Recitation, as required by CPLR §2219(a), of the papers considered in review of the instant motion.Papers NumberedNotice of Motion, Affirmation, Affidavit, Memo of Law and Annexed (ex. A-G) 1Affidavits In Opposition, Memo of Law and Annexed (ex. A-U) 2Reply Memo of Law and Annexed (ex. A) 3DECISION/ORDER Upon the foregoing cited papers and after oral argument, the Decision/Order on this motion is as follows:PROCEDURAL HISTORYPetitioner 1405 Fifth Avenue Apartments, LLC (“Petitioner”) commenced this nonpayment proceeding in December 2017, seeking possession of the subject rent stabilized apartment based on $6,549.18 in rent arrears and fees owed from May 2017 through October 2017. According to the petition, Respondent Faisa Ali (“Respondent”) promised to pay a legal monthly rent of $2,067.44, less a monthly preferential rent credit of $67.44, “plus, as additional rent, legal fees incurred as a result of Respondent’s default in the payment of rent,” pursuant to a written lease. Respondent filed a pro se answer on January 8, 2018 asserting a general denial.Respondent took possession of the subject apartment, as the first tenant thereof, pursuant to a written one-year lease dated June 21, 2010, commencing on July 1, 2010 and ending on June 30, 2011, which states a monthly legal regulated rent of $1,819.00, but provides for a monthly preferential rent of $1,500.00. The subject building is part of a three-building complex consisting of 81 units, which was constructed in 2009 under three affordable rent housing programs developed by New York City (“NYC”) after the subject property was acquired by NYC as a result of a foreclosure. Two of these programs were designed and managed by the NYC Housing Development Corporation (“HDC”), a public benefit corporation created by Article XII of the New York State Private Housing Financing Law (“PHFL”), which provides below market rate financing and mortgages to developers for the construction of affordable housing. The third affordable rent housing program under with the subject premises was acquired was the Cornerstone Program, which is administered by the NYC Department of Housing Preservation and Development (“HPD”). As a participant in these programs, Petitioner’s predecessor 1405 Fifth Avenue LLC was selected to purchase the property and construct the subject premises.In December 2006, 1405 Fifth Avenue LLC, HDC and the NYC Partnership Housing Development Fund Company (“HDFC”) entered into a Regulatory Agreement relative to the subject premises, under which HPD and HDC provided PHFL mortgage loans to 1405 Fifth Avenue LLC. The Regulatory Agreement was amended in October 2009 to memorialize HPD’s agreement to modify the permissible rents to be charged for the apartments in the subject building. Pursuant to a schedule of HPD-approved rents annexed to the “First Amendment to Regulatory Agreement”, HPD set the initial allowable monthly rent for the subject apartment at $1,819.00. In November 2009, 1405 Fifth Avenue LLC filed an application for a Real Property Tax Law (“RPTL”) §421-a tax abatement for the subject premises. In May 2011, HPD issued a Final Certificate of Eligibility for the RPTL§421-a tax abatement. After acquiring title from HPD, 1405 Fifth Avenue LLC conveyed title to the subject premises to HDFC, who remained the owner of record until October 23, 2012, when Petitioner acquired title.In the instant motion, Respondent seeks an Order granting her leave to interpose an amended answer pursuant to CPLR §3025(b) and, upon such grant, awarding summary judgment in her favor, pursuant to CPLR §3212, as to the proper legal regulated monthly rent and her rent overcharge counterclaim. In her proposed amended answer, she asserts affirmative defenses based upon rent overcharge, non-rent fees and the warranty of habitability as well as counterclaims based upon rent overcharge, the warranty of habitability, harassment and legal fees.In her motion, Respondent argues that the court should grant her leave to interpose an amended answer since she, as a pro se litigant, was unaware of her rights and defenses when she interposed her answer. In seeking summary judgment, Respondent argues that Rent Stabilization Code (“RSC”) §2521.1(g) establishes that the $1,500.00 monthly rent that she agreed to pay in her initial lease for the subject apartment was the legal regulated rent at that time and not the preferential