Civil Court of the City of New York, Bronx County, April 7, 2020

The Legal Aid Society, Bronx (Michael Fusilli of counsel), for respondent.

Todd Rothenberg, New Rochelle, for petitioner.

After oral argument, the decision and order on this motion is as follows:

Background and Procedural Posture

The petitioner, Anderson A To Anderson G LLC, commenced this summary nonpayment proceeding against Guillermo Obergh Sanchez (respondent) in February of 2019. The petition seeks unpaid rent in the amount of $4,968.51, and alleges the subject premises are subject to rent stabilization. Respondent filed a pro se answer and the matter was made returnable on March 26, 2019. Respondent's answer asserts that the rent has been paid or partially paid to the petitioner and a warranty of habitability defense.

Both sides are represented by counsel in this proceeding.

Respondent moves for leave to file an amended answer pursuant to CPLR 3025. The respondent seeks summary judgment pursuant to CPLR 3212 (e) based on respondent's first affirmative{**68 Misc 3d at 438} defense and first counterclaim of overcharge in violation of a rent reduction order (RRO). Respondent also seeks summary judgment on the second defense of rent overcharge based on an incorrect legal regulated rent and first counterclaim.

The respondent further seeks an order for a Housing Court inspection of the subject premises and an order pursuant to New York City Civil Court Act § 110 (c), Real Property Law § 235-b (1) and the Housing Maintenance Code to repair all violations in respondent's apartment.

In the alternative, respondent seeks dismissal pursuant to CPLR 3211 for failure to provide a rent demand with a good faith approximation as required by RPAPL 711 (2).

Amending the Answer

CPLR 3025 (b) provides that leave to amend a pleading shall be freely given upon such terms as may be just. (Norwood v City of New York, 203 AD2d 147, 148-149 [1st Dept 1994].) Amendment can be made at any time, especially where there is not significant prejudice to the opposing party. (National Union Fire Ins. Co. of Pittsburgh, Pa. v Schwartz, 209 AD2d 289, 290 [1st Dept 1994].) In the instant proceeding, the proposed amended answer contains meritorious defenses including overcharge and warranty of habitability. (Thomas Crimmins Contr. Co. v City of New York, 74 NY2d 166, 170 [1989].)

Petitioner argues prejudice if respondent is permitted to amend the answer. The court cannot credit petitioner's claims of prejudice. Prejudice in the context of permitting the submission of an amended pleading is shown where the nonmoving party is "hindered in the preparation of his case or has been prevented from taking some measure in support of his position." (Loomis v Civetta Corinno Constr. Corp., 54 NY2d 18, 23 [1981]; Jacobson v McNeil Consumer & Specialty Pharms., 68 AD3d 652, 654-655 [1st Dept 2009] ["Prejudice does not occur simply because a defendant is exposed to greater liability or because a defendant has to expend additional time preparing its case" (citations omitted)].) Petitioner's non-specific allegations of prejudice are unsupported. Accordingly, respondent's motion to file the amended answer is granted and the proposed amended answer is deemed served and filed.

Argument

Respondent seeks a finding of overcharge and treble damages against the petitioner on several bases. Respondent moved{**68 Misc 3d at 439} into the subject premises pursuant to a rent-stabilized lease commencing January 1, 2013, and ending December 31, 2014.^[FN1] This initial lease states a legal regulated rent of $1,586.61 and a preferential rent of $1,322.18. A subsequent lease^[FN2] commencing January 1, 2015, with a purported prior legal rent of $2,791.72 and new legal rent for one year of $2,819.64 and a two-year rate of $2,868.49 was then executed. The lease was executed at a two-year preferential rate of $1,398.95 per month. The parties executed several subsequent leases.^[FN3] The last lease executed between the parties commenced on August 1, 2018, and terminated December 31, 2019, with a legal regulated rent of $2,876.03 and a preferential rent of $1,700.02. This last lease is the only lease registered with the Division of Housing and Community Renewal of the State of New York (DHCR) during respondent's entire tenancy.

The respondent moves for partial summary judgment based on petitioner's failure to comply with a DHCR RRO effective May 1, 2018, which currently remains in effect. The RRO was issued for the subject premises on December 5, 2018. The order,^[FN4] effective May 1, 2018, "reduced the legal regulated rent to the level in effect prior to the most recent guidelines increase for the tenant's lease which commenced prior to the effective date of the order."

