New Tenant Can't Challenge Initial Rent-Stabilized Status or Rent After Vacancy Decontrol

Tenant sued landlord, claiming that she was rent stabilized and that the apartment had been illegally decontrolled in 2000 when landlord and a prior apartment occupant reached a "private agreement" circumventing initial rent registration procedures for decontrolling the unit. After the former rent-controlled tenant of the apartment had died, landlord sued to evict the apartment occupant. That case was settled between the parties. Landlord and the prior occupant agreed that the apartment was no longer subject to rent control but became rent-stabilized at $1,650 per month. Landlord also agreed to accept a lower $650 rent from that tenant. The parties agreed that the preferential rent would remain in effect for as long as that tenant remained, as long as he didn't challenge the rent. The housing court so-ordered the agreement, and landlord filed a copy with the DHCR along with its notice of initial rent. Landlord asked the court to dismiss the new tenant's complaint. The court ruled against landlord, who appealed and won.

The appeals court noted that, while a tenant's agreement to waive the benefit of any provision of the rent control law was expressly prohibited and void, when the former tenant settled his dispute with landlord over his status, he wasn't a tenant. He wasn't on the lease and had no apparent rights, other than being an occupant who claimed succession rights. Both sides, represented by attorneys, resolved their dispute concerning whether the occupant had any right to the apartment, and there was no public policy to disregard that choice. New tenant now sought to step into the prior tenant's shoes and assert rights she claimed the former tenant had when he agreed to the terms of the 2000 stipulation. But there was no factual basis for tenant's claim. And tenant now sought to raise arguments implicating the issue of how rents are set after vacancy decontrol. And even if landlord didn't give prior tenant an RR-1 form to preclude challenge to the initial rent-stabilized rent after 90 days, any right to challenge the initial rent-stabilized rent expired after four years as a matter of law. No fair market rent appeal was timely filed, so new tenant had no right to challenge the first rent-stabilized rent agreed to by landlord and the initial rent-stabilized tenant. The court also ruled that it didn't matter that a preferential rent was charged to the first rent-stabilized tenant, although two judges on the panel disagreed.

Liggett v. Lew Realty LLC: Index No. 16042021, App. No. 16493, Case No. 2022-01973 (App. Div. 1 Dept., 12/8/22; Gische, JP, Kern, Gesmer [dissenting], Scarpula, Rodriguez [dissenting], JJ)