rent as Petitioner contends. Respondent avers that Petitioner improperly treated the $1,500.00 rent amount as a preferential rent and subsequently increased her rent based on a purported legal regulated rent of $1,819.00, instead of the $1,500.00 rent amount, resulting in overcharges from July 1, 2014 to present. Respondent requests that the court find that her proper legal regulated monthly rent is currently $1,623.10, which represents the initial $1,500.00 legal monthly rent plus subsequent Rent Guidelines Board (“RGB”) allowable increases through June 30, 2014; direct that Respondent’s legal monthly rent be frozen at $1,623.10 until the New York State Division of Homes and Community Renewal (“DHCR”) rent registrations are corrected; award summary judgment in her favor as to her rent overcharge counterclaim; and award treble damages in her favor based upon Petitioner’s alleged willful overcharge.In opposition, Petitioner contends that Respondent’s request to amend her answer should be denied, since the defenses and counterclaims asserted therein are palpably insufficient or totally devoid of merit. Petitioner further argues that Respondent’s summary judgment motion should be denied as premature, since leave to amend her answer has not been granted. Alternatively, Petitioner argues that Respondent should be denied summary judgment on her rent overcharge counterclaim, since her initial legal regulated monthly rent of $1,819.00 was set by HPD and HDC and that, as such, all subsequent increases were properly based upon that amount in accordance with RSC §§2521.1(d), (f) and (1), which apply to buildings for which a loan is made under the PHFL, which were rehabilitated pursuant to the PHFL or which were obtained in a foreclosure action and previously owned by a housing development fund company created under the PHFL.DISCUSSIONLeave to Amend an AnswerPursuant to CPLR §3025(b), leave to amend a pleading should be freely granted absent unfair prejudice or surprise to the opposing party directly resulting from delay in seeking such leave. However, the court has discretion to deny such leave where the proposed amendment is palpably insufficient or totally devoid of merit as a matter of law. 46 East 91st Street Associates, LLC v. Bogoch, 23 Misc. 3d 36 (1st Dept. 2009).Herein, Petitioner has not demonstrated that surprise or unfair prejudice inured to it from any delay in Respondent’s seeking leave to amend her answer. Furthermore, this Court finds that Respondent’s proposed defenses and counterclaims are not palpably insufficient or totally devoid of merit. Therefore, in accordance with CPLR §3025(b), this Court grants leave to Respondent to amend her answer in the form annexed to the instant motion as Exhibit “F.” Respondent’s amended answer, as annexed to the instant motion as Exhibit “F,” is hereby deemed properly and timely served on May 22, 2018 and filed on May 25, 2018, which are the dates that the instant motion was served and filed.In light of the Court’s grant of leave to Respondent to amend her answer and its deeming the amended answer as properly and timely served and filed, which is within the Court’s discretion, Respondent’s application for summary judgment is properly before this Court for determination. ELG 1275 LLC v. Reyes, 2016 NYLJ Lexis 3707 (Civ. Bronx 2016).Summary JudgmentSummary judgment is appropriate where there is no genuine triable issue of fact and where the papers submitted warrant that the court directs judgment in favor of the moving party as a matter of law. Andre v. Pomeroy, 35 N.Y.2d 361 (1974). The function of the court is to determine whether any issues of fact exist that preclude summary resolution of the dispute between the parties on the merits. Consolidated Edison Co. v. Zebler, 40 Misc.3d 1230A (Sup. Ct. N.Y. 2013); Menzel v. Plotnick, 202 A.D.2d 558 (2nd Dept. 1994). The court must accept, as true, the non-moving party’s recounting of the facts and must draw all reasonable inferences in favor of the non-moving party. Warney v. Haddad, 237 A.D.2d 123 (1st Dept. 1997); Assaf v. Ropog Cab Corp., 153 A.D.2d 520 (1st Dept. 1989). The movant must submit admissible evidence to demonstrate prima facie entitlement to summary judgment as a matter of law and the absence of any issues of fact that require a trial. Zuckerman v. City of New York, 49 N. Y.2d 557 (1980); Winegrad v. New York Univ. Med. Ctr., 64 