By Order/Decision dated June 8, 2016, Hon. Maria Milin of this court granted a motion by respondents in this nonpayment proceeding for partial summary judgment. Judge Milin held that respondents had established that a colorable claim of fraud affected the rent charged by petitioner in the respondents’ first lease in 2008. More specifically Judge Milin noted that the rent in respondents’ first lease had been calculated on a prior legal rent that was entirely fictitious. Judge Milin dismissed the petitioner’s rent claim, because the demand notice upon which it was based sought substantially more than the monthly rent to which petitioner was entitled. She then granted respondents additional discovery on their counterclaim for rent overcharge. The case was then set down for trial on respondent’s counterclaims.When the case was sent to this court for trial, the parties settled the respondents’ counterclaim for breach of the warranty of habitability by stipulating that respondent would be entitled to judgment for 22 percent of the regulated rent for the period from February 2015 through January 2017. On February 22, 2017 the parties submitted to the court an agreed statement of facts relevant to the overcharge counterclaim, and on March 24, 2017 they submitted legal memoranda on the rent overcharge issue. Respondent contends now that the overcharge claim can be determined on the stipulated facts alone. Petitioner contends that the court must still take testimony on the questions of whether or not there were individual apartment improvements made prior to respondents taking occupancy, and on the issue of willfulness.The relevant facts, taken entirely from the Statement of Uncontested Facts submitted by the parties, are as follows. Respondents’ overcharge claim was made on March 20, 2015, pursuant to a court order that permitted them to interpose an amended answer and deemed the answer timely served and filed. Respondents established, and Judge Milin held, that the rent respondents paid on the base date of March 20, 2011, was affected by fraud. The fraud found by Judge Milin dated from the start of respondents’ first lease in 2008, when the initial rent was set based upon a fictitious prior legal rent. The last rent regulated tenant to occupy the apartment before the respondents lived in the apartment from September 2006 until June 2007 pursuant to a one year lease at $900.00 per month. Petitioner’s predecessor did not register the apartment in 2007, but there is a registration for 2008 indicating that the apartment is vacant with a monthly ret of $950.00. There is no lease for this amount.Petitioner purchased the building in June 2007. The apartment was vacant from that point until September 2008 when respondent took occupancy. At that point petitioner claimed high rent vacancy decontrol based upon the fictitious prior legal rent of $1600 and a claimed individual apartment improvement of $15,000.00 for which it has produced no documentation. After registering the claimed high rent vacancy decontrol in 2009, petitioner filed no further registrations with the DHCR.The Court of Appeals has ruled that when the rent actually paid on the base date, in this case March 20, 2011, is affected by fraud, the court must use the DHCR’s default formula to set the legal rent on the base date. Thornton v. Baron, 5 NY 3d 175, 181 (2005). The Court endorsed the same method more recently in Conason v. Megan Holding LLC, 25 NY 3d 1 (2015), reargument denied 25 NY 3d 1193 (2015). Both decisions describe the default formula as setting the rent at the rate of the lowest rent charged for a stabilized apartment with the same number of rooms in the same building on the base date. The default formula is used because CPLR Section 213-a bars any examination of the apartment’s rent history more than four years before the claim was made.DHCR’s current regulations, amended after the Court of Appeals decisions, apply a default rule that sets the rent at “the lowest rent registered…for a comparable apartment in the building on the date the complaining tenant first occupied the apartment.” 9 NYCRR Sections 2522.6(b)(3) and 2526.1(g). An apartment is comparable if it has the same number of rooms as the apartment at issue. Conason v. Megan Holding LLC, 2012 NY Slip Op 32625(U), aff’d as modified 25 NY 3d 1 (2015), DHCR Fact Sheet #6.In the case before this court, the only apartment in the subject building with the same number of rooms as the subject apartment is Apartment 1B. The rent for Apartment 1B on the base date was $549.14. The rent for Apartment 1B on the date respondents took occupancy was somewhat lower, but the court finds that the formula properly applied here is the one applied by the Court of Appeals. Accordingly the court determines that the legal regulated rent for the respondent’s apartment on March 20, 2011 was $549.14. The legal rent has remained at the same level since that time because the apartment has not been registered since 2009 and no leases have been signed at the appropriate amounts. See NYC Admin. Code 26-517(c).Treble damages are imposed in an overcharge case unless the owner establishes that the overcharge was not wilful. 9 NYCRR Section 2526.1(a). Judge Milin has already determined that petitioner set respondent’s rent on the basis of a fictitious last legal rent. Her determination is law of the case. This determination alone establishes that the overcharge is willful. The Statement of Uncontested Facts fully supports her conclusion. Although petitioner argues in its Memorandum of Law that a hearing must be held on the issue of willfulness, it does not snuggest any facts at all that might be presented at such a hearing that would support a lack of willfulness. The Memorandum simply states that at a hearing, “petitioner would produce fact witnesses to explain all rent increases from 2006 through 2017 and would explain why petitioner’s conduct has not been wilful.” The Statement of Uncontested Facts makes it entirely clear that this is simply not the case.The Statement of Uncontested Facts includes a summary of the rent actually paid by the respondent from March 20111 through February 2015. The calculation sheet attached to the respondents’ Memorandum of Law is accurate, including pre-judgment interest. Accordingly the court determines that the amount of the overcharge is $119,710.68Applying the parties’ stipulation with respect to the rent abatement claim to the legal rent of $549.14, the court determines that respondents are entitled to recover $2899.44 on their counterclaim for breach of the warranty of habitability.The clerk is directed to enter a money judgment in favor of the respondent and against the petitioner for $122,610.12.Dated: 3/26/18
