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New Law Impacting Overcharge Cases

Court Orders Production of Rental History from 1996

The impact of the legislation passed in June is being felt across the board by apartment building owners. In countless ways both large and small, from the leasing process to Housing Court to rent regulation, the entire landscape has changed dramatically for the worse for owners.

One of the most vivid examples is the change in the laws relating to rent overcharge claims by tenants. While the prior law was full of judicially-created exceptions, the fundamental rules in place since the enactment of the Rent Regulation Reform Act of 1997 were that a four-year statute of limitations applied to a tenant’s claim of a rent overcharge by an owner, that the calculation of any overcharge was limited to the prior four years, and that an owner was obligated to retain the records relating to rent history for the four prior years.

This area of the law was changed in several respects. First, the so-called “safe harbor” which allowed owners to avoid treble damages by voluntarily adjusting the rent and paying a refund of rent overcharges after a complaint was eliminated. Second, the four-year statute of limitations period was increased to six years. Third, with regard to rental history, the new laws state that DHCR and the courts “shall consider all available rental history which is reasonably necessary to make such determinations.” Lastly, the law provides that the new provisions not only take effect immediately but also “shall apply to any claims pending or filed on and after such date.” Thus, even though an owner may have complied fully with the four-year record-keeping requirement, owners can now be subject to overcharge liability as the result of failing to retain rental histories that they were not previously required to retain.

Owners did not have to wait long to see how these new provisions would be applied by the Housing Court. In a decision dated July 1st, merely two weeks after the new laws took effect, Housing Court Judge Karen May Bacdayan ruled in the case of 699 Venture Corp. v. Zuniga, that the owner was required by the new law to provide rental history dating to 1996! Judge Bacdayan acknowledged the owner’s contention that “23 years is a long time.” Remarkably, however, Judge Bacdayan completely ignored the fact that the law since 1997 required only four years of record-keeping and the owner had no legal obligation to do anything other than that; instead, she asserted that under the new law “owners who do not maintain records from more than six years ago do so at their own peril.”

Owners should expect to see more horrendous decisions like this one in the future. 

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