Recitation, as required by CPLR 2219(a), of the papers considered in the review of this Motion of: Respondent for an order granting leave for discovery pursuant to CPLR section 408, section 3102 and section 3120. Papers numbered Notice of Motion and Affidavits Annexed 1 Affirmation in Opposition to Respondent’s Motion 2 Answering Affidavits Replying Affidavits 3 Exhibits Others DECISION/ORDER Upon the foregoing cited papers, the Decision/Order on the motion is as follows: In this nonpayment proceeding, Guadalupe Arcos and Clever Arcos (“Respondents”) appeared by their attorney. They bring the instant application seeking leave to conduct discovery, and to serve an amended answer containing an overcharge counterclaim. Respondents demand all leases and lease riders, all rent records showing rents charged and/or paid and all documents concerning rent increases for the subject premises from 2006 to the present. Respondents argued that there is ample need for discovery because 92-01 Lamont Ave LLC (“Petitioner”) has demonstrated a pattern of fraud and the information sought is within their exclusive control. Respondents have resided in the subject premises, 92-01 Lamont Avenue, for about 32 years and have lived through different owners. Petitioner purchased the building in or around 2007. The subject premises are subject to the Rent Stabilization Law of 1969, as amended, and has been duly registered with the New York State Division of Housing and Community Renewal (DHCR). Petitioner filed this non-payment petition, alleging that Respondents are in arrears to the amount of $6,509.37 through March 2019. Respondents interposed a pro se answer where they indicated that 1) Clever Arcos’ name appears incorrectly, 2) part or all or the rent has been paid, 3) repairs are necessary, and 4) they disputed the amount sought. Specifically, Respondents claimed that the monthly rental amount on the most recent lease was $1,058.75 per month instead of $1,079.93 per month as Petitioner alleged. Respondents then retained counsel and argue they should be permitted to amend their answer since permitting them to do so will not prejudice Petitioner. In the amended answer, Respondents alleged in their First Defense, Second Affirmative Defense and Third Affirmative Defense that Petitioner has collected an overcharge from Respondents by slowly increasing the legal rent without Respondent’s knowledge so as not to alert Respondents of any wrongdoing. For evidence, Respondents provided an itemization of the annual increases of the registered rent versus the approved increases by the Rent Guidelines Board, allegedly showing there is pattern of inconsistencies between the rent registrations and approved increases by the Rent Guidelines Board. Respondents further asserted that the existence of repeated and inflated increases of rent constitutes a fraud. Respondents argue that their request for documents is not overly broad but narrowly tailored to address the issue of their overcharge claim, and therefore, they should be granted the discovery. Petitioner opposed Respondents’ request because Respondents have either already asserted the same defenses in their original pro se answer or could have asserted defenses in their original pro se answer which they attempt to raise now through their amended answer. Petitioner argued that the rent demanded in the petition does not exceed the legally allowable rent. Petitioner also provided the alleged computations of the actual annul rental increases and allowable increase based on the RBG guidelines from June 2014 to May 2019. Petitioner claimed that Respondents should not be granted leave to conduct discovery because the information sought by Respondents is unduly burdensome and overbroad. Petitioner pointed out that the leases requested in Paragraph 1, Paragraph 2 and Paragraph 3 of Respondents’ Proposed Document Request annexed to the Respondent’s motion are not within the exclusive possession of Petitioner. Petitioner further argued Respondents can obtain documents included in the apartment’s file from DHCR and Respondents should have maintained a full history of all payments they made to Petitioner. Petitioner also argued that discovery is not necessary and would serve only to further delay this proceeding because this nonpayment proceeding first appeared on the court’s calendar on March 20, 2019 and was adjourned to June 11, 2019. ANALYSIS Respondents Should be Permitted to Amend Their Answer Pursuant To CPLR §3025 (b) CPLR section 3025(b) provides that a party may amend his pleading at any time by leave of court by stipulation of all parties unless there is significant prejudice to the other side due to lateness. Murray v. City of New York, 43 N.Y.2d 400, 405, 401 N.Y.S.2d 773 (1997). Courts place the burden upon the non-moving party prove the existence of prejudice. Prejudice has been defined by the courts as “some special right lost in the interim, some change of position or some trouble or expense that could have been avoided had the original pleading contained what the amended one wants to add.” Barbour v. Hospital for Special Surgery, 169 A.D.2d 385 (1st Dept. 1991). Especially, where a party appears pro se and then obtains counsel, the court granted leave to amend answer on the basis that “justice and fairness require…leave to amend.” Harlem Restoration Project v. Alexander, N.Y.L.J., July 5, 1995, p.27 col. 2 (Civ. Ct. N.Y. County) (granting leave to amend answer where unrepresented tenant inadvertently waived a laches defense). Petitioner failed to prove that it will be prejudiced by allowing Respondents to amend their answer. The amended answer does not contain any allegations of which Petitioner is unaware or may not investigate. In addition, Petitioner can effectively respond to the amended answer and defend himself against the counterclaims. In addition, in the instant proceeding, Respondents appeared pro se and answered the petition while they were unaware of all of their alleged defenses. Only after Respondents, with the assistance of counsel, reviewed the DHCR rent history along with their leases did Respondents realize that there could be other counterclaims and defenses such as the claim of a possibility of an overcharge. Respondent Should Be Granted Discovery In a summary nonpayment proceeding, the Court has discretion to grant discovery based upon standards established by New York University v. Farkas, 121 Misc. 2d 643, 645, 468 N.Y.S.2d 808, 810 (Civ. Ct. NY County. 