Whether you’ve just gone through the due diligence process following the purchase of a building, or have been a building owner for years, I always suggest extensively reviewing a building’s legal rent history to determine if the legal rent charged is the correct legal rent.
Most building owners assume that the courts and/or Division of Housing and Community Renewal (DHCR) are limited to a four-year look-back period to determine the legal rent, but that is not always the case.
A well-known example which permits the courts or DHCR to look-back beyond the typical four-year period is when a tenant asserts a tolerable claim of fraud. Most building owners are familiar with this example based on a fairly recent line of cases.
Matter of Grimm v. State of N.Y. Div. of. Hous. & Community Renewal Off. of Rent Admin., 15 N.Y. 3d 358, 364 (2010); Matter of Boyd v. New York State Division of Housing and Community Renewal, 23 NY 3d 999 (2014).
However, even in the absence of fraud or a fraud claim, additional (less common) bases exist that also support looking back beyond four years.
Rent Stabilization Code or RSC 2526.1. allows DHCR and the courts to go back beyond the four-year period under the following bases:
1. Longevity Increase
When a building owner has not received a vacancy increase for eight years, the building owner can apply a longevity increase to the legal rent amount.
2. Preferential Rent
If the landlord has been charging the tenant below the legal threshold and claiming a preferential rent.
3. Temporary Exemption
For example, if the apartment was deemed temporarily exempt because a family member of the owner was living in the unit.
4. Overcharge ‘Willfullness’
To determine whether an overcharge was willful on the part of the previous owner and the applicability of treble damages.
Should any of the criteria described above apply to a building’s rent history, or should any anomalies exist with regard to rent registration — a basis for an overcharge claim could exist, as well as a basis for the court or DHCR to reset the rent to a lower legal rent.
Jordi Fernandez Law, P.C.
420 Lexington Avenue, Suite 2920
New York, NY 10170
Contact