Fraud Indicated in Setting Base Rent
LVT Number: #25130
Tenant complained to the DHCR of rent overcharge. Landlord claimed that the apartment was unregulated, but the DRA found that tenant was rent stabilized because the building was receiving J-51 benefits. However, the DRA found that there was no overcharge after the April 7, 2005, base date rent of $1,750.
Tenant appealed, arguing that the DHCR should look back more than four years. The DHCR ruled against tenant, who appealed. The court dismissed tenant's petition.
Tenant appealed further and won. The appeals court ruled that tenant made a sufficient showing of fraud to require the DHCR to investigate the legality of the base date rent. A prior tenant paid $572 per month when he moved out in July 2004. The next tenant paid $1,750 per month starting in October 2004. Landlord would have to have spent $39,000 on apartment renovations to justify an individual apartment improvement rent increase supporting the new rent. Tenant moved into the apartment in 2007 and currently paid over $2,000 per month. Tenant claimed that landlord couldn't possibly have spent $39,000 based on the condition of the apartment in 2007. Tenant stated that the hardwood floors, bath tub, doors, and fixtures were original (1932) and that the kitchen had been updated with low-quality appliances that tenant estimated cost less than $5,000. Tenant claimed the kitchen had very inexpensive Home Depot cabinets, slat floors, and a used or recycled sink that didn't fit in the cutout in the wall.
Landlord didn't submit any proof to rebut this claim and stated only that it could have spent $39,000. Given tenant's detailed description, the DHCR's decision was irrational. The appeals court sent the case back to DHCR to further investigate proof of the legality of the base date rent.
Two of the five judges disagreed, stating that tenant's conclusory belief that the apartment improvements couldn't have cost more than $5,000 didn't satisfy her burden of showing that the fraud exception to the four-year rule should be applied.
Boyd v. DHCR: 2013 NY Slip Op 06966, 2013 WL 5788639 (App. Div. 1 Dept.; 10/29/13; Mazzarelli, JP, Sweeny [dissenting], Freedman, Feinman, Gische [dissenting], JJ)