Civil Court of the City of New York, Kings County

Decided on April 10, 2026

LT-318668-25/KI

Karen May Bacdayan, J.

[*1]

Recitation, as required by CPLR 2219 (a) of the papers considered in review of this motion by NYSCEF Doc No. -- 8-26.

PROCEDURAL HISTORY AND ARGUMENTS

This is a nonpayment proceeding commenced against respondent Sacha A. Sealey, a rent-stabilized tenant. Respondent first occupied the premises pursuant to a one-year rent stabilized vacancy lease for $1,300, commencing November 1, 2007. (NYSCEF Doc No. 20, Sealey affirmation ¶ 3; NYSCEF Doc No. 10, respondent's exhibit A at 5, DHCR rent registration history.) Respondent retained counsel and moved to amend her answer to include several defenses including a defense of rent overcharge, and a counterclaim for damages. Respondent pleads that an "illegitimate rent increase" in 2007 requires that the legal regulated rent be set anew in order to calculate an overcharge, regardless of whether fraud (also pleaded) is present or not. Respondent also seeks discovery on her proposed rent overcharge claim. (NYSCEF Doc No. 8, notice of motion [sequence 1]; NYSCEF Doc Nos. 14-15, proposed document demands and first set of interrogatories.)

Respondent argues there is "indicia of a fraudulent scheme to deregulate the unit under the totality of the circumstances," pointing to a single but significant and unexplained rent increase -- from the prior registered rent of $631.94 in the prior tenant's two-year renewal lease that commenced March 1, 2007, to the $1,300 rent reflected in respondent's vacancy lease that commenced November 1, 2007 -- "taken mere months after" petitioner applied a 7.25 percent rent increase to the prior tenant's rent that brought it to the $631.94 reflected in the prior tenant's lease renewal. (NYSCEF Doc No. 9, respondent's attorney's affirmation in support ¶¶ 17-23; NYSCEF Doc No. 10, respondent's exhibit A, DHCR rent registration history; NYSCEF Doc No. 20, Sealey affirmation ¶ 3.) At the time respondent's vacancy lease commenced, the vacancy deregulation threshold was $2,000.

Respondent further contends that while she has demonstrated a colorable claim of fraudulent rent overcharge which warrants interposition of her rent overcharge claim and leave to conduct discovery beyond four years, there is "a new line of cases" to support her argument that: 1) "tenants are no longer even required to plead a colorable claim of fraud to be granted [*2]discovery beyond the applicable look-back period when the tenant is merely seeking a calculation of the proper legal regulated rent," and 2) a colorable claim of fraud is not needed to collect "post-HSTPA overcharges, even if the original offending overcharge occurred both pre-HSTPA and prior to [the] look back period." (NYSCEF Doc No. 9, respondent's attorney's affirmation in support ¶ 60 n 2; NYSCEF Doc No. 23, respondent's mem of law at 4-5.) Rejecting petitioner's argument that a significant increase in rent alone is insufficient under the current law to allow the court to consider all relevant rent history, respondent argues that "the mere fact that [p]etitioner engaged in an unexplained rent increase [] renders its registered rent unreliable." (NYSCEF Doc No. 23, respondent's mem of law at 5.) For these propositions, respondent cites to W. Pierre Assocs. LLC v Harvey, 241 AD3d 413 (1st Dept 2025), Syllman v Div. of Hous. & Community. Renewal, 233 AD3d 977 (2d Dept 2024), and several unreported Housing Court decisions which are not controlling.

Petitioner opposes the motion on the basis that respondent has made no evidentiary showing that her defenses have merit, and that she has not demonstrated sufficient indicia of a fraudulent scheme to deregulate the premises in order to warrant leave to conduct discovery of documents that go back 19 years.

In reply, respondent dismisses the opposition and argues that even if she has not raised a colorable claim of fraud, "recent case law suggests that tenants are no longer required to truly show a colorable claim of fraud to be granted discovery beyond the applicable look back period for the purposes of rent setting." (NYSCEF Doc No. 23, respondent's mem of law at 4 [internal footnote omitted].)