1983). Farkas established the “ample need” test wherein courts apply and consider the following factors in dealing with disclosure requests: 1. whether the petitioner asserted facts to establish a cause of action; 2. whether there is a need to determine information directly related to the cause of action; 3. whether the requested disclosure is carefully tailored and is likely to clarify the disputed facts; 4. whether prejudice will result from the granting of an application for disclosure; 5. whether prejudice can be diminished or alleviated by an order fashioned by the for this purpose; and 6. whether the court, in its supervisory role can structure discovery so that pro se tenants, in particular will be protected and not adversely affected by a landlord’s discovery requests. Respondents have ample need for discovery to determine the basis for the rent increases Petitioner registered going back to 2006. Respondents have established that there could be a rent overcharge by Petitioner since 2007. For evidence, Respondent provided calculations of the annual increases of their rents, compared with the approved increases by the Rent Guidelines Board. The evidence shows that Petitioner’s lease renewals increases have not been consistent with the Rent Stabilization guidelines since 2007, which could be a pattern of behavior derived to violate the Rent Stabilization Laws. Second, the information requested in Respondent’s proposed discovery is narrowly tailored. The information is necessary to inform Respondent what basis Petitioner used to register the higher rents and to calculate the proper rent. Third, granting disclosure would not lead to prejudice. Petitioner, as the owner of the property, is the only party who could be in possession of these documents. Whether the documents exist is a different matter. Respondents should be given the opportunity to review any records in Petitioner’s possession. In contrast, discovery in this matter would be essential to Respondents, who is asserting an overcharge defense in her amended answer. Discovery Should Go Beyond the Six-Year Statute of Limitation Rent overcharges are subject to a six-year statute of limitations (previously four years). However, an exception to the general statute of limitation allows the Court to review a rental history past the six-year limit when there is a “colorable claim of fraud.” Specifically, the First Department has held an exception can be made where a tenant has, “presented sufficient evidence that [the landlord] had engaged in a fraudulent scheme to remove the apartment from rent regulation.” Matter of Grimm v. State of N.Y. Division of Housing and Community Renewal off. Of Rent Admin. 15 N.Y.3d 358, 938 N.E.2d 924 (2010); Bogatin v. Windermere Owners LLC, 98 AD3d 896 (App. Div., 1st Dep’t 2012). The New York County Supreme Court clarified that efforts to render deregulation inevitable by artificially raising rents to just below deregulation levels suggests a scheme to achieve deregulation, with no need to prove that the rent actually rose above deregulation levels. Matter of Pehrson v. Division of Hous. & Community Renewal of the State of N.Y., 34 Misc. 3d 1220(A) (Sup. Ct. N.Y. Co. 2011) According to Respondents, Petitioner committed fraud by slowly increasing the legal rent without Respondent’s knowledge so as not to alert Respondents of any wrongdoing. Based on the DHCR rent history, a large increase of 24.34 percent occurred between 2006 and 2007. The Court notes that the extensive increase might have occurred before Petitioner became the owner of the subject premises. Moreover, a significant decrease of 13.3 percent was registered between 2012 and 2013. The basis for this decrease appears unclear at present. Petitioner provided no explanation for either situation. In addition, during the periods covered 2006-2018, the leases between the parties showed an increase in the rent that exceeded the Rent Guideline permitted increase. No evidence has been proffered by Petitioner-landlord to establish that the registered rents are proper. Petitioner’s past conduct of registering a higher rent than the DHCR guidelines allowed from 2006 to 2018 and his failure to explain for the discrepancy constitute a “colorable claim of fraud.” The Court determines that Respondents can look back to 2006 based upon the proof presented. CONCLUSION Based on the foregoing, Respondents’ motion is granted in its entirety. The proposed Amended Answer with counterclaims is deemed served and filed. Petitioner has until August 15, 2019 to provide the documents requested by Respondents or an affidavit that said records are not in their possession. Case is adjourned to August 28, 2019 at 9:30 am for trial. This constitutes the decision and order of this Court. Dated: July 29, 2019 Queens, New York