The respondent argues that petitioner is precluded from collecting above $1,322.18, which was the rent agreed to by the parties in the original 2013 lease. It is proffered that all subsequent leases executed between the parties were improper as they were not offered under the same terms or conditions as{**68 Misc 3d at 440} the original lease. Specifically, the increase in the legal regulated rent from $1,586.61 in the initial lease between the parties to $2,868.49 in the subsequent lease—an increase of almost one hundred percent—remains unexplained by petitioner.

Respondent seeks a finding of overcharge, as petitioner failed to register the leases and corresponding rents with DHCR.^[FN5] Prior to the commencement of the respondent's tenancy, the subject premises were registered with a legal rent of $1,996 and a preferential rent of $1,322.18, in 2012. The subsequent registration, which marks the commencement of respondent's tenancy, registered the subject premises as exempt due to high rent vacancy. The apartment is then registered as exempt for each subsequent year through 2018. In 2018, the apartment is registered as rent-stabilized with the respondent as the tenant and a lease commencing February 5, 2019, with a legal regulated rent of $2,876.03.

Petitioner's opposition provides no explanation for the almost $1,300 increase in the legal regulated rent for the subject premises from the initial 2013 lease executed by the parties to the subsequent lease which commenced on January 1, 2015. Petitioner also fails to justify its failure to register rents with DHCR for the subject apartment consistent with the leases executed during respondent's tenancy. Petitioner's opposition regarding adherence to the RRO is merely to restate its language. The order "reduces the rent to the level in effect prior to the most recent guidelines increase for the tenant's lease which commenced before the effective date of this Order." Petitioner argues that the legal regulated rent in effect prior to the reduction order was $2,819.64, as was stated in the lease commencing January 1, 2016, and that this is the amount that petitioner was entitled to charge pursuant to the rent reduction order. In the alternative, should the court find the 2013 lease governs, the petitioner states that any overcharge should be limited to any amount charged in excess of $1,586.61, as the initial legal regulated rent set forth by the parties' initial lease rather than $1,322.18, the preferential rent agreed to by the parties in that same lease.

Petitioner also opposes respondent's motion for summary judgment under the doctrines of res judicata and collateral{**68 Misc 3d at 441} estoppel. In a prior proceeding under L/T index No. 28678/18, the respondent, without the representation of counsel, entered into an agreement^[FN6] in which he agreed to a two-year lease commencing August 1, 2018, with a preferential rent of $1,700. Curiously, this agreement is marked without prejudice and makes no mention of any prior improper DHCR registrations or any existing or potential overcharge claims. Petitioner argues that this agreement precludes respondent from now arguing overcharge.

Summary judgment is a drastic remedy that should be granted only if no triable issues of fact exist and the movant is entitled to judgment as a matter of law. (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; Andre v Pomeroy, 35 NY2d 361, 364 [1974].) The party moving for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law and tender sufficient evidence in admissible form demonstrating the absence of material issues of fact. (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; CPLR 3212 [b].) The failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers. (Smalls v AJI Indus., Inc., 10 NY3d 733, 735 [2008].) Once a prima facie showing has been made, however, "the burden shifts to the nonmoving party to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact that require a trial for resolution." (Giuffrida v Citibank Corp., 100 NY2d 72, 81 [2003]; see also Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; CPLR 3212 [b].)

When deciding a summary judgment motion, the court's role is solely to determine if any triable issues exist, not to determine the merits of any such issues. (Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957].) The court must view the evidence in the light most favorable to the nonmoving party and give the nonmoving party the benefit of all reasonable inferences that can be drawn from the evidence. (Negri v Stop & Shop, 65 NY2d 625, 626 [1985].) If there is any doubt as to the existence of a triable issue, summary judgment should be denied. (Rotuba Extruders v Ceppos, 46 NY2d 223, 231 [1978].){**68 Misc 3d at 442}

Collectible Rent

The Rent Stabilization Code (RSC) (9 NYCRR) § 2528.4 provides that an owner who fails to timely file rent registrations with DHCR is barred from collecting rent in excess of the base date rent, and may be retroactively relieved of that penalty upon filing a proper registration only when "increases [in the legal regulated rent] were lawful except for the failure to file a timely registration." (Nolte v Bridgestone Assoc. LLC, 167 AD3d 498, 499 [1st Dept 2018]; Matter of 215 W 88th St. Holdings LLC v New York State Div. of Hous. & Community Renewal, 143 AD3d 652, 653 [1st Dept 2016].)