For the following reasons, respondent's motion to amend the answer to include a claim of fraudulent overcharge is denied; respondent's motion to amend the answer to include a counterclaim for overcharge damages is denied; and respondent's motion to amend the answer is granted as to all other proposed amendments. Respondent's motion for discovery is granted.

DISCUSSION (Please see footnote,FN1 infra)

Overcharge, Deregulation, Discovery, and the "Lookback" Period — Historical Perspective

On June 14, 2019, the Housing Stability and Tenant Protection Act of 2019 ("HSTPA") was signed into law. Prior to passage of the HSTPA, CPLR 213-a provided a four-year statute of limitations for overcharge claims, while the Rent Stabilization Law limited examination of an apartment's rent history to the four years prior to the commencement of a rent overcharge action. (See former CPLR 213-a; former Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26-516 [a] [2].) As stated by the Court of Appeals in Matter of Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal, 35 NY3d 332 (2020):

"This categorical temporal limitation on reviewable records — the lookback rule — was complemented by a record retention provision directing that certain owners shall not be required to maintain or produce any records relating to rentals of such accommodation for more than four years prior to the most recent registration or annual statement for such accommodation . . . . The record retention provision permitted owners to dispose of [*3]records outside the four-year period, further evincing the legislature's intent that records predating the recovery period not be used to calculate overcharges. Together, the statute of limitations, lookback provision and record retention rules formed an integrated scheme for calculating overcharges based on a closed universe of records pertaining only to the apartment's rental history in the four years preceding the filing of the complaint." (Regina, 35 NY3d at 353 [internal citations and quotation marks omitted].)

After passage of the HSTPA, CPLR 213-a now provides that while overcharge damages are limited to the six years prior to when an overcharge claim is asserted, "an overcharge claim may be filed at any time, and the calculation and determination of the legal rent and the amount of the overcharge shall be made in accordance with the provisions of law governing the determination and calculation of overcharges." Part F of the HSTPA amended Section 26-516(a) of the Rent Stabilization Law, which now provides that:

"[T]he legal regulated rent for purposes of determining an overcharge, shall be the rent indicated in the most recent reliable annual registration statement filed and served upon the tenant six or more years prior to the most recent registration statement . . . plus in each case any subsequent lawful increases and adjustments. . . . [I]n investigating complaints of overcharge and in determining legal regulated rent, [a court] shall consider all available rent history which is reasonably necessary to make such determinations." (L 2019 ch 36, part F, § 4.)FN2

Part F further amended Rent Stabilization Law § 26-516(h), providing that a court's ability to "consider all available rent history which is reasonably necessary to make such determinations" includes "any rent registration or other records filed with [DHCR] or any other state, municipal or federal agency, regardless of the date to which the information on such registration refers; [] any order issued by any state, municipal or federal agency; [] any records maintained by the owner or tenants; and [] any public record kept in the regular course of business by any state, municipal or federal agency." (L 2019 ch 36, part F, § 5 [internal numeration omitted].) Moreover, "[n]othing contained in [Rent Stabilization Law § 26-516(h)] shall limit the examination of rent history relevant to a determination as to . . . whether the [*4]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 (emphasis added)[.]" (L 2019, ch 36, § 1, part F, § 5 [internal numeration omitted].)FN3

The Court of Appeals in Regina clarified that, in the absence of fraudulent conduct by the landlord, Part F could not be applied retroactively to overcharge claims, as it unconstitutionally offended a landlord's settled expectations. Thus, for pre-HSTPA overcharges, pre-HSTPA law applies. The Regina Court condensed its applicable precedent as follows:

"The rule that emerges from our precedent is that, under the prior law, review of rental history outside the four-year lookback period was permitted only in the limited category of cases where the tenant produced evidence of a fraudulent scheme to deregulate and, even then, solely to ascertain whether fraud occurred — not to furnish evidence for calculation of the base date rent or permit recovery for years of overcharges barred by the statute of limitations (Grimm, 15 NY3d at 367.) In fraud cases, this Court sanctioned use of the default formula to set the base date rent. Otherwise, for overcharge calculation purposes, the base date rent was the rent actually charged on the base date (four years prior to initiation of the claim) and overcharges were to be calculated by adding the rent increases legally available to the owner under the RSL during the four-year recovery period. Tenants were therefore entitled to damages reflecting only the increases collected during that period that exceeded legal limits." (Regina, 35 NY3d at 355-356 [footnote omitted].)

Overcharge and Discovery in the Wake of Regina

After the Court of Appeals issued Regina, courts began to construe a footnote in the opinion as requiring strict pleading of all elements of common law fraud, i.e. "evidence [of] a representation of material fact, falsity, scienter, reliance and injury." (Id. at 356 n 7 [internal citations and quotation marks omitted.) This interpretation became widely accepted. (See e.g. Gridley v Turnbury Vill., LLC, 196 AD3d 95, 101 [2d Dept 2021], citing 699 Venture Corp. v Zuniga, 69 Misc 3d 863, 2020 NY Slip Op 20241 [Civ Ct, Bronx County 2020]).

After New York courts almost universally agreed that the fraud exception to the four-year "lookback period" required specifically pleading all the elements of common law fraud, the Appellate Division, First Department issued Burrows v 75-25 153rd St. LLC, 215 AD3d 105 (1st Dept 2023). Burrows held that the common law fraud element of justifiable reliance could not be established as a matter of law if public records, specifically the DHCR rent registration history, could be examined to reveal a representation of fact upon which a tenant claiming a fraudulent scheme to deregulate could not have justifiably relied. (Burrows, 215 AD3d at 109.) After the [*5]Burrows decision, claims of fraud were eliminated at the pleading stage because "disclosure in the publicly available rental histories of the discrepant figures for legal regulated rent and preferential rent negates any inference of fraud as a matter of law." (Id. at 113.) Burrows thus transformed the subjective element of justifiable reliance, generally not susceptible to summary judgment, into an objective, bright-line rule.

The "Chapter Amendments" and Burrows Appeal

The Burrows decision was unpopular with the legislature and was ultimately renounced by the Court of Appeals. On June 20, 2023, just two months after Burrows was handed down, the legislature passed a bill which eliminated common law fraud as defined in Burrows from the calculus of fraudulent overcharges stemming from fraudulent deregulation. Instead, under the legislation, "the unlawful deregulation of any apartment, including such deregulation as results from claiming an unlawful increase such as would have brought the rent over the deregulation threshold that existed under prior law," was presumptively fraudulent and shifted the burden to the landlord to prove that it relied in good faith "on a directive or ruling by an administrative agency or court." (L 2023, ch 760, Part B, § 2 [b].) Many surmised that this amendment would pose the same kind of retroactivity issues which the Regina Court had condemned as unconstitutional. In response to this concern, on March 1, 2024, the Governor signed into law 2024 NY Senate Bill 8011/2024 NY Assembly Bill 8506 (the "Chapter Amendments"), which amended Section 2 of Part B of Chapter 760 the Laws of 2023 by, inter alia, removing the aforementioned statutory presumption of fraud and adding Section 2-a, currently in effect:

"When a colorable claim that an owner has engaged in a fraudulent scheme to deregulate a unit is properly raised as part of a proceeding before a court of competent jurisdiction or the state division of housing and community renewal, a court of competent jurisdiction or the state division of housing and community renewal shall issue a determination as to whether the owner knowingly engaged in such fraudulent scheme after a consideration of the totality of the circumstances. In making such determination, the court or the division shall consider all of the relevant facts and all applicable statutory and regulatory law and controlling authorities, provided that there need not be a finding that all of the elements of common law fraud, including evidence of a misrepresentation of material fact, falsity, scienter, reliance and injury, were satisfied in order to make a determination that a fraudulent scheme to deregulate a unit was committed if the totality of the circumstances nonetheless indicate that such fraudulent scheme to deregulate a unit was committed (emphases added)." (L 2024, ch 95, § 4.)

