April 6, 2020

The roller coaster ride of New York City landlord and tenant law continues. 

I. Introduction

This article will review the April 3, 2020 Court of Appeals decision in Regina Metropolitan Co. LLC v. DHCR, 2020 WL 1557900, and will:

1) Briefly explain the Rent Stabilization rent overcharge section of the HSTPA, historic tenant-friendly legislation in New York State;

2) Explain, in detail, how the Regina v. DHCR case, which just came down from New York State’s highest court, modifies the application of the Rent Stabilization rent overcharge section of the HSTPA; and

3) Explore what the author considers to be the questions raised by the new case and express the author’s opinions about winners and losers, for what that is worth.

This article may be read in one of two ways. It is 16 pages and it excerpts many relevant portions the Regina v. DHCR decision as it comments thereon. Inasmuch as Regina v. DHCR is 57 pages (not including the dissent), you could look at reading the entire article as reading the Cliff Notes. Or, you could skip reading the excerpts and just read my commentary that surrounds the excerpts. I recommend reading the whole article, even if you are not a lawyer. You should read the words of the actual law for yourself.

II. HSTPA

On June 14, 2019, the New York State Legislature made sweeping changes to many laws that affect residential landlord and tenant relationships. The law is known as the Housing Stabilization and Tenant Protection Act of 2019 (“HSTPA”).

Among other things, the law made momentous changes to the Rent Stabilization overcharge laws. 

A. There Is No Statute of Limitations on An Overcharge Claim

There is no longer any statute of limitations on a rent overcharge! Formerly, there was a four-year statute of limitations (Civil Practice Law and Rules (“CPLR”) § 213-a). That meant that an overcharge claim had to be filed within four years of the last overcharge. Now CPLR § 213-a states, “…an overcharge claim may be filed at any time…” This means that many more tenants will be eligible to file overcharge claims.

B. A Court or The DHCR Can Look Back as Far as It Wants and At as Many Sources of Information as It Deems Appropriate, When Attempting to Determine If There Is an Overcharge and At What Level the Legal Rent Should Be Set

Furthermore, a court or the DHCR can look back as far as it wants and at as many sources of information as it deems appropriate, when attempting to determine if there is an overcharge and at what level the legal rent should be set. Before this amendment to the law, a court or DHCR could only look back four-years when determining if there was an overcharge, unless there was evidence of fraud and in some other limited circumstances. 

Let us look at all the material added to the law to give a court or DHCR latitude in overcharge matters at Rent Stabilization Law (“RSL”) § 26-516(h):

“The [DHCR], and the courts, in investigating complaints of overcharge and in determining legal regulated rents, shall consider all available rent history which is reasonably necessary to make such determinations, including but not limited to:(i) any rent registration or other records filed with [DHCR], or any other state, municipal or federal agency, regardless of the date to which the information on such registration refers;(ii) any order issued by any state, municipal or federal agency;(iii) any records maintained by the owner or tenants; and(iv) any public record kept in the regular course of business by any state, municipal or federal agency. Nothing contained in this subdivision shall limit the examination of rent history relevant to a determination as to:(i) whether the legality of a rental amount charged or registered is reliable in light of all available evidence including but not limited to whether an unexplained increase in the registered or lease rents, or a fraudulent scheme to destabilize the housing accommodation, rendered such rent or registration unreliable;(ii) whether an accommodation is subject to the emergency tenant protection act or the rent stabilization law;(iii) whether an order issued by the [DHCR] or by a court, including, but not limited to an order issued pursuant to section 26-514 of this chapter, or any regulatory agreement or other contract with any governmental agency, and remaining in effect within six years of the filing of a complaint pursuant to this section, affects or limits the amount of rent that may be charged or collected;(iv) whether an overcharge was or was not willful;(v) whether a rent adjustment that requires information regarding the length of occupancy by a present or prior tenant was lawful;(vi) the existence or terms and conditions of a preferential rent, or the propriety of a legal registered rent during a period when the tenants were charged a preferential rent;(vii) the legality of a rent charged or registered immediately prior to the registration of a preferential rent; or(viii) the amount of the legal regulated rent where the apartment was vacant or temporarily exempt on the date six years prior to a tenant’s complaint.”

