BBG News

Court Of Appeals Holds HSTPA Not Retroactive On Prior Rent Overcharges

Apr 2, 2020

In a stunning set of decisions, New York’s highest court, the Court of Appeals, by majority decision, addressed a series of issues that arose in five J-51/deregulation cases that followed in the wake of Roberts.

Although Roberts was decided more than a decade ago, the methodology of calculating the rent remained hotly contested.  The tenants argued that the HSTPA should be retroactively applied, which would result in an expansion of the period of rent record review, would expand the liability period from 4 to six years and would expand the imposition of treble damages from 2 to 6 years.  The Court’s majority rejected all of these claims as to any overcharge pre-dating the HSTPA (6/14/2019).

The decision is more than 100 pages long.  We will continue to analyze, but our initial reading is that the Court found the following:

  • Pre HSTPA owners were obligated to retain records for 4 years; opening the record review beyond 4 years would expose owners to injury which they could not rebut due to absence of documents.
  • Pre HSTPA, overcharges were to be decided by this 4 year “closed universe of records.”
  • The base date for determining rent overcharge is the rent charged 4 years prior to the complaint being filed.
  • The exception to the 4 year rule due to fraud is limited, because there cannot be fraud if the action was not willful.
  • Owners are entitled to the normal rent stabilized increases following the base date, even in the absence of rent registration.
  • Even if the base date rent was “excessive” by virtue of the statute of limitations, that becomes the legal base date rent.
  • Even if that base rent was “excessive” the tenant benefits substantially by becoming rent stabilized.
  • The default mechanism to establish rent does not apply where DHCR endorsed the method of rent calculation used by the owner.
  • The HSTPA cannot be applied retroactively to an overcharge that occurred prior to the HSTPA’s enactment because such retroactive application would impair owners’ substantive rights.

Owners that have had adverse decisions applying the HSTPA retroactively or otherwise not complying with these Court of Appeals decisions, whether in Court or before DHCR, should take all appropriate steps to seek relief from the injuries suffered.  If you need assistance, please do not hesitate to contact the BBG attorney that you worked with, to determine what remedies are available to you.

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