[1] In the case at bar, petitioner has failed to register the rent for the entirety of the respondent's tenancy, except for the most recent lease at a purported legal regulated rent of $2,876.03. The court notes that this registration fails to mention the preferential rent and fails to account for the years where no registration was filed, thus providing no explanation for the increase in legal rent from $1,996 as was registered in 2012 to $2,876.03. Accordingly, this registration statement must be deemed a nullity. (Thornton v Baron, 5 NY3d 175 [2005].) Further, petitioner is barred from the collection of any rent until filing a proper registration.

Rent Stabilization Code (9 NYCRR) § 2522.5 (g) (1) provides that a proper lease renewal must be offered "on the same terms and conditions" as the expired lease. The leases executed after respondent's initial 2013 lease include unjustifiable legal rent increases. As such, these leases must be deemed null and void. A landlord and a tenant may not make an agreement that goes against the scheme of rent regulation, even if favorable to the tenant. (Drucker v Mauro, 30 AD3d 37, 39 [1st Dept 2006] ["It is well settled that the parties to a lease governing a rent-stabilized apartment cannot, by agreement, incorporate terms that compromise the integrity and enforcement of the Rent Stabilization Law. Any lease provision that subverts a protection afforded by the rent stabilization scheme is not merely voidable, but void (Rent Stabilization Code [9 NYCRR] § 2520.13), and this court has uniformly thwarted attempts, whether by mutual consent or by contract of adhesion, to circumvent regulated rent maximums"].) In addition, the tenant cannot waive a benefit of the Rent Stabilization Law. (9 NYCRR 2520.13.) An agreement by the tenant to waive the benefit of any provision of the Rent Stabilization Law or Rent Stabilization Code is void. (Georgia Props., Inc. v Dalsimer, 39{**68 Misc 3d at 443}AD3d 332, 334 [1st Dept 2007]; Riverside Syndicate, Inc. v Munroe, 39 AD3d 256, 257 [1st Dept 2007], affd 10 NY3d 18 [2008]; United W. LLC v Margulies, 12 Misc 3d 1159[A], 2006 NY Slip Op 50971[U], *3 [Civ Ct, NY County 2006].) A lease which attempts to evade the Rent Stabilization Code and contains an illegal rent is void at its inception and the rent registration statement listing this illegal rent is also a nullity. (Thornton v Baron, 5 NY3d 175 [2005].)

The initial lease between the parties with a legal regulated rent of $1,586.61 and a preferential rent of $1,322.18 remains valid. This lease, while not collectible until properly registered, is still binding. (Jazilek v Abart Holdings, LLC, 72 AD3d 529, 531 [1st Dept 2010].)

Part E, section 1 of the Housing Stability and Tenant Protection Act of 2019 (HSTPA) (L 2019, ch 36, § 1) states the following:

"Any tenant who is subject to a lease on or after the effective date of a chapter of the laws of two thousand nineteen which amended this subdivision, or is or was entitled to receive a renewal or vacancy lease on or after such date, upon renewal of such lease, the amount of rent for such housing accommodation that may be charged and paid shall be no more than the rent charged to and paid by the tenant prior to that renewal."

Therefore, in compliance with the HSTPA, the starting point of any lawful rent increase for respondent's lease is the amount paid under his initial lease—to wit, $1,322.18.

Overcharge

Part F, section 5 of the HSTPA amended Rent Stabilization Law of 1969 (RSL) (Administrative Code of City of NY) § 26-516 as follows:

"h. The division of housing and community renewal, and the courts, in investigating complaints of overcharge and in determining legal regulated rents, shall consider all available rent history which is reasonably necessary to make such determinations, including but not limited to (i) any rent registration or other records filed with the state division of housing and community renewal, or any other state, municipal or federal agency, regardless of the date to which the information on such registration{**68 Misc 3d at 444} refers; (ii) any order issued by any state, municipal or federal agency; (iii) any records maintained by the owner or tenants; and (iv) any public record kept in the regular course of business by any state, municipal or federal agency. Nothing contained in this subdivision shall limit the examination of rent history relevant to a determination as to:

"(i) whether the legality of a rental amount charged or registered is reliable in light of all available evidence including but not limited to whether an unexplained increase in the registered or lease rents, or a fraudulent scheme to destabilize the housing accommodation, rendered such rent or registration unreliable."