These changes to the Rent Stabilization Law regarding rent overcharges were made because, in the past, certain bad landlords (certainly not all landlords) counted on the passage of time to insulate them from their indiscretions with a rent roll. Before these changes, if a landlord illegally raised the rent, all the landlord had to do was wait and hope that no tenant challenged the illegal jump in the next four-years. The HSTPA eliminates this loophole or boundary . Regina v. DHCR puts the loophole/limitation back, at least for pre June 14, 2019 matters, but I am getting ahead of myself…

C. There Were Radical Changes to The Treble Damage Section of The Law and Attorneys’ Fees Are Now Mandatory

The most radical changes to the overcharge laws, however, are contained in the damages section. Before these amendments to the Rent Stabilization Law, a court or DHCR could award a tenant up to four years of damages for an overcharge. With these amendments, however, now a court or the DHCR can award a tenant up to six years of damages for an overcharge. 

Moreover, what makes overcharge findings so devastating to landlords is the punitive damages section built into the law. Before these changes to the law, a landlord caught overcharging a tenant could simply refund the overcharged amount and avoid any punitive damages. The new law removes the ability of owners to avoid punitive damages if they voluntarily return the amount of the rent overcharge prior to a decision being made by a court or the DHCR. See RSL § 26-516 [a], as amended by L 2019, ch 36, part F, § 4 [June 2019], which states:

“After a complaint of rent overcharge has been filed and served on an owner, the voluntary adjustment of the rent and/or the voluntary tender of a refund of rent overcharges shall not be considered by the Division of Housing and Community Renewal or a court of competent jurisdiction as evidence that the overcharge was not willful.”

And wow are the new damages punitive! 

Under the new law, if a court or a DHCR finds that an overcharge is willful, it can order that the landlord refund to tenant not only the amount it overcharged tenant, but also triple the amount of the overcharge for six full years. Before the change in the law, a court or DHCR could only award two years of triple damages. RSL § 26-516(a).

Finally, the new law makes is mandatory (not up to DHCR’s or a court’s discretion, as was the case up until June 14, 2019) to award an overcharged tenant costs, reasonable attorney’s fees, and interest for the overcharge. RSL § 26-516(a).

III. New York State’s Highest Court Holds that the Penalties for Overcharge Contained in the HSTPA May NOT Be Retroactively Applied

On April 3, 2020, the New York State Court of Appeals, New York State’s highest court, decided four cases grouped together for one decision. The name of the first case, and the name I assume this decision will be referred to as going forward is In the Matter of Regina Metropolitan Co. LLC v. DHCR (“Regina”).

The Court in Regina says (p. 2) that the goal of the decision is to answer the following question:

“…under the Rent Stabilization Law (RSL): what is the proper method for calculating the recoverable rent overcharge for New York City apartments that were improperly removed from rent stabilization during receipt of J-51 benefits prior to our 2009 decision in Roberts v Tishman Speyer Props., L.P. (13 NY3d 270 [2009]).” 

In my opinion, however, Regina goes on to answer a broader question. Regina ultimately holds that the new overcharge penalties under the HSTPA cannot be retroactively applied to overcharges that happened before the new law was enacted.

I am going to take you through the Regina decision by quoting important sections of it and giving some commentary thereon where I think it may not be self-explanatory.

The Court in Regina explains (p. 2) the old method of calculating Rent Stabilization rent overcharges:

“…when leave was granted in these cases, the RSL mandated that, absent fraud, an overcharge was to be calculated by using the rent charged on the date four years prior to filing of the overcharge complaint (the “lookback period”) as the “base date rent,” adding any legal increases applicable during the four-year lookback period and computing the difference between that legal regulated rent and the rent actually charged to determine if the tenant was overcharged during the recovery period. In such cases, consideration of rental history predating the four-year lookback and statute of limitations period was prohibited. While the appeals to this Court were pending, the Legislature – as is its prerogative – enacted the Housing Stability and Tenant Protection Act of 2019 (HSTPA), making sweeping changes to the RSL, the majority of which are not at issue in these appeals. As relevant here, Part F of the HSTPA includes amendments that, among other things, extend the statute of limitations, alter the method for determining legal regulated rent for overcharge purposes and substantially expand the nature and scope of owner liability in rent overcharge cases (see L 2019, ch 36, Part F). The tenants in these cases urge us to apply the new overcharge calculation provisions to these appeals that were pending at the time of the HSTPA’s enactment, some of which seek recovery of overcharges incurred more than a decade before the new legislation.”

