The four-year statute of limitations on rent overcharge claimsoriginally intended as a bright line rule to simplify the calculation of a tenant’s legal renthas been altered over the years to the point where application depends on the peculiar facts of each case. In the landmark decision of Grimm v. New York State Division of Housing and Community Renewal, 15 N.Y.3d 358, 912 N.Y.S.2d 491 (2010), the Court of Appeals held that where there is evidence of "fraud," DHCR may examine the rental history prior to the four-year look-back period. If fraud is found, DHCR can utilize the so-called "default rent formula" to establish the tenant’s rent, a formula that will undoubtedly reduce the tenant’s rent substantially.
What constitutes proof of fraud, however, is not wholly clear. In Grimm, the Court of Appeals addressed the issue as follows:
DHCR…argues that, under the Appellate Division’s holding, any "bump" in an apartment’s renteven those authorized without prior DHCR approval, such as rent increases upon installation of improvements to an apartment (see Rent Stabilization Law §26 511[c][13])will establish a colorable claim of fraud requiring DHCR investigation. Again, we disagree. Generally, an increase in the rent alone will not be sufficient to establish "a colorable claim of fraud," and a mere allegation of fraud alone, without more, will not be sufficient to require DHCR to inquire further. What is required is evidence of a landlord’s fraudulent deregulation scheme to remove an apartment from the protections of rent stabilization. As in Thornton, the rental history may be examined for the limited purpose of determining whether a fraudulent scheme to destabilize the apartment tainted the reliability of the rent on the base date.1
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