Thus, the changes to the Rent Stabilization Law pursuant to the HSTPA appeared to impose no time limit on how far back DHCR and courts can look in order to determine whether an overcharge has occurred. The amended CPLR 213-a, when read in conjunction with the amended RSL § 26-516, instructed the courts and DHCR to "consider all available rent history" necessary to determine the legal rent and any overcharge that may have occurred. (Dugan v London Terrace Gardens, L.P., 177 AD3d 1, 9-10 [1st Dept 2019].) However, the recent decision in Matter of Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal (— NY3d —, 2020 NY Slip Op 02127 [2020]) held the retroactive application of overcharge calculation amendments in the Housing Stability and Tenant Protection Act did not comport with due process and is thus unenforceable. Regina Metro. resurrects the pre-HSTPA rule, where a tenant was required to demonstrate a colorable claim of a fraudulent scheme^[FN7] to deregulate the apartment that would warrant granting discovery beyond the statute of limitations.^[FN8] (Conason v Megan Holding, LLC, 25 NY3d 1 [2015]; Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin., 15 NY3d 358 [2010]; Thornton v Baron, 5 NY3d 175 [2005]; Spatz v Valle, 63 Misc 3d 134[A], 2019 NY Slip Op 50452[U] [App Term, 1st Dept 2019].){**68 Misc 3d at 445}

In the case at bar, the rent was registered at $1,996 in 2012^[FN9] and was subsequently registered as exempt for high rent vacancy in 2013. In 2013, the high rent deregulation threshold was $2,500. Despite being well within its rights to do so due to the unexplained rent increase between his initial lease and the lease commencing January 1, 2015, and inconsistent lease registrations, respondent does not challenge this registration. A review of the ledger^[FN10] indicates there is no evidence petitioner has ever charged respondent above $1,996. Accordingly, there is no overcharge under this basis.

[2] The rent reduction order effective May 1, 2018, was filed after petitioner's 2018 rent registration. This registration submits the premises to rent stabilization, thus enabling the filing of a request for a rent reduction. The order specifically states the rent shall be reduced to the last legal rent in effect prior to the reduction order. As the court has rendered the leases subsequent to the initial lease null and void, discussed supra, the last legal rent in effect is the registered rent of $1,996. Petitioner argues the legal rent of $1,586.61 pursuant to respondent's initial lease, rather than respondent's preferential rent of $1,322.18, should be controlling in determining the proper amount of rent collectible pursuant to the rent reduction order. To allow either the $1,996 legal regulated rent or the legal rent of $1,586.61 as set forth in the parties' 2013 lease to determine the effect of the rent reduction order would be in contravention of the intent of the order and the goals of the legislature in enacting Rent Stabilization Law of 1969 (Administrative Code of City of NY) § 26-514, namely, "to motivate owners of rent-stabilized housing accommodations to provide required services, compensate tenants deprived of those services, and preserve and maintain the housing stock in New York City." (Jenkins v Fieldbridge Assoc., LLC, 65 AD3d 169, 173 [2d Dept 2009], citing Matter of Hyde Park Assoc. v Higgins, 191 AD2d 440, 442 [2d Dept 1993].) Therefore, to allow petitioner to collect a higher rent than the monthly amount ($1,322.18) agreed upon by the parties in the last valid, executed lease would effectively allow petitioner to collect increases despite a rent reduction order forbidding such increases and despite petitioner's failure to offer and register lawful leases.{**68 Misc 3d at 446}

Accordingly, in compliance with the RRO, the petitioner should have charged the respondent a monthly rent of $1,322.18, which was the preferential amount on the initial lease, from May 1, 2018, the effective date of the order, to date. During the time period at issue in the petition, petitioner charged the respondent $26,093.91, comprised of a monthly rent of $1,350.10 from May 1, 2018, to August 1, 2018, a lease increase of $293.51 in August 2018, and a monthly rent of $1,700 from September 1, 2018, to August 1, 2019. The petitioner was entitled to charge $21,154.88 during this time period, calculated at a monthly rate of $1,322.18 for the 16 months between May 1, 2018, and August 1, 2019. Accordingly, petitioner overcharged the respondent $4,939.03 during this time period. Once it is determined that the landlord had overcharged the complaining tenant for rent, it becomes incumbent on the landlord to establish by a preponderance of the evidence that such overcharges were not willful. (Matter of Chu v New York State Div. of Hous. & Community Renewal, 231 AD2d 567 [2d Dept 1996].) Petitioner has failed to establish that the rent overcharge in the instant proceeding is not willful. It is evident in the instant proceeding that petitioner wholly disregarded the RRO and continued to charge the rent it believed to be in effect prior to the issuance of the order.