The Court in Regina explains (p. 3) why it is holding for the landlord litigants:

“Because such application of these amendments to past conduct would not comport with our retroactivity jurisprudence or the requirements of due process, we resolve these claims pursuant to the law in effect when the purported overcharges occurred.”

The Court in Regina makes clear (p. 4), however, that it is not ruling on the constitutionality of the HSTPA, only on its retroactive application:

“As to the HSTPA, today we fulfill this quintessential judicial function in holding that a limited suite of enforcement provisions may not be applied retroactively and opine in no way on the vast majority of that legislation or its prospective application.” 

The Court in Regina starts its analysis (p. 4) by explaining the history of the Roberts-J-51 cases, of which the Regina cases are the progeny:

“These rent overcharge cases arose in the wake of our 2009 decision in Roberts, interpreting RSL provisions relating to New York City’s J-51 program, which offered tax benefits to building owners who made capital improvements to their residential properties. Buildings electing to receive J-51 benefits become subject to the rent stabilization scheme (RSL [Administrative Code of City of NY] § 11-243[b], [i][1], [t]). From 1993 until the enactment of the HSTPA in 2019, the RSL contained “luxury deregulation” provisions, permitting an owner of a stabilized unit to deregulate if the rent exceeded a statutory threshold and (1) the tenant vacated or (2) the tenants’ combined income exceeded a statutory threshold (former RSL §§ 26-504.1, 26-504.2). As early as 1996, first in an opinion letter and later promulgated as an agency regulation, the Division of Housing and Community Renewal (DHCR) took the position that statutory language precluding luxury deregulation of apartments during receipt of J-51 benefits did not apply to buildings that were already subject to the RSL prior to receipt of those benefits (see Roberts, 13 NY3d at 281-282; former Rent Stabilization Code [RSC] [9 NYCRR] § 2520.11[r][5], [s][2]). In Roberts, this Court rejected DHCR’s long-standing statutory interpretation and concluded that luxury deregulation was unavailable in any building during receipt of J-51 benefits (13 NY3d at 285-287). In 2011, the Appellate Division held that Roberts applied retroactively (Gersten v 56 7th Ave. LLC, 88 AD3d 189, 198 [1st Dept 2011], appeal withdrawn 18 NY3d 954 [2012]).”

Then the Court in Regina explains (p. 5) how the four cases it is deciding in this decision tie in with Roberts:

“Each of these cases involves an apartment that was treated as deregulated consistent with then-prevailing DHCR regulations and guidance before this Court rejected that guidance in Roberts… The central issue below in each of these cases – sent to this Court by leave of the Appellate Division before enactment of the HSTPA – was how to calculate the “legal regulated rent” in order to determine whether a recoverable overcharge occurred and its amount.”

Next, the Court in Regina reviews the pre-HSTPA limitation of the requirement for landlords to keep records (p. 8), which would be relevant to determining whether there was a rent overcharge:

“This categorical temporal limitation on reviewable records – the “lookback” rule – was complemented by a record retention provision directing that certain owners “shall not be required to maintain or produce any records relating to rentals of such accommodation for more than four years prior to the most recent registration or annual statement for such accommodation” …Together, the statute of limitations, lookback provision and record retention rules formed an integrated scheme for calculating overcharges based on a closed universe of records pertaining only to the apartment’s rental history in the four years preceding the filing of the complaint. 
Consistent with the lookback rule, the enforcement provisions provided that, except for certain claims filed shortly after initial registration of a unit, “the legal regulated rent for purposes of determining an overcharge, shall be the rent indicated in the annual registration statement filed four years prior to the most recent registration statement,” i.e., the base date rent, plus “any subsequent lawful increases and adjustments” … Thus, where the apartment had been deregulated more than four years prior to the filing of an overcharge complaint, and the tenant failed to promptly challenge the deregulated status of the apartment, there might be no rent registration on file for the base date or, indeed, any time within the four-year lookback period. 
Under the pre-HSTPA law, the base date rent was therefore the rent actually charged on the base date – i.e., four years prior to the overcharge complaint – even if no registration statement had been filed reflecting that rent. 
In a series of cases, we confirmed that reviewing rental history outside the four-year lookback period was inappropriate for purposes of calculating an overcharge, but we recognized a limited common-law exception to the otherwise-categorical evidentiary bar, permitting tenants to use such evidence only to prove that the owner engaged in a fraudulent scheme to deregulate the apartment.”

