Court Opinion

ID: 5486241
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:14:01.071106+00
Date Added: 2024-06-11T08:33:41.250977
License: Public Domain

Smith, J. (dissenting).
In Thornton v Baron (5 NY3d 175 [2005]) and Matter of Cintron v Calogero (15 NY3d 347 [2010] [decided today]), the Court carved out exceptions to the command of the Rent Regulation Reform Act of 1997 that a rent charged more than four years before a tenant complains may not be considered in deciding an overcharge claim. But in this case, the majority goes far beyond making an exception. The majority has, in substance, largely repealed the statute—or, perhaps, has turned it into a source of endlessly complex litigation. I am not sure which it has done, and I am not sure which is worse.
The statute and the regulations implementing it are unequivocal.
*368“[N]o determination of an overcharge and no award or calculation of an award of the amount of an overcharge may be based upon an overcharge having occurred more than four years before the complaint is filed .... This paragraph shall preclude examination of the rental history of the housing accommodation prior to the four-year period preceding the filing of a complaint pursuant to this subdivision” (Rent Stabilization Law [RSL] of 1969 [Administrative Code of City of NY] § 26-516 [a] [2]; see also id. § 26-516 [a] [“Where the amount of rent set forth in the annual rent registration statement filed four years prior to the most recent registration statement is not challenged within four years of its filing, neither such rent nor service of any registration shall be subject to challenge at any time thereafter”]; Rent Stabilization Code [9 NYCRR] § 2526.1 [a] [2]).
Thornton and Cintron presented special situations in which, for understandable reasons, a majority of the Court decided that this language should not be taken literally. Thornton involved an elaborate fraudulent scheme, in which illusory leases containing false representations were created, collusive lawsuits brought and a court misled into entering orders that made it possible to collect illegal rents; the Court held that such an extreme form of misconduct should not be protected by the four-year time bar. Cintron presented the problem of how to reconcile the four-year limitation with another section of the statute providing for rent reduction orders of indefinite duration.
But this is a garden-variety overcharge case—perhaps the paradigm of the situation for which the four-year limitation was intended. The landlord charged an illegal rent, and the illegality went undetected for more than four years. The statute says plainly that in such a case, the rent charged four years previously shall not be subject to challenge. But the majority holds that a challenge is allowed.
The majority’s justification for this result is that “the overcharge complaint alleges fraud” and that there are “indicia of fraud”—consisting essentially of allegations that the landlord lied to previous tenants about what the legal maximum rent was (majority op at 366). In other words, the majority seems to equate “fraud” with a wilful overcharge—as though the *369four-year limit were applicable only to landlords who overcharge by mistake. In fact, the statute contains its own remedy for wilful overcharges: treble damages (RSL § 26-516 [a]). It does not make the four-year limitation inapplicable in wilful overcharge cases—cases which, as the Legislature certainly knew, are a large number of the cases to which the limitation on its face applies.
The majority seemingly tries to temper its holding by saying that “an increase in the rent alone will not be sufficient to establish a ‘colorable claim of fraud’ ” and that “a mere allegation of fraud alone, without more, will not be sufficient to require DHCR to inquire further” (majority op at 367). But obviously it does not take much “more” than an allegation of fraud—there is practically nothing more in this case. The majority adds that what DHCR is supposed to “inquire” about is whether there was a “fraudulent scheme to destabilize the apartment” (id..). It does not say what it takes to prove such a “fraudulent scheme.” Simply a wilful overcharge? A wilful overcharge coupled with the hope that the overcharge will eventually result in the apartment’s escape from rent stabilization?
If the majority opinion does not simply nullify the four-year limit in every case where the overcharge was not a good faith error, it requires DHCR to undertake an inquiry that the majority leaves wholly undefined. And what if DHCR’s inquiry shows that, though there was a wilful overcharge, there was no “fraudulent scheme”? Does this mean that, if the landlord has been charging an illegal rent for more than four years, it may continue to do so?
The majority opinion can be read to mean either that the four-year limitation has largely ceased to exist, or that any case to which the limit applies on its face must lead to a mini-litigation, in which DHCR tries to figure out whether the overcharge was “fraudulent” enough to escape the time limit. If the former, the majority has simply tossed aside the Legislature’s command. If the latter, I do not envy DHCR its task.
Chief Judge Lippman and Judges Pigott and Jones concur with Judge Ciparick; Judge Smith dissents in a separate opinion in which Judges Graffeo and Read concur.
Order affirmed, etc.