Current Landlord Not Liable for Award Collected by Prior Landlord

LVT Number: 17036

Facts: Rent-stabilized tenant moved into an apartment in 1985 and paid rent of $775 per month. In 1991, tenant filed a fair market rent appeal with the DHCR. In 1993, the DRA ruled for tenant, reduced the initial regulated rent to $435, and ordered a refund of $37,500. Original landlord appealed. In 1995, original landlord sold the building to second landlord. In 1997, the DHCR denied original landlord's PAR. A month later, second landlord sold the building to current landlord without providing notice of the fair market rent appeal award.

Facts: Rent-stabilized tenant moved into an apartment in 1985 and paid rent of $775 per month. In 1991, tenant filed a fair market rent appeal with the DHCR. In 1993, the DRA ruled for tenant, reduced the initial regulated rent to $435, and ordered a refund of $37,500. Original landlord appealed. In 1995, original landlord sold the building to second landlord. In 1997, the DHCR denied original landlord's PAR. A month later, second landlord sold the building to current landlord without providing notice of the fair market rent appeal award. In 1998, tenant sued second landlord and current landlord to collect a money judgment in the amount of the fair market rent appeal award with interest and attorney's fees. Tenant claimed that no trial was needed because the law and facts were clear. Current landlord asked the court to dismiss the case because it wasn't a party to the fair market rent appeal. The court ruled against current landlord but found that there were questions of fact as to whether current landlord or second landlord owed the money. Both sides appealed. The appeals court ruled for tenant and found that current landlord was liable for the award and attorney's fees. The court ruled that current landlord was responsible for overcharges collected by prior landlords and that current landlord should have done due diligence when buying the building. Current landlord appealed. Court: Landlord wins. Current landlord isn't liable for the fair market rent appeal award collected by prior landlord because current landlord wasn't a party to the DHCR proceeding and didn't have an opportunity to participate in the fair market rent appeal process. Unlike rent overcharge provisions, the Rent Stabilization Code doesn't impose liability on current landlord for rents collected by prior landlord in excess of fair market rent. And DHCR Policy Statement 93-1 limits liability to owners who participate in the fair market rent appeal process. Current landlord bought the building a month after tenant's PAR was decided and collected the legal regulated rent at all times. There was no judgment when current landlord bought the building, so no lien showed up in a title search. There was also no proof of any fraudulent transfer by prior landlord.

Fullan v. 142 E. 27th St. Assocs.: NYLJ, 12/23/03, p. 19, col. 4 (Ct. App. NY; Ciparick, J)