[Emphasis supplied.]

Throughout Regina, the Court makes it clear that a court or DHCR may still look back beyond the four-year lookback period, even under the old overcharge laws, if the tenant can prove that the landlord engaged in a fraudulent attempt to deregulate. It’s funny – over the years I created an eighteen (18) page internal memo on all the criteria that might establish a landlord’s attempt to fraudulently deregulate. I remember thinking when the HSTPA came down that I should archive the document, but something prevented me from deleting it. OMG I am glad I did not! 

Before the Court in Regina moves on, it sums up the pre-HSTPA Rent Stabilization rent overcharge damages calculation rule (p.12):

“The rule that emerges from our precedent is that, under the prior law, review of rental history outside the four-year lookback period was permitted only in the limited category of cases where the tenant produced evidence of a fraudulent scheme to deregulate and, even then, solely to ascertain whether fraud occurred – not to furnish evidence for calculation of the base date rent or permit recovery for years of overcharges barred by the statute of limitations (Grimm, 15 NY3d at 367). In fraud cases, this Court sanctioned use of the default formula to set the base date rent. Otherwise, for overcharge calculation purposes, the base date rent was the rent actually charged on the base date (four years prior to initiation of the claim) and overcharges were to be calculated by adding the rent increases legally available to the owner under the RSL during the four-year recovery period. Tenants were therefore entitled to damages reflecting only the increases collected during that period that exceeded legal limits.”

A few pages later in the Regina decision (p.14), to make itself perfectly clear, the Court states definitively that, under the old rule, that absent fraud, the legal rent in an overcharge is set at whatever the rent was four-years ago:

“[T]enants who commenced a claim more than four years later and could not show fraud would be entitled, by virtue of the interrelated four-year statute of limitations and lookback rule, to recover only the increases added to the market base date rent that were over the legal limits during the recovery period.”

And in case anyone reads to this point in the decision and is still stamping their feet and saying, “But that’s not fair! So, a landlord can get away with an illegally inflated rent if enough time go by and it doesn’t get caught?!” the Court in Regina says – YES! (p. 18):

“That Roberts revealed particular conduct to be illegal does not mean that tenants must be able to recover a certain measure of monetary damages for associated rent increases despite their failure to seek recovery within the limitations and lookback periods. Critically, our decision in Roberts has led to the return of many apartments to the rent stabilization scheme, including those at issue in these appeals; one amicus estimates the number of Roberts apartments at upwards of 50,000. While the statute of limitations and lookback period preclude tenants in those apartments from recovering certain damages they could have recovered if their claims had been initiated earlier, as a result of Roberts they may now enjoy rent stabilization protection.”

[Emphasis supplied.]

The Court in Regina is saying that even if the four-year lookback rule results in a tenant not being able to get the rent back to where she would have if she had only sued earlier, that’s just too bad, because she did not sue earlier, and that is the whole purpose of a statute of limitations and a companion lookback period, to bound these claims in time. Moreover, the Regina Court emphasizes again that none of this prevents a court or the DHCR from looking back to the dawn of time of the issue is whether the apartment should be returned to Rent Stabilization, as, indeed, many have been. I have a lot more to say on this point below, but for now, let us keep working our way through the decision.

