Note: The April 13, 2015 decision is at http://law.justia.com/cases/new-york/ot ... 660-u.html
We have heard there might be further motions or reargument in this matter, so please use due diligence when using this decision. See update below. Also see http://courts.state.ny.us/Reporter/pdfs ... _30911.pdf
New York Law Journal
July 20, 2016
Landlord- Tenant—Rent Overcharges—Where Landlord Had Not Filed Rent Registration Statements Because It Believed the Apartment Was Unregulated, the Four-Year Statute of Limitations Is Inapplicable—Inability to Document Renovations By Prior Landlord
Tenant plaintiffs commenced an action seeking, inter alia, reimbursement for alleged rent overcharges. They moved for leave to renew the court's prior decision, which had denied the plaintiffs' and the defendant landlord's motions for summary judgment.
The landlord had purchased the building in February 2014. The plaintiffs entered possession of the subject apartment in May 2007, "pursuant to a fair market residential lease agreement (the first lease) with [the landlord's] predecessor-in-interest." The plaintiffs' first lease provided for rent in the amount of $1,700 per month. During the next eight years, the plaintiffs signed at least five fair market residential leases with the prior landlord. The plaintiffs' rent had been raised a total of $100. The plaintiffs' current rent is $1,872 per month.
Prior to the plaintiffs' tenancy, the apartment had been registered as rent-stabilized. The monthly rent was $267.23. The landlord alleged that after a former tenant had vacated the apartment in 2007, the prior landlord, paid two construction companies more than $70,000 to renovate the apartment. The landlord asserted that those "renovations coupled with two statutory rent increases, increased the legal regulated rent…beyond $2,000" and that the apartment was therefore "deregulated in 2007, due to a high rent vacancy."
The plaintiffs alleged that "the apartment is still subject to the Rent Stabilization Law (RSL) and was not properly deregulated in 2007." They sought damages for "rent overcharges from May 1, 2007, treble damages and attorney fees." Each party moved for summary judgment.
The landlord argued, inter alia, that the subject rent increases are "beyond" the four-year statute of limitations (SOL) for such claims. The plaintiffs challenged the assertion that "approximately $70,000 worth of renovation work was done to the apartment in 2007 to increase the legally allowable rent to over $2,000 per month."
The court found that "the action was not time-barred because the RSL's four-year [SOL] is limited to calculating a rent overcharge claim and does not apply when the court is determining whether an apartment is regulated in the first instance and…there were triable issues of fact, including whether the apartment is exempt from rent stabilization based on the high rent vacancy decontrol said to have occurred in 2007."
The plaintiffs argued that since the prior decision had been issued, there had been "a change in the factual circumstances of the case." The plaintiffs cited a letter from the landlord's counsel, in which the landlord offered to reimburse the plaintiffs for "rent overcharges in the amount of $741 for the years 2011 through 2015 based on the fact that 'to date [they] have not received documentation from the prior owner to substantiate [the alleged apartment improvements that occurred prior to defendant's purchase of the property and prior to plaintiffs' occupancy of the subject premises], as the improvements occurred nearly a decade ago."
The landlord's letter advised the plaintiffs, "[w]ithout prejudice to any of defendant's defenses…, the defendant has retroactively registered the rents charged to plaintiffs for the years 2011 to 2015 at the Division of Housing and Community Renewal (DHCR),' thereby conceding that the apartment is regulated under the RSL."
The court granted the plaintiffs' motion to renew and upon renewal, and plaintiffs' summary judgment on their cause of action "to collect rent overcharges from May 1, 2007, the beginning of their tenancy in the apartment."
The court acknowledged that the SOL for rent overcharge claims is four years pursuant to CPLR §213-a and RSL §26-516(a)(2). However, the court found that "the four-year [SOL] is only applicable in cases where the landlord has filed annual rent registrations and is not applicable when no rent registrations were filed." The court based such finding on RSL §26-516(a) which provides that "[w]here the amount of rent set forth in the annual rent registration statement filed four years prior to the most recent registration statement is not challenged within four years of its filing, neither such rent nor service of any registration shall be subject to challenge at any time thereafter." The court explained that "the entire basis for the [SOL] is based on a rent registration statement being filed every year." Thus, "in the absence of rent registrations filed annually, there is no basis for applying the four-year [SOL]."
Since the plaintiffs are entitled to legal fees, pursuant to the RSL, the court did not address the plaintiffs' claim for attorney fees under Real Property Law §234, since the "plaintiffs may not collect the same attorney fees twice."
However, the court denied the plaintiffs' motion for summary judgment on their claim for treble damages. The court stated that "[t]reble damages amount to a substantial penalty, the purpose of which is to punish owners who deliberately and systematically charge tenants unlawful rents." The court further noted that "[t]he burden is on the owner to rebut the presumption of willfulness."
The court found that there was an issue of fact as to "whether the rent overcharge was 'willful' under the law." The landlord had bought the building in 2014, after the plaintiffs had been in the apartment for approximately seven years. The landlord had affirmed that, at the time of purchase, "it understood that certain improvements totaling $70,000 had been made to the apartment by the prior owner and thus believed the apartment was no longer regulated under the RSL."
The landlord further asserted that "it was only when it attempted to collect the records of the alleged improvements from the prior owner for purposes of the instant litigation," that "it realized that the prior owner had no such records." The court held that it could not be established, as a matter of law, that the landlord had "'willfully' overcharged the plaintiffs."
Tomic v. 92 East LLC, 151152/2015, NYLJ 1202756589079, at *1 (Sup., NY, Decided April 13, 2016), Kern, J.