On April 2, 2020, while New York trial courts were closed, the Court of Appeals of New York ruled on Regina Metropolitan Co., LLC v. the New York State Division of Housing and Community Renewal (DHCR).
The ruling significantly limited a portion of the Housing Stability and Tenant Protection Act of 2019 (HSTPA) which was enacted almost one year before the April 2, 2020 ruling. Specifically, Regina limited the “lookback period” of overcharged claims.
Prior to the enactment of the HSTPA, an overcharged challenge to the legal rent of a rent-stabilized apartment was limited to a four-year lookback period from the date DHCR or the courts received the complaint or a filing. DHCR or the courts set a base date of four years prior to the filing and then examined all the rent increases from that date to determine if each increase was proper under the Rent Stabilization Law and Code. If each increase was proper, there was no overcharge in most cases.
However, when the HSTPA was enacted, it expanded the lookback period beyond four years and substantially expanded the scope of a building owner’s liability in rent or liability in overcharge cases. The expansion of the four-year lookback period in the HSTPA was viewed as one of the most detrimental changes for building owners.
After the enactment of the HSTPA, an owner now had the burden to establish the legal rent well beyond four years including increases that occurred prior to the purchase of the building and even if the building was transferred several times prior to the overcharge filing. Under the HSTPA, DHCR and the courts are required to consider “all available rent history which is reasonably necessary” to investigate an overcharge claim. In short, that four-year review period was eliminated in most cases, and the court and DHCR were both required to look beyond four years.
However, Regina changed that. The wide-open review period that was enacted under the HSTPA, requiring DHCR and the courts to go beyond the four-year lookback period, was eliminated except in a few limited exceptions.
One of those exceptions is based on a “colorable claim of fraud.” Prior to the enactment of the HSTPA, a common-law exception to the four-year lookback period existed where a tenant was able to make a “colorable claim of fraud.” Regina goes to great length to preserve this common-law exception.
The court also noted, in a footnote, that rent reduction orders issued prior to the period that remained in effect during the recovery periods were part of the reviewable years of rental history.
Finally, it should also be noted that where the landlord utilized a preferential rent, the courts and DHCR generally can look beyond the four-year period pursuant to RSC 2521.2.
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