N. Y.2d 851 (1985); Alvarez v. Prospect Hosp., 68 N.Y.2d 320 (1986). The movant’s failure to make such a showing mandates denial of summary judgment, regardless of the sufficiency of the opposing papers. Winegrad v. New York Univ. Med. Ctr., supra; Alvarez v. Prospect Hosp., supra. Once a prima facie showing has been made, the burden shifts to the non-moving party to submit admissible evidence sufficient to raise a triable issue of fact. Giuffrida v. Citibank Corp., 100 N.Y.2d 72 (2003); Zuckerman v. City of New York, supra.In the case at bar, it is undisputed that the subject premises is governed by the Rent Stabilization Law of 1969, as amended, due to a tax abatement received by Petitioner’s predecessor pursuant to RPTL §421-a. See also, 28 RCNY§6-02(g). Therefore, contrary to Petitioner’s contention, RSC §2521.1(g) is controlling herein. RSC §2521.1(g), the statute relating to initial legal regulated rents for buildings that receive a tax benefit pursuant to RPTL §421-a, states:“The initial legal regulated rent for a housing accommodation constructed pursuant to section 421-a of the Real Property Tax Law shall be the initial adjusted monthly rent charged and paid but not higher than the rent approved by HPD pursuant to such section for the housing accommodation or the lawful rent charged and paid on April 1, 1984, whichever is later.” 9 NYCRR §2521.1(g).Petitioner’s argument that RSC §§2521.1(d), (f) and (1) govern the determination of Respondent’s legal regulated rent and supersede RSC §2521.1(g) in this instance because the initial legal regulated rent was set by HPD and HDC is unavailing. RSC §§2521.1(d) and (f) relate to HDC financed buildings that do not receive a RPTL §421-a tax benefit and RSC §2521.1(1) relates to properties that were, or continue to be, owned by a HDFC that acquired the property as a result of a foreclosure but do not receive a RPTL §421-a tax benefit, whereas RSC §2521.1(g) specifically governs RPTL §421-a buildings. Therefore, although the subject premises was HDC financed and was previously owned by a HDFC who acquired it as a result of a foreclosure, it is also subject to RPTL §421-a; thus RSC §2521.1(g) controls.As such, although HPD and HDC set the maximum allowable legal monthly rent that could initially be charged for Respondent’s apartment at $1,819.00, Petitioner charged, and Respondent paid, $1,500.00 monthly. Therefore, in accordance with RSC §2521.1(g), this Court finds that Respondent’s initial legal regulated monthly rent was actually $1,500.00 and that all subsequent increases should have been based on the $1,500.00 rent charged and paid. As the subject premises is rent stabilized pursuant to RPTL §421-a, Petitioner, and its predecessors, were required to register all rents for the subject building with the DHCR annually, charge no more than the allowable maximum legal regulated rent for each apartment and only increase rents at rates set forth annually by the RGB. Accordingly, since Petitioner based all subsequent increases on the $1,819.00 maximum allowable legal rent, instead of the $1,500.00 actual initial legal rent, this Court finds that Respondent was overcharged.Rent overcharge claims are generally subject to a four-year statute of limitations, precluding examination of an apartment’s rental history more than four years prior to the filing date of the overcharge complaint, which is called the base date. Matter of Grimm v. State of NY Div of Horn. & Community Renewal Off. of Rent Admin., 15 N.Y.3d 358 (2010). See also, RSC §2526.1(a)(2). An exception to this rule is specified in RSC §2526.1(a)(2)(iv), which states that “…the rental history of the housing accommodation pre-dating the base date may be examined for the limited purpose of determining whether a fraudulent scheme to destabilize the housing accommodation…rendered unreliable the rent on the base date.” The Court of Appeals has held that “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.” Matter of Grimm, 15 N.Y.3d at 367.Furthermore, when there is an overcharge, there is a presumption of willfulness. Therefore, pursuant to RSL §26-516(a), a landlord “shall be liable to the tenant for a penalty equal to three times the amount of such overcharge,” unless the landlord proves by a preponderance of the evidence that the overcharge was not willful. See also, 9 NYCRR §2506.1(a)(1). If willfulness is not found, the overcharge penalty is the amount of the overcharge plus interest. Thus, the statute allows for either treble damages or interest from the date of the first overcharge at the rate of interest payable on a judgment pursuant to CPLR §5004. 