In Grimm v. New York State Div. of Hous. and Community Renewal, 15 NY3d 358 (2010), the Court of Appeals ruled that the four-year look-back period for determining a stabilized rent can be breached where a tenant establishes that the base rent was tainted by fraud; at the very least, where a tenant raises a colorable claim of fraud, the tribunal “has an obligation to ascertain whether the rent on the base date is a lawful rent.”1 The court wrote:
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 protection 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.2
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