Congrats to our Partners, Jacqueline Handel-Harbour & Steven Sperber for bringing another victory to SKH HEIBERGER LLP:
No Look Back of More Than 4 Years for Pre-HSTPA Cases without a Claim & Showing of Fraud.
By Ryan P. Saxton
The Court of Appeals had spoken on this issue. The Appellate Term – 1st Dept. stands by the Regina Metropolitan LLC v. DHCR, 2020 NY Slip Op 02127 Court of Appeals Decision by refusing to permit a lookback beyond 4 years for a Pre-HSTPA matter without an allegation of fraud AND colourable claim of fraud. The Court of Appeals in Regina, determined that the Housing Stability Tenant Protection Act (“HSTPA”) which requires the entire rent history to be examined to determine a reliable rent cannot be retroactively applied to overcharge claims alleged prior to HSTPA’s enactment in June of 2019.
In the recent Decision, SKH Heiberger LLP’s client was protected by the Regina decision in 150 E. Third St. LLC v. Ryan & Gladys, 2021 NY Slip Op 21044 (App. Term 1st Dept. February 26, 2021). The Appellate Term clearly stated that Tenants cannot just claim “overcharge” in a pre-HSTPA matter placing the burden on the Landlord to prove its calculations used in determining the legal rent beyond four years. The tenants in the case of Ryan & Gladys, resided in a completely renovated unit since 2011, with the apartment registered as deregulated. The tenants sought a windfall in alleged overcharges years later despite admitting in a written stipulation at trial all of the renovations that landlord had made previously permitting deregulation of the unit.
Without even asserting “fraud”, the tenants were misguided into believing they could lookback as far as 2006 when the premises were deregulated to obtain a recalculation of rents. Our firm submitted a Brief written by firm Partner, Jacqueline Handel-Harbour and argued by Steven Sperber, Managing Partner Supreme Court litigation, who successfully convinced the Appellate Term to modify the trial court’s decision. The Appellate Court held:“The trial court erred in considering the rental history for the apartment beyond the four-year lookback period. Tenants' pre-HSTPA answer did not allege that there was any fraudulent scheme to deregulate the apartment (see CPLR 3018[b]), and tenants never moved to amend their answer to assert fraud during the one and one-half years the proceeding was pending prior to the enactment of the HSTPA.
Moreover, no mention of fraud was made in the parties' detailed stipulation, which was prepared by the attorneys for the parties. Under the circumstances the trial court should not have considered tenants' belated contention of fraud, which was raised for the first time in tenants' post-trial motion (see Matter of Roberts v Borg, 83 AD3d 947, 949 [2011]; see also Cole v Mandell Food Stores, 93 NY2d 34, 40 [1999]).
In any event, even if the fraud issue was properly considered, the stipulated facts fail to support a finding of a fraudulent scheme to deregulate, so as to warrant looking beyond the four year limitations period. Neither the sizeable increase in the apartment rent in 2006, based in part on apartment improvements, nor the Court's skepticism about the quality or extent of those improvements, were sufficient to establish a colorable claim of fraud (see Breen v 330 E. 50th Partners, L.P., 154 AD3d 583 [2017]).
We therefore remand for a new determination on the overcharge issue consistent herewith, based upon the parties' stipulation of facts.” The case was remanded for further proceedings. However, it is important to note that while the HSTPA has put Landlords at potential risk for significant overcharge damages if their records are not in order, Landlords can now find solace in knowing that without an allegation and colorable claim of fraud, a lookback beyond 4 years should not occur in a Pre-HSTPA case. We are excited by this decision and will keep you informed as new information is available.