Next, we are getting to the constitutional analysis, which is interesting and worth understanding. The Regina Court begins the constitutional analysis by reviewing the new HSTPA provisions (p.22):

“Part F extended the four-year limitations period for overcharge claims to six years, provided that an overcharge complaint “may be filed . . . at any time” and eliminated the provision – present, in substance, since 1983 – stating that “no determination of an overcharge and no award or calculation of an award of the amount of an overcharge may be based upon an overcharge having occurred more than four years before the complaint is filed” (RSL § 26-516[a][2]; see CPLR 213-a). It also entirely abolished the lookback rule in favor of new requirements: the base date rent is no longer defined as the rent charged or reflected in a registration statement on the base date but that reflected in the “most recent reliable” registration statement filed six “or more” years before the most recent registration (RSL § 26-516[a][i]). Examination of rent history that predates the period covered by the former lookback rule is no longer precluded. Instead, DHCR and courts are now required to “consider all available rent history which is reasonably necessary” to investigate overcharge claims and determine legal regulated rent, regardless of the vintage of that history and including records kept by owners, tenants and agencies (id. § 26-516[a][i], [h]). Part F likewise lengthened the four-year record retention period to six years and provides that an owner’s “election not to maintain records” does not limit the authority of DHCR or a court to examine the rental history further (id. § 26-516[g]). Whereas the RSL previously provided for only two years of treble damages for willful overcharges, treble damages are now recoverable for the entire six-year limitations period (id. § 26-516[a][2]).”

After reviewing much case law on retroactive application of statutory penalties in many contexts, the Regina Court starts applying that jurisprudence to this matter (p. 30):

“Retroactive application of the overcharge calculation provisions in Part F implicates all three … retroactivity criteria by impairing rights owners possessed in the past, increasing their liability for past conduct and imposing new duties with respect to transactions already completed. This is true even though rent stabilization is a highly regulated area.”

[Emphasis supplied.]

The Court in Regina (p. 31) finds that changing the penalty for past acts is not fair to landlords who relied on the law as it was, because the new penalties are so much more stringent than the old penalties, that they amount to more than a mere procedural change, rather they represent a change in landlord’s substantive rights, and thus trigger a constitutional presumption against retroactivity:

“Rather, by increasing overcharge exposure relating to owners’ past acts, retroactive application of the provisions would undermine considerable reliance interests concerning income owners already derived from rents collected on real property years – if not decades – before. 
Because the overcharge calculation provisions, if applied to past conduct, would impact substantive rights and have retroactive effect, the presumption against retroactivity is triggered.”

The Court in Regina is saying that the HSTPA Rent Stabilization overcharge penalties are so dramatic a change, that it just would not be fair to apply them retroactively. 

But what about the fact that the HSTPA Section F specifically stated that it would apply to “claims pending”?! The Court in Regina answers that (p. 35) by saying that, whatever the legislature intended, the Court does not see sufficient language to indicate that the legislature wanted to revive time-barred claims:

“The “claims pending” language in the Part F effective date provision is insufficient to indicate that the Legislature intended retroactive application in a manner that revives time-barred claims, such as by extending the statute of limitations to permit recovery of … annual overcharge claims that were time-barred under the prior law.”

OK! But here is where it gets tricky (in this author’s opinion). The Court in Regina then creates a distinction between pending overcharge claims where the damages calculation was already resolved, which are now on appeal, and pending cases where the overcharge calculation has not yet been done. Page 38:

“Read in context, and because some of the Part F provisions have effects beyond reviving time-barred claims, the “claims pending” language must be construed as evincing a retroactive intent. At the very least, “claims pending” indicates the Part F provisions were intended to apply to overcharge claims where the calculation issue remained unresolved as of the June 2019 effective date….
Therefore, although there was no clear directive to revive time-barred claims, we conclude that the Legislature evinced a sufficiently clear intent to apply Part F to timely pending claims…, where the overcharge calculation issue was unresolved at the time the HSTPA was enacted.”

So, then the Regina Court goes on to analyze the constitutionality of the retroactivity language for all Rent Stabilization overcharge calculations, not just those already calculated in pending cases. The Court believes it must do this, because retroactive legislation can end up being very unfair to people. The Court is now looking to see if making these stiff penalties retroactive supports some type of fundamental purpose of the new legislation. P. 39:

“To comport with the requirements of due process, retroactive application of a newly enacted provision must be supported by “a legitimate legislative purpose furthered by rational means” (American Economy, 30 NY3d at 157-158, citing General Motors Corp. v Romein, 503 US 181, 191 [1992])… “retroactive legislation does have to meet a burden not faced by [purely prospective] legislation,” which is satisfied when “the retroactive application of the legislation is itself justified by a rational legislative purpose” (Pension Benefit Guar. Corp. v R.A. Gray & Co., 467 US 717, 730 [1984]… Because “[r]etroactive legislation presents problems of unfairness that are more serious than those posed by prospective legislation…[p.43] In cases where retroactivity is integral to full achievement of the fundamental purpose of the legislation, a rational basis for the retroactive effect may be readily identifiable.”

