Subtenant of Prior Landlord Becomes Rent-Stabilized Tenant Due to Illusory Prime Tenancy

Tenant complained to the DHCR in March 2019 of rent overcharge. Landlord claimed that the tenant was in fact a subtenant and that it wasn't responsible for any overcharge. The DRA ruled for tenant and ordered landlord to refund $138,000, including triple damages. The DRA found that there was an illusory prime tenancy. Tenant had lived in the apartment since 2011 and paid cash to the prior owner's daughter. A renewal lease that took effect on Nov. 1, 2021, in the daughter's name was made on a form created in 2014. The base date rent was reduced to $1,500 per month.

Landlord appealed and lost. Landlord claimed that, if there was an illusory tenancy scheme, it was between the prior owner and tenant. But there was no proof that the complaining tenant participated in the scheme, in the creation of the false lease, or in any way benefited from the situation. And the fact that tenant had admitted that she didn't have documents pertaining to her subtenancy or to rents paid before landlord bought the building didn't constitute an admission to participation in the illusory tenancy scheme.

Triple damages were appropriate. Among other things, landlord continued to overcharge tenant after the DRA sent a notice that triple damages would be imposed.

Greenwood Development LLC: DHCR Adm. Rev. Docket No. MS210010RO (6/17/25)[8-pg. document]