DHCR Applies Safe Harbor Rule on Appeal to Eliminate Triple Damages

LVT Number: #31527

Tenant in a building receiving J-51 tax benefits complained of rent overcharge in 2017. The DRA ruled for tenant and found that: (a) the apartment had been rent controlled until 2012 when it became vacant; (b) landlord set the fair market rent for the next tenant at $2,600 per month in 2013 and gave tenant a preferential monthly rent of $2,100; (c) landlord believed the apartment was deregulated; (d) the legal regulated rent was the collected rent of $2,100; and (e) landlord must refund $30,571 in rent overcharges, including triple damages.

Tenant in a building receiving J-51 tax benefits complained of rent overcharge in 2017. The DRA ruled for tenant and found that: (a) the apartment had been rent controlled until 2012 when it became vacant; (b) landlord set the fair market rent for the next tenant at $2,600 per month in 2013 and gave tenant a preferential monthly rent of $2,100; (c) landlord believed the apartment was deregulated; (d) the legal regulated rent was the collected rent of $2,100; and (e) landlord must refund $30,571 in rent overcharges, including triple damages. Since landlord already had refunded $12,408, the amount owed to tenant was $18,164.

Landlord appealed and argued that the DRA's retroactive application of HSTPA amendments, which eliminated the safe harbor rule precluding triple damages when an overcharge was refunded in response to a tenant complaint, violated due process. The DHCR ruled against landlord, who then filed an Article 78 court appeal. The DHCR took the case back for reconsideration. After review, the DRA ruled against landlord. Since landlord took two years to answer the complaint, it wouldn't have benefitted from the Safe Harbor rule against triple damages even before HSTPA.

Landlord appealed again and won. Landlord's refund to tenant, issued seven months before the DRA sent landlord a treble damage notice and eight months before the DRA issued its first order in this case was sufficient to rebut the presumption of willful overcharge. The DRA also had reissued a copy of the complaint to landlord in October 2019 to impose HSTPA requirements and, by then, landlord had issued the refund to tenant. The total overcharge, with interest, was $13,865. The remainder due to tenant after prior refund was $1,457.

41-47 Nick LLC: DHCR Adm. Rev. Docket No. JO410002RO (6/16/21)[7-pg. document]

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