Following passage of the Chapter Amendments, the Court of Appeals considered the Burrows appeal and decided the case on March 20, 2025. (Burrows v 75-25 153rd St., LLC, 44 NY3d 74 [2025].) The Burrows appeal presented an opportunity for the Court of Appeals to expound upon the meaning of the infamous footnote seven in Regina, as well as the precedent cited in Regina, specifically Thornton v Baron, 5 NY3d 175 (2005), Matter of Grimm v New York State Div. of Hous. & Community Renewal Off. of Rent Admin., 15 NY3d 358 (2010), and Conason v Megan Holding, LLC, 25 NY3d 1 (2015). The Burrows appeal also presented an opportunity for the Court to speak to the validity of the legislature's construction of these seminal cases in the Chapter Amendments.

While the Court of Appeals' decision in Burrows did not address the propriety or the [*6]impropriety of the legislature's interpretation of prior Court of Appeals precedent in the Chapter Amendments, it did abrogate the Appellate Division's interpretation of footnote seven in Regina and held that courts are to follow pre-HSTPA Court of Appeals pronouncements, which did not require pleading every element of common law fraud when investigating overcharges that accrued prior to passage of the HSTPA:

"The Regina footnote was intended only to highlight the difference between a [good faith deregulation], and those in which tenants came forward with evidence of fraud. It was not meant to alter the showing required to invoke the fraud exception. Indeed, Regina reaffirms our traditional approach to the fraud exception, which does not include a requirement that tenants demonstrate reasonable reliance on owners' allegedly fraudulent conduct (here, registration of the initial legally regulated rent)." (Burrows, 44 NY3d at 82-83 [internal citations and quotation marks omitted].)

In the absence of guidance from the Court of Appeals, it must be presumed that the Chapter Amendments pass constitutional muster. (Gomes v Vermyck, LLC, 238 AD3d 26, 40 [2d Dept 2025] [finding that the legislature intended to return litigants to standard applied in Thornton, Grimm, and Conason.) This court has previously found in 1532-1609 Ocean Ave. LLC v Hertzan, 85 Misc 3d 367, 2024 NY Slip Op. 24180 (Civ Ct, Kings County 2024), that the Chapter Amendments can be harmonized with Regina. As summarized from Hertzan, the Chapter Amendments require that "once a colorable claim that an owner knowingly engaged in a fraudulent scheme to deregulate a premises is properly raised[,] . . . [t]he totality of the circumstances test requires a court [] to consider all of the relevant facts and all applicable statutory and regulatory law and controlling authorities." (Hertzan, 2024 NY Slip Op. 24180, *7 [internal quotation marks omitted].) This terminology has persisted in pre-HSTPA caselaw,FN4 in Regina,FN5 in Burrows, and today.FN6 "A colorable claim is a plausible legal claim. This means that [*7]the claim is 'strong enough' to have a reasonable chance of being valid if the legal basis is generally correct and the facts can be proven in court."FN7 That the legislature chose to employ this term should come as no surprise and requires little interpretation beyond the guidance provided in Court of Appeals precedent. The "requisite factors" of a properly raised colorable claim of fraud are cogently distilled from Grimm in Pehrson v Div. of Hous. & Community Renewal of the State of NY, 34 Misc 3d 1220 (A), 2011 NY Slip Op. 52487 (U) (Sup Ct, NY County 2011).FN8

