Trial Needed to Determine Landlord's Responsibility for Rent Overcharges in J-51 Building

June 25, 2025

LVT Number: #33727

Rent-stabilized tenants brought a class action against landlord, claiming common-law fraud and rent overcharge. Tenants claimed that, while the building was subject to the J-51 tax benefit program, landlord failed to register their apartments with the DHCR as rent stabilized until 2018. Tenants argued that the failure to register was part of a fraudulent scheme to deregulate the apartments. Tenants asked the court for a ruling without trial on the issue of landlord's liability for rent overcharges.

Rent-stabilized tenants brought a class action against landlord, claiming common-law fraud and rent overcharge. Tenants claimed that, while the building was subject to the J-51 tax benefit program, landlord failed to register their apartments with the DHCR as rent stabilized until 2018. Tenants argued that the failure to register was part of a fraudulent scheme to deregulate the apartments. Tenants asked the court for a ruling without trial on the issue of landlord's liability for rent overcharges. The court ruled against tenants, finding that they failed to establish each element of common-law fraud.

Tenants appealed and lost. There were issues of fact that required a trial as to landlord's liability. Under the totality of the circumstances of this case, and even applying 2023 amendments to the law regarding the standard required to allege a fraudulent scheme to deregulate under the Rent Stabilization Law, tenants hadn't established that landlord "knowingly engaged" in a fraudulent scheme to deregulate the apartments. 

Gunther v. 29th St. PVP, LLC: Case No. 2024-00750, Index No. 717673/18, 2025 NY Slip Op 02912 (App. Div. 2; 5/14/25; Duffy, JP, Wooten, Taylor, Hom, JJ)

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