Again, the Regina Court emphasizes (p. 46) how sweeping the change in the penalties for overcharges are under the HSTPA:

“There can be no doubt here that the HSTPA Part F amendments represent a clear rejection of prior rent stabilization enforcement policy and effectuate a significant readjustment of substantive rights relating to overcharge recovery,… Moreover, retroactivity concerns are further heightened where, as here, the new statutory provisions “affect[] contractual or property rights, matters in which predictability and stability are of prime importance”… The HSTPA does much more than require a party to shoulder a new payment obligation going forward – and its destabilizing effect is especially severe.”

Then the Regina Court concludes that the legislature fails to explain the policy goal for changing the rules so drastically and so late in the game (p. 50):

“While prospective application of Part F to overcharges occurring after the effective date may serve legitimate and laudable policy goals, no explanation has been offered, much less a rational one, for retroactive application of the amendments to increase or create liability for rent overcharges that occurred years – even decades – in the past. Part F contains no statement of legislative findings. Such a statement is contained elsewhere in the legislation, noting the continuing housing emergency; the need “to prevent speculative, unwarranted and abnormal increases in rents”; the acute shortage of housing accommodations caused by high demand and decreased supply; and the need, with respect to those being charged market rents, to avoid profiteering and other disruptive practices (L 2019 ch 36, Part G, § 2). Prospective application of Part F could be understood to address these concerns by deterring future overcharges, but retroactive application to cases pending in the appellate pipeline does not do so; the HSTPA cannot deter conduct that has already occurred (James Sq., 21 NY3d at 250). Likewise, to the degree that prospective application of certain provisions of the HSTPA is justified because the Legislature has concluded that those provisions will act to preserve the stock of stabilized housing or moderate rents going forward, retroactive application of the amendments to increase the amount of an overcharge judgment (or create overcharge liability where none existed) does not return apartments to rent stabilization or ensure the propriety of rents collected in the future. Rather than serving any of the policy goals of rent stabilization (which it would not), retroactive application of the overcharge calculation amendments would merely punish owners more severely for past conduct they cannot change – an objective we have deemed illegitimate as a justification for retroactivity…”

[Emphasis supplied.]

The Court in Regina concludes (p. 54) that:

“Thus, the overcharge calculation and treble damages provisions in Part F may not be applied retroactively, and these appeals must be resolved under the law in effect at the time the overcharges occurred.”

IV. Regina – Further Questions and Some Comments

A. Regina Applies Beyond J-51 Overcharges

I do not think that Regina applies only to overcharge claims in illegal deregulation J-51 cases. Nor do I believe that Regina applies only to pending overcharge cases. My opinion, at this time, is that Regina stands for the principal that the overcharge calculations and treble damages provisions in Part F of the HSTPA may not be applied retroactively to any overcharge claim. Perhaps other lawyers will disagree with me, let’s see.

B. If an overcharge claim is filed post-HSTPA, but a portion of the overcharge happened before the HSTPA, which penalty provision applies? 

My main question is this – If an overcharge claim is filed post-HSTPA, but a portion of the overcharge happened before the HSTPA, which penalty provision applies? If you were overcharging me post-HSTPA, shouldn’t the provisions of the HSTPA apply? Or, rather, does the choice of law depend on when the overcharge technically began? 

Most overcharges can trace their origins back many years. Remember the HSTPA begins in June 2019. Thus, if my overcharge case filed in November 2022 is anchored in a landlord indiscretion with the rent roll in November 2016, does the old law apply…or the new? Regina suggests that pre-June 2019, landlord did not know how very bad the penalties for an overcharge would one day be and she also did not know she should hold on to her records. However, certainly after June 2019 (the HSTPA) landlord did know. At that point, landlord might have chose to hold on the records that were then only three years old and landlord might have looked back on its past bad acts and said “wow, with these new penalties, maybe I should re-regulate that illegally deregulated apartment, or maybe I should correct that overcharge of a currently deregulated tenant.” 