9 NYCRR §2526.1(a)(1). In addition, a landlord may be assessed reasonable costs and attorneys’ fees. NYC Administrative Code §26-516(a).A new residential property owner can be held liable for rent overcharges by a prior owner under a carry-over liability theory. RSC §2526.1(f)(2)(i). The carry-over liability also applies to fraudulent conduct by a prior landlord. Helfand v. DHCR, 182 Misc.2d 1 (Sup. Ct. NY 1999).Herein, as no colorable claim of fraud has been established, the base date for calculating the overcharge is May 25, 2014, which is four years prior to the filing of Respondent’s amended answer in which her overcharge counterclaim was asserted.As noted from the rent history and the DHCR rent registration record annexed to Respondent’s motion, and as stated by Respondent in her motion, prior to July 1, 2014, Petitioner’s increases were in accordance with the RGB guidelines, such that, as of June 30, 2014, Respondent was properly charged $1,623.10 monthly, which represents the $1,500.00 initial legal regulated monthly rent plus all subsequent RGB increases. However, on July 1, 2014, Petitioner increased her monthly rent from $1,623.10 to $1,900.00, resulting in overcharges.More specifically, the papers submitted reveal that the lease terms and increases were as follows:Vacancy lease dated June 21, 2010, lease term: July 1, 2010 to June 30, 2011, initial registered legal rent: $1,819.00, initial purported preferential rent charged: $1,500.00;lease renewal dated February 15, 2011, lease term: July 1, 2011 to June 30, 2012, RGB increase: 2.25 percent, registered legal rent: $1,859.92, preferential rent charged: $1,533.75 (2.25 percent increase properly taken on purported initial preferential rent of $1,500.00);lease renewal dated February 14, 2012, lease term: July 1, 2012 to June 30, 2013, RGB increase: 3.75 percent, registered legal rent: $1,929.66, preferential rent charged: $1,591.27 (3.75 percent increase properly taken on purported preferential rent);lease renewal dated February 13, 2013, lease term: July 1, 2013 to June 30, 2014, RGB increase: 2 percent, registered legal rent: $1,968.25, preferential rent charged: $1,623.10 (2 percent increase properly taken on purported preferential rent);lease renewal dated February 19, 2014, lease term: July 1, 2014 to June 30, 2015, RGB increase: 4 percent, registered legal rent: $2,046.98, preferential rent charged: $1,900.00 (17.06 percent increase improperly taken on purported preferential rent, resulting in a monthly overcharge of $276.90 ($1900.00 – $1,623.10). The proper increase should have been 4 percent, totaling $1,688.02 monthly);lease renewal dated February 18, 2015, lease term: July 1, 2015 to June 30, 2016, RGB increase: 1 percent, registered legal rent: $2,067.44, preferential rent charged: $1,950.00 (2.63 percent increase improperly taken on purported preferential rent, resulting in a monthly overcharge of $326.90 ($1,950.00 – $1,623.10). The proper increase should have been 1 percent, totaling $1,704.90 monthly);lease renewal dated February 17, 2016, lease term: July 1, 2016 to June 30, 2017, RGB increase: 0 percent, registered legal rent: $2,067.44, preferential rent charged: $2,015.00 (3.33 percent increase improperly taken on purported preferential rent, resulting in a monthly overcharge of $391.90 ($2,015.00 – $1,623.10). The proper increase should have been 0 percent, totaling $1,704.90 monthly);lease renewal dated February 15, 2017, lease term: July 1, 2017 to June 30, 2018, RGB increase: 0 percent, registered legal rent: $2,067.44, preferential rent charged: $2,000.00 (2.60 percent increase improperly taken on purported preferential rent, resulting in a monthly overcharge of $376.90 ($2,000.00 – $1,623.10). The proper increase should have been 0 percent, totaling $1,704.90 monthly).The above improper increases over the course of 38 months resulted in $12,325.30 of overcharged rent paid by Respondent and $122.06 in excess security deposits, totaling $12,447.36 in overcharges. Respondent paid the purported preferential rent as charged from July 2014 through April 2017. In June 2017, she paid $4,030.00 to pay for May and June 2017 rent at $2,015.00 