Tenants Presented Insufficient Proof of Fraudulent Scheme to Deregulate Apartments

Tenants sued landlord, claiming rent overcharge and a fraudulent scheme to deregulate their J-51 building apartments. The court ruled for tenants, finding that proof of a building-wide fraudulent scheme required application of the default formula in calculating rent overcharges. Landlord appealed, claiming that tenants hadn't sufficiently proved there was a fraudulent scheme. The appeals court ruled for landlord, finding that the law required strict enforcement of the four-year lookback period in effect prior to enactment of the HSTPA on June 14, 2019. And for deregulations that occurred in buildings receiving a  J-51 tax abatement, all elements of fraud must be established in order to expand the lookback period beyond four years and invoke the default formula. It wasn't enough for mere speculation of fraud based on the filing of late or incorrect registrations. Tenants failed to meet the burden to prove fraud. 

Aras v. B-U Realty Corp.: Index No. 161448/14 Appeal No. 16846 Case No. 2022-01126, 2023 NY Slip Op 04917 (App. Div. 1 Dept.; 10/3/23; Kern, PJ, Gesmer, Kennedy, Scarpulla, Rodriguez, JJ)