Landlord Was Responsible for Rent Overcharge Despite Building Purchase at Judicial Sale

Landlord sued to evict rent-stabilized tenants based on nonpayment of rent. Tenants claimed rent overcharge. The court ruled against landlord and in favor of tenants in 2018. The court found that rent overcharges due from landlord to tenants totalled $120,678. This included overcharges collected by the building's prior landlord.

Landlord appealed and lost. A DHCR rent reduction order, effective July 1, 1993, reduced and froze the collectible legal rent for the apartment. Tenants moved into the apartment in 2008 while that order was still in effect. Landlord argued that it bought the building in 2013 through a judicial sale. Landlord claimed that these circumstances triggered the carryover liability exemption under Rent Stabilization Code Section 2526.1(f)(2)(i), since landlord had no relationship with the prior building owner, didn't collude with the prior owner, and no records sufficient to establish the legal rent were provided at the judicial sale of the building by which landlord took title.

However, the court found that landlord was on notice of the rent overcharge. Landlord admitted that prior to June 6, 2013, landlord had personal knowledge of a rent restoration application filed in February 2013, which resulted in the June 20, 2013, rent restoration order. Tenants also showed that landlord had acknowledged receipt of a complaint filed by tenants in a separate Supreme Court action based on the 1993 rent reduction order. 

930-940, LLC v. Farley: Index No. 2018-2215KC, 2021 NY Slip Op 50634(U), NYLJ 7/13/21 p.21 col.4 (App. T. 2 Dept.; 7/2/21; Aliotta, PJ, Elliot, Toussaint, JJ)