Overcharges: Bigger Loopholes for Outlaw Landlords

By Rose Ann Magaldi

Not long ago, the state Division of Housing and Community Renewal revised its complaint form for rent overcharges. The new form made it so burdensome and difficult to complain that many tenants either were deterred from complaining or had their complaints rejected for not properly completing the form.

Not satisfied with this, the DHCR and owners teamed up to persuade the Legislature to change the law in a way that eliminates many claims of rent overcharges. The new law is effective immediately and is arguably applicable to all complaints pending before DHCR and the courts on June 19, 1997.

Before June, the courts had held that tenants had the right to examine their apartments’ complete rental history to obtain all available evidence of rent overcharges. If an overcharge was found at any point in time, the current rent was lowered to eliminate that overcharge, and the tenant was entitled to a refund of all overcharges collected for the four-year period preceding the complaint.

The new law specifically prohibits the examination of the rental history and the calculation of any rent overcharges beyond the last four years. Now, when a tenant files an overcharge complaint, DHCR and the courts can not look back any further than the annual rent-registration statement filed four years earlier. If the overcharge began before then, the tenant is out of luck.

For example, a tenant who filed a rent overcharge complaint on July 1, 1997 can look back only to the 1993 registration statement. An overcharge will be found only if it occurred for the first time after the 1993 statement was filed. If the overcharge began in 1992, the tenant’s complaint is dismissed, even if the owner is still charging the excess rent.

This change puts the burden on new tenants to act swiftly and diligently in pursuing claims of rent overcharges. A new tenant should obtain the apartment’s rental history from the DHCR and seek the assistance of an attorney or tenant organizer in analyzing the claim. The courts remain the preferred forum, but the risk there is that an unsuccessful claim can result in an award of attorney’s fees to the owner. Any tenant who filed a complaint before June 19 should argue that the old law continues to apply.

In addition to making it easier for landlords to get away with rent overcharges, the new law also makes it easier for them to unlawfully decrease services. In the past, a tenant could receive both a rent abatement in court under the warranty of habitability law, based on the owner’s failure to provide safe and livable housing, and a rent reduction from DHCR, based on the decrease in services required by the Rent Stabilization Law and the Rent Control Law.

The courts reasoned that the two remedies served different public policies and therefore complemented one another. Whereas rent abatements for breaches of the warranty of habitability are intended to protect individual tenants from owners who fail to provide services, the DHCR rent reduction is geared toward the public-policy goal of preserving and maintaining the housing stock.

The new law supersedes these rulings. Any rent abatement awarded by the courts under warranty of habitability must be offset by any rent reduction ordered by DHCR, and vice versa.

Tenants should now carefully analyze their claims before deciding whether to proceed in Housing Court under a warranty claim or before DHCR under a decrease-in-services claim. The goal should be both to obtain compensation for the tenant and to compel the owner to comply with their duty to provide the tenant with safe, habitable housing and all services required by law.

Although both these changes in the law widen loopholes for illegal conduct by owners, tenants should still vigorously pursue their rights, lest owners view these changes as carte blanche to ignore the few tenant protections which remain.

Rose Ann Magaldi is a partner in the law firm of Hartman, Ule, Rose & Ratner, LLP, and specializes in the protection of tenant rights under rent regulation.