According to the ledger, the respondent paid $21,195.40 during this time.^[FN11] "[T]reble damages can be calculated only from an amount that respondent paid over an amount that petitioner is owed." (Curry v Battistotti, 5 Misc 3d 1012[A], 2004 NY Slip Op 51355[U], *6 [Civ Ct, NY County 2004], affd 12 Misc 3d 129[A], 2006 NY Slip Op 51030[U] [App Term, 1st Dept 2006].) Accordingly, the amount subject to treble damages is the overpayment of $40.52—calculated at $21,195.40, the amount respondent paid during the relevant time period, less $21,154.88, as the amount petitioner should have charged during the relevant time period. Trebling this amount, the award to respondent is $121.56. No calculation of interest upon this award is required by law or warranted. (Grady v Hessert Realty L.P., 178 AD3d 401 [1st Dept 2019].)

Res Judicata and Collateral Estoppel

Petitioner argues that respondent has waived any overcharge claims or challenges to the rent based on the doctrine of res judicata. This argument must fail. Stipulations which purport{**68 Misc 3d at 447} to waive a benefit of the Rent Stabilization Law are generally void on public policy grounds. (RSC § 2520.13; 390 W. End Assoc. v Harel, 298 AD2d 11, 16 [1st Dept 2002], citing Cvetichanin v Trapezoid Land Co., 180 AD2d 503, 504 [1st Dept 1992], lv dismissed 79 NY2d 933 [1992]; New York Hanover Corp. v Ibodli, 46 Misc 3d 77, 78-79 [App Term, 1st Dept 2014]; Matter of Weis v Lefkowitz, 261 AD2d 480 [2d Dept 1999].) Logic dictates that if an express waiver of a right is void, an implicit waiver must also be void. (Estro Chem. Co. v Falk, 303 NY 83, 87 [1951] ["(A) 'statutory right conferred on a private party, but affecting the public interest, may not be waived or released if such waiver or release contravenes the statutory policy' " (citations omitted)].) For these same reasons, petitioner's collateral estoppel arguments are also without merit.

Failure to File a Proper Rent Demand

A proper demand for rent must fairly afford the tenant, at least, actual notice of the alleged amount due and of the period for which such claim is made. At a minimum, the landlord or his agent should clearly inform the tenant of the particular period for which a rent payment is allegedly in default and of the approximate good faith sum of rent assertedly due for each such period. (542 Holding Corp. v Prince Fashions, Inc., 46 AD3d 309, 311 [1st Dept 2007], citing Schwartz v Weiss-Newell, 87 Misc 2d 558, 561 [Civ Ct, NY County 1976].)

The rent demand seeks a monthly rent of $1,700 for January and February of 2019, and $1,068.51 for December 2018. This court has found that the lease which is the basis for the alleged $1,700 per month rent amount to be invalid. Petitioner has failed to seek an appropriate rent, and, accordingly, the court cannot find that such demand includes a good faith sum of rent assertedly due. As a predicate notice is a condition precedent to a nonpayment summary proceeding, it is not subject to amendment and failure to provide a proper predicate notice must result in dismissal. (Chinatown Apts. v Chu Cho Lam, 51 NY2d 786 [1980].) This proceeding cannot be maintained in the absence of a proper rent demand and is therefore dismissed.

Conclusion

The petitioner has not charged the respondent above the legal regulated rent of $1,996, which this court finds to be the last reliable registered legal regulated rent. Accordingly, there is no overcharge under this basis. The petitioner, however, disregarded the rent reduction order and overcharged the respondent from May 1, 2018, to date. Respondent is awarded{**68 Misc 3d at 448} treble damages in the amount of $121.56, as a result of this overcharge. The collectible rent for the subject premises, as a product of the voluntary initial lease between the parties and rent reduction order, is $1,322.18. The collectible rent remains frozen at $1,322.18 until such time the rent reduction order is lifted and the lease is lawfully registered. All future rents are to be based on the preferential rent of $1,322.18 and allowable increases above that amount. This proceeding is further dismissed for failure to provide a proper rent demand as a condition precedent, and respondent reserves all rights and defenses pertaining to warranty of habitability claims.

Accordingly the clerk is instructed to enter a money judgment in favor of the respondent and against the petitioner in the sum of $121.56.