Recitation, as required by C.P.L.R. § 2219(a), of the papers considered in review of this motion:

Upon the foregoing cited papers, the decision and order on Respondent's motion for leave to amend their pro se answer and for discovery is as follows:

This summary nonpayment proceeding was filed on July 31, 2024. After an initial adjournment to set a briefing schedule, Respondent, through counsel, made a motion for [*2]discovery predicated on improper deregulation and rent overcharge. Respondent also seeks leave to interpose an amended answer. Petitioner opposes the motion in all respects.

Absent prejudice or surprise, leave to amend a pleading pursuant to CPLR 3025(b) is freely given, so long as the proposed amendment is not palpably insufficient or patently devoid of merit. (see McIntosh v. Ronit Realty, LLC, 181 AD3d 579, 579 [2d Dept 2020]; Chinapen v. Sookdeo, — N.Y.S.3d —, 2025 NY Slip Op 01905, 1 [2d Dept 2025]).

The party opposing amendment has the burden to show the proposed amendment is palpably insufficient or is devoid of merit. (see Wilmington Sav. Fund Soc'y, FSB v. Sotomayor, 222 AD3d 702, 703 [2d Dept 2023] [citations omitted]; Mitchell v. Jimenez, 233 AD3d 773, 776 [2d Dept 2024]).

Here, petitioner does not show that the proposed amendments are devoid of merit. Respondent's affirmative defense and counterclaim is supported by an undisputed DHCR rent registration history. The printout indicates that in 2013, the registered legal regulated rent was $1,355.59. Then in 2014, the unit is listed as "exempt-high rent vacancy." There is no explanation given for the substantial rent increase which deregulated due to high rent. Under this exempt status, no registrations were filed from 2015-2018. Then in 2019, the apartment was re-registered as rent stabilized at a rate of $3,250.00. This rent is not explained. Furthermore, petitioner raised the rent by $663.77 post-HSTPA when such increases were barred. Because the unexplained rent increases could be fraudulent, the overcharge claim is potentially meritorious. Further, Respondent's defense that the rent demand is defective due to Respondent's full payment for the months demanded in Petitioner's rent demand is also not devoid of merit.

As to delay and prejudice, petitioner's claims are wholly conclusory. (see Cruickshank v. Dukes, 188 Misc 2d 514, 516 [App Term, 2d Dept 2001] ("Plaintiff's claim of prejudice, which rests on conclusory, speculative and unsubstantiated assertions, is insufficient to defeat" motion to amend.)). Significant prejudice or surprise is not easily shown, especially in the early stages of litigation. "Prejudice arises when a party incurs a change in position or is hindered in the preparation of its case or has been prevented from taking some measure in support of its position, and these problems might have been avoided had the original pleading contained the proposed amendment." (Valdes v. Marbrose Realty Inc., 289 AD2d 28, 29 [1st Dept 2001]; see also Thirty Realty LLC v Kamal, 83 Misc 3d 138(A) [App Term, 1st Dept. 2024]).

The court also notes that the original answer was filed when respondent was pro-se. Counsel was retained, identified possible defenses and moved to amend. These types of motions ought to be granted, provided the proposed defenses are not devoid of merit so that respondents have the full benefit of counsel. (see 3225 Holdings LLC v. Imeraj, 65 Misc 3d 1219(A), n. 5 [Civ Ct, Bronx County 2019] citing Harlem Restoration Project v. Alexander, 1995 NY LEXIS 783 [Civ Ct, New York County 1995]).

In summary proceedings leave of court is required when seeking discovery. (see Mautner-Glick Corp. v. Higgins, 64 Misc 3d 16, 18 [App Term, 1st Dept 2019]). To justify disclosure, a movant must demonstrate "ample need" for a claim or defense and requests for disclosure should be carefully tailored to obtain information necessary to a tenant's defenses or counterclaims. (see Smilow v. Ulrich, 11 Misc 3d 179, 182 [Civ Ct, New York County 2005], citing New York Univ. v. Farkas, 121 Misc 2d 643, 647 [Civ Ct, NY County 1983]).

Courts will consider several factors in determining whether the "ample need" standard is met, including "whether the party seeking discovery has asserted facts to establish a claim or defense" and "whether there is a need to determine information directly related to the claim or defense ...," although not every factor must be shown. (Mautner-Glick Corp. v. Higgins, 64 Misc 3d at 18-19, citing New York Univ. v. Farkas, 121 Misc 2d at 647; Carr v. Carr, 78 Misc 3d 135(A) [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2023]).

It is well established that an apartment's rent history beyond any "look back"^[FN1] period is subject to review for determination as to its regulatory status. (see East W. Renovating Co. v. New York State Div. of Hous. & Community Renewal, 16 AD3d 166, 167 [1st Dept 2005]; see also Reichenbach v. Jacin Investors Corp., 237 AD3d 446, 447 [1st Dept 2025]).

