Buyer After Judicial Sale Must Refund Overcharge

Facts: Tenant complained of a rent overcharge in 1991. Shortly thereafter, landlord declared bankruptcy and a bank acquired the building. New landlord bought the building in June 1993. In August 1993 the DHCR ruled for tenant, finding a rent overcharge. But the DHCR ruled that only prior landlord and the bank were responsible for refunding overcharges because new landlord bought the building after foreclosure. The Rent Stabilization Code provides an exception against overcharge liability for landlords who buy a building at a judicial sale. Tenant appealed and lost. Tenant appealed again. Court: Tenant wins. The appeals court ruled that since new landlord bought the building after the foreclosure, the limited exception from responsibility for overcharge refund didn't apply. Rent registration information was available to new landlord, and tenant's overcharge complaint was pending before the DHCR at the time the property was sold.

Gaines v. DHCR: NYLJ, p. 27, col. 1 (8/12/96) (App. Div. 1 Dept.; Rosenberger, JP, Ellerin, Rubin, Kupferman, JJ)