One approach to rebutting the intent to overcharge and, its onerous brother, treble damages.
New York City followed the state legislature's lead in enacting Administrative Code Section J51-2.5, now codified as Admin. C. Section 11-243, et seq. The statute contains what has become more commonly known as the "J-51" program. The J-51 program incentives building owners to renovate their properties by giving them property tax benefits. There are two elements to the tax benefits: (1) an exemption from annual increases in the property's assessed taxable value; and, (2) an abatement of the annual property tax assessment for the covered property. In return, the building must be treated as if it is rent regulated. Rent regulation would require that rent for each subsequent lease be increased pursuant to the determination made by the NYC Rent Guidelines Board (RGB).
Treble Damages for Rent Overcharges
N.Y. ADC. LAW Section 26-516(a) provides for the imposition of treble damages on landlords of rent stabilized buildings who willfully overcharge. The code creates a rebuttable presumption that any overcharge found is willful. Accordingly, the burden is on the landlord to establish, by a preponderance of the evidence, that the overcharge was not "willful".
High Rent/Income Deregulation
The Rent Regulation Reform Act of 1993; the Rent Regulation Reform Act of 1997; and the Rent Act of 2011 provide for the deregulation of certain apartments based on either one of two scenarios. One, the apartment has a legal regulated rent of twenty-five hundred dollars ($2,500) or more per month and the apartment is occupied by persons whose total annual household income exceeds two hundred thousand dollars ($200,000) in each of the two preceding calendar years. Or two, the rent stabilized apartment becomes vacant and could be offered at a legal regulated rent of twenty-five hundred dollars ($2,500) or more per month.
J-51, High Rent/Income Deregulation & Avoiding Treble Damages
Under certain circumstances, landlords facing rent overcharge claims may have a viable argument that, if there were overcharges, such overcharges were not "willful" because they thought the apartment was deregulated pursuant to the Department of Housing and Community Renewal's (DHCR) interpretation of J-51. In Casey v Whitehouse Estates, Inc. 2012 NY Slip Op 51471(U) (Sup. Ct., NY County, August 6, 2012) the court held that where a landlord overcharged due to a belief that a deregulated buildings with a J-51 exemption, unlike regular RSL buildings that are also receiving J-51, does not preclude high rent/income deregulation, and such landlord: "was acting in good faith reliance upon the DHCR's own interpretation of the law...the facts alleged cannot support a finding that the landlord fraudulently or purposefully evaded the Rent Stabilization Law, so the treble damage provisions of the rent regulations simply do not apply under the facts alleged."
If you encounter DHCR records which show the landlord claimed both exemption and J-51 do not despair, there might be an argument to rebut the intent to overcharge and, its onerous brother, treble damages.
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