monthly and, in August 2017, she paid $2,172.32 toward rent arrears. Respondent has not made any payments directly to Petitioner since August 4, 2017. (However, the NYC Department of Social Services (“DSS”) began paying $283.00 monthly to Petitioner on Respondent’s behalf in April 2018. The DSS payments have no affect on the calculation of the overcharge award since the payments are less the legal regulated rent). Next, in August 2014, Respondent was charged, and paid, $276.90 as an additional security deposit due to the increase in her monthly rent from $1,623.10 to $1,900.00. The proper additional security deposit amount should have been $188.02, resulting in an excess of $88.88. Similarly, in July 2015, Respondent was charged, and paid, $50.00 as an additional security deposit due to the increase in her monthly rent from $1,900.00 to $1950.00. The proper additional security deposit amount should have been $16.82, resulting in an excess of $33.18, and a total of $122.06 in excess security deposits charged, and paid. Pursuant to the Rent Stabilization Law, a landlord cannot hold a security deposit in excess of one month’s rent. 9 N.Y.C.R.R. §2525.4. In light of the foregoing, Respondent is entitled to a credit of $12,447.36 from Petitioner due to rent overcharges in the amount of $12,325.30 plus excess security deposits in the amount of $122.06.In addition, Respondent is entitled to treble damages pursuant to RSC §2526.1(a)(2)(i), since Petitioner has not demonstrated, by the preponderance of the evidence, that the rent overcharges were not willful. 9 NYCRR §2506.1(a)(1). Petitioner’s misguided reliance on RSC §§2521.1(d), (f) and (1) in support of its contention that $1,819.00 was the proper initial legal monthly rent is insufficient to rebut the presumption of willfulness. Matter of Obiora v. New York State Div. of Hous. & Community Renewal, 77 A.D.3.d 755 (2nd Dept. 2010).In accordance with RSC §2526.1(a)(2)(i), treble damages is calculated at three times the overcharge amount for the last two years since a tenant’s claim, which here would be from May 2016 to May 2018, since Respondent’s amended answer, in which her overcharge counterclaim was asserted, was deemed filed in May 2018. Therefore, Respondent is entitled to a treble damages award in the amount of $17,200.50 [{$1,950.00 - $1,623.10 = $326.90} x 2 = $653.90 + {$2,015.00 - $1,623.10 = $391.90} x 12 = $4,702.80 + {$2,000.00 - $1,623.10 = $376.90} = $5,733.50 x 3 = $17,200.50].Lastly, since Petitioner filed improper rent registrations, in that the registrations did not reflect Respondent’s correct legal regulated rent, Respondent’s current legal regulated monthly rent is frozen at $1,623.10, which is the amount of the last properly charged legal rent, until Petitioner corrects the DHCR rent registrations. Jazilek v. Abart Holdings, LLC, 72 A.D.3d 529 (1st Dept. 2010). See also, NYC Administrative Code §26-517(e) and 9 NYCRR §2528.4(a). Such amended rent registrations are not applied retroactively. Matter of Second 82nd SM LLC v. New York State Div. of Hous. & Community Renewal, 2012 N.Y. Misc. Lexis 1577 (Sup. Ct. NY 2012) and Ernest & Maryanna Jeremias Family Partnership, LP v. Matas, 39 Misc. 3d 1206A (Civ. Kings 2013).CONCLUSIONAccordingly, Respondent’s motion is granted, to the extent that Respondent is granted leave to amend her answer as stated herein and, upon such grant, Respondent’s application for summary judgment on her rent over charge counterclaim is granted. This Court finds that Respondent’s current legal regulated monthly rent is $1,623.10 and shall remain frozen at that amount until Petitioner corrects the relevant DHCR rent registrations. Furthermore, this Court finds that Respondent is entitled to an award for rent overcharges in the amount of $12,325.30 plus excess security deposits in the amount of $122.06, totaling $12,447.36 as well as an award for treble damages in the amount $17,200.00, for a total of award of $29,525.30. Accordingly, the Clerk of the Court is directed to enter a money judgment in favor of Respondent and against Petitioner in the sum of $29,525.30 on her rent overcharge counterclaim.The parties are to appear on November 15, 2018, at 9:30 a.m., in Part D, Room 524 for settlement or trial as to the parties’ remaining claims and defenses.This constitutes the Decision and Order of the Court.Dated: September 24, 2018New York, New York
