No Rent Fraud Where Landlord of J-51 Building Relied on DHCR Policy Later Overruled

Rent-stabilized tenant complained of rent overcharge. The DRA ruled for tenant and found that there was a total overcharge with interest equal to $22,014. Since landlord had refunded $44,709 to tenant while the complaint was pending, landlord owed no money to tenant. Tenant appealed and lost. Tenant claimed that the DRA should have applied the default formula to determine the 2014 base date rent, and should have applied triple damages because landlord didn't make the refund promptly. Tenant also argued that there was a fraudulent scheme to deregulate the apartment. 

The DHCR found no proof that landlord engaged in any fraudulent scheme to deregulate the apartment. Landlord's mistaken deregulation of the apartment while receiving J-51 tax benefits occurred before the 2009 Roberts court decision when landlord relied on the DHCR's mistaken position that such deregulation was proper.  NY's highest court later noted in the Regina case that a finding of willful rent overcharge generally didn't apply to "Roberts" cases, and without a finding of willful overcharge, there could be no fraud. In addition, in the absence of fraud, the rent charged and paid on the base date is the legal regulated rent. Landlord also made a timely adjustment to tenant's rent in response to the overcharge complaint and refunded more than what the overcharge turned out to be. The DRA also properly awarded tenant attorney's fees only up to the date when the refund was made. Attorney's fees won't be awarded for work done after full resolution of the complaint. 

Galonoy & Yuen: DHCR Adm. Rev. Docket No. LM110029RT (8/29/23)[4-pg. document]