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Disappointing Decision from the Court of Appeals on J-51 issues: Regina Metro

Posted by Jennifer Rozen | Apr 13, 2020 | 0 Comments

On April 2, 2020, New York's Court of Appeals, issued a 110 page decision in Matter of Regina Metro. Co. LLC v. DHCR. The long-awaited decision consolidated 3 other cases (Raden, Taylor, and Reich) that were pending, all of which dealt with deregulation and overcharge calculations in the J-51 context.  The decision issued in the midst of a pandemic and economic crisis was devastating to NYC tenants, and severely limits the gains made through the passage of the 2019 HSTPA.  
 
Under the HSTPA, New York's rent-regulatory laws were extended in perpetuity, eliminating the need for renewal every few years. The HSTPA also eliminated the landlord's ability to deregulate apartments, and put strict restrictions on a landlord's ability to increase the rent, even for a vacant and/or improved apartment. Notably, the HSPTA significantly changed the value of rent-overcharge claims by extending the statute of limitations from four to six years and allowed tenants to collect treble damages for up to six years, rather than two. The language of the HSTPA is clear on its face. The changes enacted by the statute were to apply to all pending claims. Under HSTPA, DHCR and the courts were to consider all available rent history in order to make a determination on overcharge claims and in order to establish legal regulated rents. Prior to its enactment, absent fraud, a tribunal adjudicating an overcharge claim was limited to a review of 4 years of the apartment's rent-history prior to the filing of any complaint.
 
In its recent decision, the Court of Appeals held that HSTPA's rent overcharge provisions can only be applied prospectively, despite the express statutory language that the law applied to all pending claims. The court deemed retroactive application of the statute impermissible based on the effect that the majority believed it would have on property owners. The court specifically noted the impairment of owner's past rights and increased liability for past acts that were once lawful (like maintaining records of improvements for only 4 years). 
 
 
The majority ruled on due process grounds finding, "We conclude that the overcharge calculation amendments cannot be applied retroactively to overcharges that occurred prior to their enactment."  The court rationalized this by finding that the Legislature failed to provide any rational basis for significantly expanding an owner's liability, based on acts that were lawful prior to the enactment of HSTPA.
 
The decision in Regina limits a tenant's right to collect overcharge damages for only the 4 years prior to the filing of a complaint (rather than the 6 provided for in the HSTPA), but the decision appears to be lacking any real discussion of how to set the legal rent in an overcharge case. Tenant advocates will have to hold tight to some of the language in the decision, which seems to imply that tenants can still look as far back in the rent history to set the legal rent. The decision was lengthy, so as the lower courts begin to analyze it, we will provide updates to you all.
 
Stay safe,

About the Author

Jennifer Rozen

Managing Attorney - The President and Owner of Rozen Law Group. She was a named partner at Fishman Rozen prior to launching the firm. Jennifer Rozen became a partner of Fishman & Mallon, LLP in May 2013. Her involvement in tenant and consumer law begin in October of 2005 when she landed a job as a summer intern at Fishman & Neil. She has been advocating on behalf of New York City tenants and consumers ever since.

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