What has emerged from the Chapter Amendments and the Court of Appeals decision in Burrows is a functionally identical new version of the old law regarding claims of fraud, requiring that a court apply the rule created by pre-HSTPA precedent when considering whether a colorable claim of a fraudulent scheme to evade the rent stabilization laws has been "properly raised." If so, then the court must examine the "totality of the circumstances" to determine if the landlord "knowingly engaged" in the scheme.FN9

[*8]The Law and Its Application to the Facts:

Respondent Has Not Properly Raised a Fraudulent Scheme to Deregulate the Apartment

The court finds that respondent has not properly raised a colorable claim of a fraudulent scheme to deregulate the premises and, accordingly, no overcharge damages based on the default formula will lie. Respondent's pleading of fraud is conclusory,FN10 and based entirely on a single yet significant increase of rent from $631.94 (the rent for the prior long-term rent-stabilized tenant's lease pursuant to a two-year lease renewal that commenced March 1, 2007), to $1,300, the respondent's rent in her one-year vacancy lease that commenced November 1, 2007.FN11 As noted supra, the vacancy deregulation threshold at the time respondent's lease commenced was $2,000, $700 in excess of the rent in respondent's first lease. (See former Rent Stabilization Law § 26-504.2 [a]). By June 2019, respondent's rent was over $1,000 shy of the $2,774.76 deregulation threshold in effect at the time. (NYSCEF Doc No. 10 at 6.) While respondent's rent has continued to increase and is now $1,931.83, the HSTPA eliminated a landlord's ability to deregulate an apartment when the rent passes a particular threshold. Contrary to respondent's assertion that "the fact that [p]etitioner was engaging in such a scheme is even more convincing when one considers that [p]etitioner had raised [the] rent a mere nine months earlier on the previous tenant," the court notes that the prior tenant was assessed a 7.25 percent increase on March 1, 2007, a proper increase for a two-year rent-stabilized lease renewal at that time. (See NYSCEF Doc No. 12, respondent's exhibit C, 2006 Apartment & Loft Order #38.) This situation thus differs from the finding in Pehrson that although the tenant's monthly rent of $1,947.47 fell "below the [then] threshold for removing the apartment from rent regulation, [it was] so close to that level that the next vacancy inevitably [would] allow an increase triggering deregulation," thus "suggest[ing] a scheme to achieve deregulation through the next unknowing tenant, by fixing the current rent artificially close to $2,000.00 per month, but just below that level so as to keep the current tenants content that their rent still is stabilized and not prompt them to file a [*9]complaint that might expose the scheme." (See Pehrson, 2011 NY Slip Op 52487[U], *3.)

Regardless, respondent argues that, even in the absence of fraud, "[u]nder recent, applicable caselaw, a tenant may be granted discovery upon the showing of an unexplained [pre-HSTPA] rent increase that renders the registered rent unreliable" in order to set the current legal regulated rent upon which to calculate an overcharge. (NYSCEF Doc No. 23, respondent's mem of law at 5.) In other words, respondent's position is that, under the HSTPA, fraud need not be properly raised in order to warrant discovery regarding a decades-old significant increase in rent which, if unsupported, will result in a new legal regulated rent upon which to calculate an overcharge. (NYSCEF Doc No. 22, respondent's attorney's affirmation ¶ 36 ["the information sought is vital to [respondent's] ability to succeed on her overcharge claim."])

The court agrees that respondent is entitled to discovery with respect to her rent setting claim. The court disagrees, however, that respondent may be awarded overcharge damages based upon a new, reconstructed legal regulated rent.

Application of the HSTPA to Rent Setting and Overcharge Damages - Recent Decisions

The HSTPA distinguishes between several distinct categories of instances where it is proper to examine all relevant rent history. Chief among them for the purposes of this decision are (1) when an unexplained increase impugns the reliability of the rent registrations and/or the current rent; (2) when a colorable claim of fraud has been raised; and (3) when it is claimed that a premises has been unlawfully deregulated:

"Nothing contained in [Rent Stabilization Law § 26-516(h)] shall limit the examination of rent history relevant to a determination as to . . . 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; [and] whether a premises is subject to the [E]mergency [T]enant [P]rotection [A]ct or the [R]ent [S]tabilization [L]aw (emphasis added)[.]" (L 2019, ch 36, § 1, part F, § 5 [internal numeration omitted].)FN12

The procedure for calculating damages will differ depending on the circumstances. Here, respondent is claiming neither unlawful deregulation nor fraud, but instead challenges the legality of her current rent based on a significant unexplained increase in 2007, which she claims entitles her to an award of overcharge damages.