Figuring this out should be fun. 

C. Everybody calm down, tenants are not so harmed by Regina and landlords are not so benefited.

Tenants are not so harmed by Regina and landlords are not so benefited.

Many overcharges, especially the lucrative ones, come out of illegal deregulation cases. As the Regina Court points out, the court and DHCR were always allowed to look back as far as they needed to, in order to determine regulatory status. They still can. As the Regina Court also points out, tenants can still win the Holy Grail, a determination that their free-market apartment is subject to Rent Stabilization. When such a finding is coupled with the elimination of a rent increase pathway to deregulation (the HSTPA eliminated High Rent Deregulation), the landlord is still the loser and the tenant still a winner. 

Furthermore, all these Regina cases were brought many years before the HSTPA. Presumably, these tenants and their counsel knew the rules and expected a recovery akin to what they received, and yet still thought their cases were worth pursuing. Indeed, pre-HSTPA overcharges could still be worthwhile cases. 

Moreover, remember – even under the old law, there are at least three other reasons that a court or the DHCR can look back beyond four years when setting the rent for overcharge purposes, and the Regina Court mentions two of them in the decision:

1) Fraud (mentioned throughout in the Regina decision)
2) A rent overcharge occasioned by a DHCR Rent Reduction Order (mentioned in the Regina decision at footnote 6 on p. 12)
3) When the landlord utilizes a preferential rent (built into the preferential rent statute; RSC § 2521.2)

Courts will still be looking back beyond four-years, even when applying the old law.

D. Rent Freezes – Regina Does Not Answer This

Finally, this last section is very esoteric and only for my lawyer frenemies out there, you know who you are. 

I am not sure that Regina dealt with the biggest issue afoot in New York City Rent Stabilization overcharge jurisprudence. It came close! But I am unsure you can call this an applicable holding, as opposed to dicta. In footnote 9 on page 15 the Regina Court frowns, shall we say, upon the reasoning of Thornton and a great deal of its progeny (Jazilek, In re Second 82nd SM LLC, Bradbury, Matas, Leyva)  that the rent gets frozen under RSL § 26-517(e) in an overcharge fraud case. The Regina Court says (p. 15 fn. 9):

“We also reject the tenants’ arguments in Taylor and Reich that the rent should have been frozen under RSL § 26-517(e), which provides that “[t]he failure to file a proper and timely . . . rent registration statement” precludes an owner from collecting rent increases until a registration is filed. To the extent this provision is relevant to overcharge cases, the owners in Taylor and Reich filed registration statements for the years covered by the four-year recovery period and lookback rule (records prior to that period cannot be reviewed absent fraud). The fact that, in Taylor, these registration statements were filed retroactively is addressed by a separate statutory surcharge for late registration. In any event, rent freezing is inapplicable in Roberts [J-51 overcharge] cases where the failure to timely register resulted directly from DHCR’s endorsement of a misunderstanding of the law (see Taylor, 151 AD3d at 106; Matter of Park v New York State Div. of Hous. & Community Renewal, 150 AD3d 105, 113 [1st Dept 2017]).”

In my opinion, again for what that is worth, rent freezing is still a legally acceptable method for setting the rent in an overcharge case, either pre or post HSTPA. Until the courts tell us it isn’t.

V. Conclusion

Regina stands for the principal that, the overcharge calculations and treble damages provisions in Part F of the HSTPA may not be applied retroactively to any overcharge claim.

As I write this article in the wake of Regina coming down, the City of New York is in its most dire week yet of the unprecedented Corona Virus crisis. The economy is shut down and people are terrified about their health and that of their loved ones. New Yorkers are dying. It would be nice, in these troublesome times, for our Rent Stabilization jurisprudence to be simpler and clearer, for the benefit of both landlords and tenants. But this is what we have. Thus, I offer this article to the general public and my fellow lawyers, in the hope of making things just a bit clearer. As always, I try to be a balanced voice, not writing from the perspective of either landlord or tenant. Indeed, I continue to believe that now, more than ever, we are all in this together. 

As there are further developments, I will keep you updated.

Respectfully submitted,

Michelle Itkowitz