In Gersten v. 56 7th Ave. LLC the court held that "a tenant should be able to challenge the deregulated status of an apartment at any time during the tenancy" and that "landlords must prove the change in an apartment's status from rent-stabilized to unregulated even beyond the four-year statute of limitations for rent overcharge claims." (88 AD3d 189, 199 [1st Dept 2011]). Unlike overcharge claims, there is no time restriction on the lookback period if there's a dispute as to the regulatory status of an apartment. (see AEJ 534 E. 88th, LLC v. New York State Div. of Hous. & Community Renewal, 194 AD3d 464, 469-470 [1st Dept 2021], citing Matter of Regina Metro. Co., LLC v. New York State Div. of Hous. & Community Renewal, 35 NY3d 332, 351 [2020] see also Cox v. 36 S Oxford St, LLC, 237 AD3d 604, 605 [1st Dept 2025]).

Here, Respondents have articulated a dispute as to the regulatory status of the premises. As previously stated, the DHCR registration history indicates that in 2013, the registered legal regulated rent was $1,355.59. The legal 20% rent increase from this rate would have resulted in a rent of $1,626.71. In 2014, the apartment would have been deregulated had the legal rent reached $2,500.00. Consequently, at least $873.29 in rent increases in 2014 are unexplained as the unit is listed as "exempt-high rent vacancy." Under this exempt status, no registrations were filed from 2015-2018.

The DHCR printout is sufficient to demonstrate that respondent has a good faith challenge to the regulatory status of the apartment. (see Temo LLC v. Herrera, 82 Misc 3d 299, 303-04 [Civ Ct, Kings County 2023]). There are unexplained increases, potentially unexplained gaps in registration and an unexplained re-registering as rent stabilized. Petitioner alone would be able to explain these discrepancies.

Although not argued by petitioner in any detail, the eventual reregistration of the unit as rent stabilized cannot stand in the way of discovery as respondent has the right to learn how the apartment exited rent stabilization for five-plus years.

Rent stabilization rights cannot be created by waiver or estoppel. (see Hayward v. Site 4 DSA Owner LLC, 226 AD3d 510, 510 [1st Dept 2024]; Gregory v. Colonial DPC Corp., III, 234 AD2d 419, 419 [2d Dept 1996]). This means that if the apartment properly exited rent stabilization, the re-registering with DHCR may have no legal effect. Consequently, re-[*3]registering as rent stabilized cannot be a bar to discovery.

Respondent's moving papers and answer allege that the DHCR rent history shows a prima facie fraudulent scheme to deregulate the apartment [and then reregulate without explanation].

Petitioner's opposition maintains that Respondents have not properly pleaded fraud, citing to Burrows v. 75-25 153rd St., LLC, (215 AD3d 105, 109 [1st Dept 2023]), and alleging that "gaps" in registrations, "status changes," and unexplained rent increases are not enough. The standard in Burrows requires that tenants plead all five elements of common law fraud in detail, i.e. (1) a representation of material fact by the landlord; (2) that the representation was false; (3) that the landlord should have known that the representation was false, that is the landlord had "scienter," meaning a mental state consisting in an intent to deceive, manipulate, or defraud; (4) that the tenant relied upon the false material misrepresentation; and (5) that the tenant suffered injury as a result.

Burrows, to the extent relevant here, has been modified by the Court of Appeals. (see Burrows v. 75-25 153rd St., LLC, — NE3d —, 2025 WL 863241, at *3 [2025]; ("...we hold today that reasonable reliance is not a required element for the fraud exception to apply. But, as has long been required, to invoke the fraud exception, a plaintiff must allege sufficient indicia of fraud, or a colorable claim of a fraudulent scheme to evade the protections of the rent stabilization laws...")

Still, respondent must establish a colorable claim of fraud in order to obtain discovery on an alleged overcharge that accrued before the look back period and prior to the passage of the HSTPA. (see Grimm v. State Div. of Hous. & Community Renewal, 15 NY3d 358, 367 [2010]). When a tenant does not plead a colorable claim of fraud by identifying substantial indicia, i.e., evidence, of a landlord's fraudulent deregulation scheme to remove an apartment from the protections of rent stabilization" courts are precluded from examining an apartment's rental history beyond the "look back" period. (see Bhawan 330 Realty, LLC v. Briones, 85 Misc 3d 128(A), 2 [App Term, 2d Dept, 2d, 11 & 13 Jud Dists 2025] [citations omitted]).

Increases in rent alone do not generally establish a colorable claim of fraud. (see Grimm, 15 NY3d at 367). "What is required is evidence of a landlord's fraudulent deregulation scheme to remove an apartment from the protections of rent stabilization." (id; see also 150 E. Third St LLC v. Ryan, 71 Misc 3d 1, 4 [App Term, 1st Dept 2021), aff'd sub nom. 150 E. Third St. LLC v. Ryan, 201 AD3d 582 [1st Dept. 2022] (Neither the sizeable increase in the apartment rent in 2006, based in part on apartment improvements, nor the Court's skepticism about the quality or extent of those improvements, were sufficient to establish a colorable claim of fraud)).

