Apartment buildings in New York City. (Photo: Victor J. Blue/Bloomberg)

This is the first article in the final part of a series about developments in rent overcharge litigation that have taken place since 2009, when the Court of Appeals upheld the ruling of the Appellate Division, First Department, in Roberts v. Tishman Speyer Props., L.P., 62 A.D.3d 71 (1st Dep't 2009), aff'd 13 N.Y.3d 270 (2009). Its goal is to offer modest suggestions about efficient ways to pursue rent overcharge litigation.

The first practice suggestion is drawn from the observation that the New York State Division of Housing and Community Renewal (DHCR) reviews rent overcharge complaints under Rent Stabilization Code (RSC) §2526.1, while Supreme Court actions are governed by Rent Stabilization Law (RSL) §26-516. What is significant is that both venues recognize “rent overcharge” as a purely statutory claim, albeit one that they accord different procedural treatment. The DHCR's exacting rules of administrative practice are clearly spelled out in the RSC. By contrast, judicial actions are governed by the CPLR, which contains no special provisions regarding rent overcharge litigation. In lieu of any such rules, it is suggested that any complaint raising a cause of action for rent overcharge should plead it as a purely statutory claim; specifically, a violation of RSL §26-516. Many rent overcharge complaints now filed in Supreme Court feature an inchoate, disjointed jumble of barely related common-law claims for some unspecified quantum of money damages and/or declaratory and/or injunctive relief. This is clearly poor practice. Instead, a plaintiff should allege a violation of RSL 26-516 and be prepared to submit successive summary judgment motions on the issues of liability and damages. The statute itself presupposes this. First, it defines a “rent overcharge” as a payment “above the rent authorized for a housing accommodation”—i.e., its “legal regulated rent,” which the statute defines as “the rent charged on the date four years prior to the date of the initial registration of the housing accommodation … plus in each case, any lawful increases and adjustments.” Establishing figures to correspond to these terms of art would necessarily require a fact finder to perform several sets of calculations. Second, RSL §26-516 separately sets forth a list of permissible damages, including: (1) monetary compensation; (2) treble damages (if the overcharge was “willful”); (3) costs and attorney fees; and (4) injunctive relief. These items of relief plainly depend on the fact of an overcharge first being established. These require another set of calculations. Thus, RSL §26-516 plainly contemplates a two-step process. Note that the inclusion of the foregoing items of relief in the statute also makes it improper for plaintiffs to assert separate causes of action for injunctive relief and legal fees, as many insist on doing.

The second practice suggestion proceeds from the first. It is simply that, assuming that rent overcharge claims in Supreme Court will require a two-step fact finding process to resolve, plaintiff's should be prepared to submit two motions for summary judgment that are amply supported with documentary evidence. An initial liability-phase motion, and a later damages-phase motion are suggested. Note that the procedural vehicle of a motion for summary judgment in lieu of a complaint (CPLR 3213) appears to be unavailable in rent overcharge litigation. See, e.g., Berman v. Waverly Assoc., 19 A.D.3d 136 (1st Dep't 2005). Note also that Supreme Court always has the option of using the doctrine of primary jurisdiction to submit questions of overcharge liability and/or calculation to the DHCR. See, e.g., Olsen v. Stellar W. 110, 96 A.D.3d 440 (1st Dep't 2012); Wilcox v. Pinewood Apt. Assoc., 100 A.D.3d 873 (2d Dep't 2012); Collazo v. Netherland Prop. Assets LLC, 155 A.D.3d 538 (1st Dep't 2017); Kreisler v. B-U Realty, 164 A.D.3d 1117 (1st Dep't 2018). It is suggested that a plaintiff who submits sufficient documentary evidence to establish a prima facie case of liability and/or damages runs less risk of this happening.

The third practice suggestion comes from the observation, that rent overcharge claims are subject to a four-year statute of limitations (RSC §26-516 [a]), while “regulatory status” requests have no statute of limitations. Instead, the First Department holds that “a tenant should be able to challenge the deregulated status of an apartment at any time during the tenancy.” Gersten v. 56 7th Ave., 88 A.D.3d 189, 199 (1st Dep't 2011). Unfortunately, complaints that jumble both causes of action into a single request for a multi-part declaratory judgment are common. This is bad practice, since it is easy to imagine one claim being time barred and the other not. Therefore, it is suggested that plaintiffs should always plead separate causes of action for rent overcharges and for regulatory status determinations.

The final practice suggestion comes from the observation that the two varieties of Supreme Court rent overcharge litigation (plenary actions and Article 78 proceedings) are governed by different standards of review. In the former, a claim's sufficiency “to be resolved by the fact finder in the same manner as other issues, based on the persuasive force of the evidence submitted by the parties.” Jemrock Realty Co., LLC v. Krugman, 13 N.Y.3d 924, 925 (2010). In the latter, the DHCR was the fact finder, and normally, “[the] courts will not disturb an administrative agency's determination unless it lacks any rational basis.” Matter of Regina Metro. Co. v. DHCR, 164 A.D.3d 420, 423 (1st Dep't 2018). An exception exists “where the question is one of pure statutory reading and analysis, [so] … there is little basis to rely on any special competence or expertise of the [DHCR].” Id. Also, a DHCR determination will be deemed “arbitrary and capricious when it neither adheres to its own prior precedent nor indicates its reason for reaching a different result on essentially the same facts.” Matter of London Leasing L.P. v. DHCR, 153 A.D.3d 709, 711 (2d Dep't 2017). Nevertheless, an Article 78 proceeding requires the court to apply a quasi-appellate standard of review, whereas all factual determinations in a normal action are made de novo. It is therefore suggested that plaintiffs take care not to make evidentiary arguments that are inapposite to the type of case being litigated.

Francis J. Lane III is a staff attorney in the Law Department of New York County Supreme Court, Civil Branch. He can be reached at [email protected].

Other articles in this series:

'Why Is New York City Rent So Damn High?' A 'Lookback' at a Decade of Court of Appeals Rent Overcharge Decisions

'Manhattan Rent Is Definitely Too Damn High!' A 'Lookback' at a Decade of First Department Rent Overcharge Decisions: Part 1

'Manhattan Rent Is Definitely Too Damn High!' A 'Lookback' at a Decade of First Department Rent Overcharge Decisions: Part 2

'Manhattan Rent Is Definitely Too Damn High!' A 'Lookback' at a Decade of First Department Rent Overcharge Decisions: Part 3

'Brooklyn Rent Is Lower, But Still Too Damn High!' A 'Lookback' at a Decade of Second Department Rent Overcharge Decisions