Ask Sam: If my apartment was illegally deregulated, how much money can I collect in overcharges?
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I read that it is now easier to sue and collect overcharges if you believe your apartment was illegally deregulated. Is this true? How much money can I expect?
The Housing Stability and Protection Act (HSTPA), passed by the New York State legislature in 2019, improved tenants’ ability to collect rent overcharges from landlords who illegally deregulated their apartments, but a subsequent court decision has complicated matters, says Sam Himmelstein, a lawyer with the firm Himmelstein, McConnell, Gribben, Donoghue & Joseph who represents residential and commercial tenants and tenant associations.
Before the passage of the HSTPA, if a tenant suspected their apartment had been illegally removed from rent stabilization, courts could only investigate four years of the apartment’s rental history prior to the date the tenant’s complaint was filed. Furthermore, if the apartment was found to have been wrongly deregulated, the tenant could only recover rent overcharges going back four years, and treble damages for the most recent two years of overcharges (if the landlord was found to have willfully and intentionally overcharged the tenant).
“The HSTPA said you can now look back to the last reliable registration to determine what the rent should be, and collect six years of overcharges and treble damages,” Himmelstein says. “This initially opened things up, but then landlords challenged the retroactive application of the HSTPA.”
Changes to the law from the Regina case
The result of that challenge, in a case called Regina Metropolitan Co. v. New York State Division of Housing & Community Renewal, was that the Court of Appeals, the highest court in New York State, ruled it was unconstitutional to apply certain changes in the law enacted in the HSTPA to overcharges that occurred before the HSTPA was enacted.
The decision limits tenants to collecting overcharges for up to four years prior to the enactment of the HSTPA, and the four-year rule limiting the investigation of the rental history will still apply to any overcharges that occurred prior to the enactment of the HSTPA.
Tenants who suspect their apartments have been illegally deregulated can still challenge their status in court, and there is no statute of limitations on a status challenge. However, the four-year statute of limitations on a monetary challenge still applies to overcharges collected up to June 2019, so tenants may not be able to collect as much in damages.
“As time passes since the 2019 law, the statute of limitations will keep getting extended until it reaches the new threshold of six years. The recovery period is limited to four years prior to June 2019, when the HSTPA was passed, so that goes back to June 2015,” explains Ronald Languedoc, a partner at HMDGJ Law. “Anything that happened in the rental history from June 2015 to present is subject to a challenge, and the period for recovering overcharges goes back to that date as well.”
So if you file a complaint against your landlord in June of this year for illegally deregulating your apartment and you win in court, you can potentially recover six years of overcharges—which is the maximum recovery period.
There is an exception to the four-year rule in cases dealing with fraud. Tenants who are alleging their landlords committed fraud in illegally deregulating apartments are not subject to the four-year rule, but it is their burden to prove that fraud took place.
“In overcharge cases, the tenant asserts that there was an overcharge and the landlord has to produce proof,” Languedoc says. “In fraud cases it goes the opposite way, and can be difficult to do. Tenants have to be creative in researching public records and their apartment history.”
Where to sue your landlord
If you decide to sue your landlord and attempt to collect overcharges, you have a choice of forum in which to do so. You could file a complaint with DHCR or sue in State Supreme Court. Another option is to withhold your rent, which would prompt the landlord to sue you in housing court and allow you to raise the issue of illegal deregulation in a defense and counterclaim.
“If there’s enough money at stake, we recommend the Supreme Court,” Languedoc says. “The DHCR often seems to take a narrower view of these cases, especially with fraud.”
The Supreme Court also allows you as of right pre-trial discovery, and in housing court tenants may file motions for discovery, which are generally granted. In both Supreme and Housing Court, tenants have the right to an in-person trial, he adds, whereas in the DHCR, hearings are rare.
“Sometimes tenants will choose housing court, and the advantage is that judges are specialized in these issues,” Languedoc says. “The disadvantage is that you’ll end up on the tenant blacklist.”
Another disadvantage of housing court is that you’ll have to wait for your landlord to sue you, which could affect how much rent overcharges you’re able to collect, due to the statute of limitations. In Supreme Court, the tenant initiates the lawsuit.
Keep in mind that the 2019 laws have far-reaching benefits for NYC tenants beyond their ability to collect overcharges. You can read an overview of all the rent reform changes from HSPTA here.
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Sam Himmelstein, Esq. represents NYC tenants and tenant associations in disputes over evictions, rent increases, rental conversions, rent stabilization law, lease buyouts, and many other issues. He is a partner at Himmelstein, McConnell, Gribben, Donoghue & Joseph in Manhattan. To submit a question for this column, click here. To ask about a legal consultation, email Sam or call (212) 349-3000.