provides that an owner found to have charged an unlawful rent will be given a reasonable opportunity to be heard, and if it can establish by a preponderance of the credible evidence that the overcharge was not willful, treble damages will not be imposed as a penalty. Read in context, there is nothing in this provision that, by its terms, limits the owner in proving its good faith to the four-year period immediately prior to the filing of the overcharge complaint. The four-year limitation specifically refers to the period within which a rent may be challenged; it does not, by its terms, limit the period in which the owner can draw evidence to explain its actions to the four years immediately prior to the filing of the complaint.

It is difficult to conceive of a rational basis for precluding from consideration evidence that is otherwise relevant and helpful in determining willfulness simply because it predates the date of the overcharge complaint by four years. Owners, who were the intended beneficiaries of this amendment limiting the period in which rents may be challenged, will surely not complain because consideration of such evidence, whatever its date, is not adverse to their legitimate interests. In fact, owners who make every effort to comply with their obligations under the Rent Stabilization Law can only benefit from an inquiry that will allow a full and thorough review of all competent evidence on this issue. A rule that arbitrarily excludes from consideration such evidence not only fails to advance the objectives of the Rent Stabilization Law but may well result in severe penalties being imposed in situations where they clearly are not warranted" (internal citations omitted).

Thus, the majority seemed to imply that because the four-year rule was intended to benefit owners, only owners could submit evidence beyond the four-year look-back period on the issue of willfulness. In its next paragraph, however, the majority appeared to undercut that position, implying that tenants as well as owners could submit such information:

Parenthetically, willfulness is a penalty proceeding and DHCR should have access to any competent evidence, including an owner's record of compliance with these regulations, before deciding to impose treble damages as punishment for an overcharge. No one would seriously argue that any valid interest would be served by allowing a landlord who is a chronic offender of these regulations to bar from consideration any part of its history of charging tenants illegal rents just because the overcharges occurred four years before the most recent complaint. Conversely, an owner who has never been found to have violated these regulations should have the full benefit of that history to support its claim that the instant overcharge was not willful, but rather, an aberration and a good-faith mistake.

The authors find this aspect of the majority's analysis to be confusing. Section 26-516(a) precludes "examination of the rental history of the housing accommodation" beyond the four-year period. But information as to landlord's past "history" of overcharging with respect to other apartments does not constitute evidence as to the "rental history of the housing accommodation" in question.

Justice John W. Sweeny, Jr., in an opinion joined by Justice Angela M. Mazzarelli, took a stricter view of the statute:

We have previously upheld Rent Stabilization Law §26-516(a)(2), as amended by the Rent Regulation Reform Act of 1997, which specifically 'preclude[s] examination of the rental history of the housing accommodation prior to the four-year period preceding the filing of a [rent overcharge] complaint.'

There is no dispute in this case that the base date was July 17, 1998. The improvements claimed to have been made by the owner were completed by February 13, 1998, prior to the base date. The complaint was filed on July 17, 2002, more than four years after the completion of the claimed renovations. The inclusion of the renovations in the rental calculations was thus impermissible (internal citations omitted).

Whereas the majority viewed the case as one of pure statutory construction, where no deference was due the agency, the dissent saw this case as a fact specific one, and deferred to the agency's fact finding:

The agency made a willfulness finding partially on the owner's improper representations as to the apartment's legal rent in its 2001 and 2002 rent registrations, as well as other factors. It cannot thus be said that the agency's findings were not supported by the record or that the IAS Court erroneously upheld those findings. The judgment of the IAS court should therefore be affirmed.

The majority remanded the matter to DHCR to redetermine the issue of willfulness. It remains to be seen whether the Appellate Division will grant leave to appeal to the Court of Appeals from this non-final order.

Warren A. Estis is a founding partner at Rosenberg & Estis, and Jeffrey Turkel is a partner at the firm.

Endnotes:
1 N.Y.L.J. Oct. 22, 2007 at 18, col. 1 (App. Div. 1st Dep't)
TenantNet
 
Posts: 10311
Joined: Mon Jan 21, 2002 2:01 am
Location: New York City


Return to Tenant Reference materials

Who is online

Users browsing this forum: No registered users and 27 guests