In its 4-3 ruling in 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 the Division of Housing and Community Renewal (DHCR) or a court can ignore the four-year look-back period for rent overcharge claims where the tenant raises a “colorable” claim of fraud. In response to DHCR’s argument that chaos would ensue if it were required to evaluate claims of fraud on a case-by-case basis, Judge Carmen B. Ciparick, who authored the majority opinion, wrote:

DHCR also argues that, under the Appellate Division’s holding, any “bump” in an apartment’s rent—even those authorized without prior DHCR approval, such as rent increases upon installation of improvements to an apartment—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.1

Judge Robert S. Smith, writing for the dissent, sympathized with DHCR’s dilemma:

The majority opinion can be read to mean either that the four-year limitation has largely ceased to exist, or that any case to which the limit applies on its face must lead to a mini-litigation, in which DHCR tries to figure out whether the overcharge was “fraudulent” enough to escape the time limit. If the former, the majority has simply tossed aside the Legislature’s command. If the latter, I do not envy DHCR its task.2

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