BBG News

Rent Overcharges: What Statute of Limitations Applies?

Sep 21, 2022

One major change effectuated by the Housing Stability and Tenant Protection Act of 2019 (“HSTPA”) concerned the scope of an owner’s liability for rent overcharge claims, including treble damages. Prior to the passage of the HSTPA, the scope of liability was generally four years for the overcharge and two years for treble damages. The rental history that could be examined in order to determine if an overcharge had occurred (commonly referred to as the “lookback period”) was likewise generally limited to four years prior to the bringing of the claim. The HSTPA expanded the scope of liability to six years for both overcharges and treble damages, and the lookback period, in some cases, became even longer.

However, in 2020, the New York Court of Appeals held in IMO Regina Metropolitan Co., LLC v. NYS Div. of Housing & Comm. Renewal, and three other cases [Raden v. W7879 LLC, Taylor v. 72A Realty Assoc. LP, and Reich v. Belnord Partners LLC] that “the overcharge calculation amendments cannot be applied retroactively to overcharges that occurred prior to their enactment.” This holding reinstated the pre-existing four year limitations period for all pre-HSTPA overcharges.

An issue that then arose was how to determine the applicable limitations period when an overcharge complaint was filed after the enactment of the HSTPA (June 14, 2019) but the complainant sought overcharges that allegedly occurred both before and after the enactment.

In Austin v. 25 Grove St. LLC, decided on February 3, 2022, the Appellate Division, First Department, provided guidance on that issue, which affects countless overcharge complaints and due diligence evaluations.

Austin was a rent overcharge action that was commenced in July, 2020, after the enactment of the HSTPA. The complaint sought overcharge damages that allegedly began at the inception of the tenancy in 2013 and stretched through the date of the complaint—post HSTPA. Asserting the more expansive HSTPA provisions, the tenantplaintiff argued that the owner was liable for overcharges for the entire period of the tenancy and maintained that the lookback period to calculate the legal rent (and, therefore, the amount of overcharges) went back even further. The Appellate Division rejected those arguments.

The Appellate Division in Austin ruled, in pertinent part:

To the extent plaintiffs seek to recover overcharges that accrued before the enactment of the Housing Stability & Tenant Protection Act of 2019 (HSTPA), effective June 14, 2019, the amendments to CPLR 213-a and Rent Stabilization Law § 26-516 [changing the pre-existing four year statute of limitations] enacted under the HSTPA are not applicable… Regina Metro applies to this case insofar as it determined that Part F of the HSTPA governing rent overcharges cannot be applied retroactively to overcharges that accrued before the enactment of the HSTPA.

This ruling made clear that even if an overcharge complaint was brought after the enactment of the HSTPA, the pre-existing four-year statute of limitations can control both the scope of liability for damages, as well as the lookback period for calculating the overcharge. It is an appellate ruling that provides good direction and owner-favorable relief when litigating rent overcharge claims or examining potential claims in a due diligence review.

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