However, because respondent's overcharge claim accrued when she entered into possession in 2007 (pre-HSTPA) and began paying the inflated rent,FN13 and the unexplained increase in rent occurred pre-HSTPA, any award of overcharge damages to respondent would be quintessentially backward looking because the methodology for calculating an overcharge has [*10]changed under the HSTPA. Under the circumstances here, that respondent may have paid an unlawfully inflated rent post-HSTPA does not allow for anything more than re-setting the rent prospectively. Neither the recent cases cited by respondent, nor their ancestors or progeny, command a different result.

2904 Atl. Ave., LLC v Hoyte, 2026 NY Slip Op 26025 (App Term, 2d Dept, 2d, 11th, and 13th Jud Dists 2026)

Recently in 2904 Atl. Ave., LLC v Hoyte, 2026 NY Slip Op 26025 (App Term, 2d, 11th, & 13th Jud Dists 2026), the Appellate Term, Second Department held that the expanded six-year statute of limitations does not apply to post-HSTPA overcharges based on a pre-HSTPA rent reduction order.FN14 In Hoyte, the tenant, whose occupancy commenced pre-HSTPA, sought application of the post-HSTPA expanded six-year statute of limitations for overcharges dating back to March 21, 2017, six years prior to when she filed her answer on March 21, 2023. (See also Rent Stabilization Code [9 NYCRR] § 2526.7 [i] [2] [eff Nov. 8, 2023] ["Any recovery of overcharge penalties, including treble damages, where appropriate, shall be limited to the six years preceding the complaint, provided, however, that there shall be no recovery of treble damages for overcharges that occurred prior to June 15, 2017, and no recovery of damages for overcharges that occurred prior to June 15, 2015."])

The Housing Court denied the tenant's motion for summary judgment, stating, "Regina is clear in that the HSTPA overcharge amendment is not retroactive to claims of overcharge that arose prior to the passage of the HSTPA," and limited the period for damages to the four years prior to the tenant interposing their overcharge claim. (2904 Atl. Ave., LLC v Hoyte, 88 Misc 3d 1210[A], 2024 NY Slip Op. 51894[U] [Civ Ct, Kings County 2024].) The court subsequently granted the tenant's motion to reargue and renew, as the tenant had not had the chance to raise the newly promulgated Rent Stabilization Code § 2526.7 (i) (2) at the time she filed her summary judgment motion. Nevertheless, the Housing Court adhered to its original decision, holding that the new regulation was inconsistent with the finding in Regina and that the expanded six-year statute of limitations does not apply to overcharge claims that arose prior to the passage of the HSTPA, i.e. such claims are determined by pre-HSTPA law. (2904 Atl. Ave., LLC v Hoyte, 88 Misc 3d 1210[A], 2024 NY Slip Op. 51893[U] [Civ Ct, Kings County 2024].) The landlord appealed.

Because the Appellate Division, Second Department has not ruled on this issue, the Appellate Division in Hoyte followed holdings in two Appellate Division, First Department [*11]cases, Austin v 25 Grove St. LLC, 202 AD3d 429 (1st Dept 2022), and Wise v 1614 Madison Partners, LLC, 214 AD3d 550 (1st Dept 2023).FN15 Noting that Regina "did not consider the application of Part F to overcharge claims which, on the effective date of Part F of the HSTPA, (1) had already accrued (2) were not already pending . . . and (3) were still viable," Hoyte cites to both the Austin and Wise courts in opining that "Part F is not applicable to such overcharge claims that had accrued, were not pending, and were still viable on June 14, 2019 (emphasis added)." (Hoyte, 2026 NY Slip Op. 26025, *2-3 [internal citations omitted].)

