Reasonable Reliance on Landlord's Actions Not Needed to Prove Fraud in Overcharge Case

Tenants in a 421-a building sued landlord in 2020, claiming that prior landlord unlawfully registered inflated initial rents for their rent-stabilized apartments. Tenants claimed that this was a fraudulent scheme to deregulate the units and that the court should look back more than four years to allow recalculation of the legal rents and apply the default formula to set the 2016 base date rents. The court denied landlord's request to dismiss the case.

Landlord appealed and won. The Appellate Division found that tenants' claims were untimely since neither tenants nor prior tenants could have reasonably relied on the inflated legal regulated rents filed on DHCR registration statements (see LVT #32569). 

Tenants appealed to New York's highest court, which modified the appeals court ruling. The Court of Appeals ruled that a tenant wasn't required to prove reasonable reliance on a landlord's fraudulent action to invoke the fraud exception to the four-year lookback period in this overcharge case. But the appeals court properly granted landlord's motion to dismiss because documentary evidence refuted tenant's claim about a rent concession. The case was sent back to the Appellate Division to conform its ruling to the Court of Appeals' reasoning.

Burrows v. 75-25 153rd St. LLC: Case No. 16, 2025 NY Slip Op 01669 (Ct. App.; 3/26/25; Garcia, J)