Current Landlord Responsible for Refund of Rent Overcharge by Prior Landlord

Tenant complained to the DHCR of rent overcharge. The DRA ruled for tenant, and the DHCR denied landlord's PAR. Landlord then filed an Article 78 court appeal, claiming that the DHCR's decision was arbitrary and unreasonable. The court ruled for landlord.

The DHCR appealed and won. The appeals court found that the lower court improperly granted landlord's application to revoke the overcharge award. As with two other decisions concerning other tenants in the same building, the DHCR rationally found that the prior building owner collected rent overcharges. Landlord didn't dispute that carryover liability for a prior landlord's overcharge was the general rule, not the exception, or that a building purchaser was expected to complete due diligence and discover what there was to be known at the time title was acquired. And even though the DHCR commenced the rent overcharge complaint in this case, it retained the statutory role as the finder of fact. Landlord, on the other hand, failed to present any evidence of actual rents collected. 

197 Madison Holdings LLC v. DHCR: Index No. 151090/22, App. No. 4179, Case No. 2024-02416, 2025 NY Slip Op 02400 (App. Div. 1 Dept.; 4/24/25; Manzanet-Daniels, JP, Gonzalez, Shulman, O'Neill Levy, JJ