The so-called "Chapter Amendments" are also relevant to the analysis. (see L 2023, ch 760, Part B, § 2 (b), as amended by L 2024, ch 95, § 4). Courts have held that the Chapter Amendments simply "intended to return us to the analysis of fraud utilized in pre-HSTPA overcharge cases," meaning the tenant must sufficiently plead "a colorable claim that an owner knowingly engaged in a fraudulent scheme to deregulate a premises...to allow the court more leeway in determining fraud." (1532-1609 Ocean Ave LLC v. Hertzan, 85 Misc 3d 367, 376 [Civ Ct, Kings County 2024]); see also Gomes v. Vermyck, LLC, 228 NYS3d 208, 223 [2d Dept 2025] ("...we view the Legislature's purpose that the standard for establishing a fraudulent scheme to deregulate an apartment unit should be that which was set forth in Thornton v. Baron, 5 NY3d 175, Matter of Grimm v. State of NY Div. of Hous. & Community Renewal Off. of Rent [*4]Admin., 15 NY3d 358, and Conason v. Megan Holding, LLC, 25 NY3d 1); Reichenbach v. Jacin Investors Corp., 237 AD3d 446, 446 [1st Dept 2025] ("...the amendments direct the courts to return to the fraud analysis in" Thornton and Matter of Grimm)).

Thus, the Chapter Amendments essentially overruled the Appellate Division's determination in Burrows, which petitioner largely relies on. (see 41-47 Nick LLC v Odumosu, 85 Misc 3d 290 [Civ Ct, New York County 2024]).

This Judicial Department has made it crystal clear that the Chapter Amendments reflect that "plaintiffs do not need to prove all of the elements of common-law fraud so long as the totality of the circumstances nonetheless indicate that a fraudulent scheme to deregulate an apartment unit was committed." (Gomes v. Vermyck, LLC, 228 NYS3d at 225).

Here, by demonstrating a 140% rent increase from the last registered rent stabilized tenant [prior to reentering rent stabilization], no registrations for several years, an unexplained re-entry into rent stabilization, and a more than 20% increase post HSTPA,^[FN2] respondent has shown, under a totality of the circumstances, enough to get discovery on the overcharge claim. (see e.g. 603 N.J.. Ave., LLC v Hall, 74 Misc 3d 137(A), 2 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2022]).

In any event, if the apartment was improperly deregulated [not withstanding its re-regulation with a rent 140% higher than the prior registered rent], respondent "should have the opportunity to establish a fraudulent scheme to regulate under the totality of the circumstances approach that now applies to all pending claims (L 2024, ch 95), or alternatively, to show that there were rent overcharges during the lookback period." (Cox v. 36 S Oxford St, LLC, 237 AD3d 604, 606 [1st Dept 2025]).

The court notes that petitioner's opposition makes no attempt to justify these substantial rent increases, explain why an apartment would be deregulated only to be re-registered as rent stabilized approximately five years later, or explain why a large increase is justified post-HSTPA. (see Doc. No. 20). Nor does petitioner make any attempt to explain why there are missing registrations if the apartment remains rent stabilized. (see Gassama v. New York State Dep't of Hous. & Cmty. Renewal, 226 AD3d 589, 590 [1st Dept 2024] (missing registrations do "not evince a fraudulent scheme" where landlord files retroactive registrations which "had no bearing on the reliability of the base date rent four years before petitioner filed his claim"); see also Butterworth v. 281 St. Nicholas Partners, LLC, 160 AD3d 434, 434 [1st Dept 2018] (missing registrations part of "sufficient indica" of fraud)).

Indeed, it is entirely possible that even if the rent increases petitioner claims are proper, its failure to file proper and timely rent registrations [as the premises are rent stabilized] renders the rent frozen at the 2013 registered amount. (see Queens Fresh Meadows, LLC v Beckford, 85 Misc 3d 136(A), 2 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2025], citing Bradbury v 342 W. 30th St. Corp., 84 AD3d 681, 684 [1st Dept 2011] ("Where an owner fails to file a proper and timely registration, until such registration is filed, the rent is frozen at the legal regulated rent listed in the preceding registration statement")).

As such, it would be a perverse outcome to deny discovery on overcharge because the [*5]unit is currently registered as regulated.

Scope of Discovery

Petitioner shall comply with the Document Demand at NYSCEF Doc. No. 18. The demands are narrowly tailored, relating only to the subject apartment and relating only to the apartment's rent and regulatory history from 2013 to present. However, petitioner need not comply with par. 9 and 10 [trial witness and documents list] at this time.

Petitioner shall provide responsive documents within (45) days of respondent filing a notice of entry of this decision and order on NYSCEF.

Based on the foregoing, respondent's motion for leave to file an amended answer is granted. The amended answer at NYSCEF Doc. No. 11 is deemed served and filed. The motion for discovery is granted to the extent stated above.

The matter is marked off calendar pending discovery. Either party may move to restore, as appropriate, or the parties may submit a stipulation restoring the matter.

This constitutes the decision and order of the court. It will be posted on NYSCEF.