In Austin, the tenant commenced a rent overcharge action in July 2020, after passage of the HSTPA. The Appellate Division modified the lower court and held, citing Regina, that the pre-HSTPA four-year statute of limitations must be applied "to overcharges that accrued before the enactment of the HSTPA." (Austin, 202 AD3d at 430.) However, based on the record before it, the Austin court could not determine as a matter of law whether the landlord engaged in fraudulent conduct, nor could it calculate the amount of an overcharge award; thus, the issue was "set aside." (Id. at 430-431.) In Wise, a class action rent overcharge case, the Appellate Division agreed with the Supreme Court that a fraudulent scheme to register the initial rents charged at inflated amounts in order to evade the rent stabilization laws had been adequately pleaded, and agreed with the Supreme Court that because the overcharge claim was based upon pre-HSTPA conduct, the pre-HSTPA four-year statute of limitations must be applied to the calculation of damages. (Wise, 214 AD3d at 550 [internal citations omitted].) The Wise court neither provided analysis for this reasoning, nor reached the calculation of an overcharge award; however, based on the principles espoused in Regina, Wise is consistent with the view that a landlord will not be retroactively and impermissibly harmed by the assessment of overcharge damages so long as the pre-HSTPA statute of limitations was applied.

From Hoyte, it can be understood that the calculation of the legal regulated rent within the four-year statute of limitations will not implicate the same retroactivity concerns present in Regina, because the calculation method in Hoyte will be the same as it was under pre-HSTPA law. (See Regina, 35 NY3d at 355 n 6 ["[W]e held [in Cintron v Calogero, 15 NY3d 347 [2010]] that rent reduction orders issued prior to [the four-year lookback period] that remained in effect during the recovery period were part of the reviewable four years of rental. Such consideration did not contradict the record retention limitations because DHCR can take notice of its own orders and the rent registrations it maintains to ascertain the rent established by a rent reduction order without imposing onerous obligations on landlords."] [internal citations and quotation marks omitted].) In other words, the current legal rent will be calculated from the rent set when the rent reduction order went into effect, and the calculation of an overcharge award will not involve reconstruction of the rent, a method proscribed in Regina yet permitted by the HSTPA.FN16

From both Hoyte and Wise, it can be understood that pre-HSTPA law applies to overcharge calculations when a complaining tenant took occupancy either pre-HSTPA or post-[*12]HSTPA under limited circumstances.FN17 In both Hoyte and Wise, because the methodology for calculating the legal rent and any overcharges is the same both pre-HSTPA and post-HSTPA, a landlord's settled expectations regarding monetary liability will not be disturbed such that overcharges can be permissibly assessed post-HSTPA for pre-HSTPA conduct. However, for the reasons more fully developed below, in the absence of this consistency between the pre-HSTPA and post-HSTPA law, application of Part F to overcharge calculations will have an unconstitutional retroactive effect. This court is of the opinion that Wise is limited in its reach to fraudulent overcharges, and Hoyte is limited in its reach to cases where the prior law and the current law are the same regarding calculation methodologies, i.e. overcharge awards based on a rent reduction order.

W. Pierre Assocs. LLC v Harvey, 241 AD3d 413 (1st Dept 2025)

Citing to W. Pierre Assocs. LLC v Harvey, 241 AD3d 413 (1st Dept 2025), and Syllman v Div. of Hous. & Community Renewal, 233 AD3d 977 (2d Dept 2024), respondent advances that "Ms. Sealey is no longer required to show a colorable claim of fraud to be granted discovery [for the requested documents from February 1, 2007 supporting an IAI]." (NYSCEF Doc No. 9, respondent's attorney's affirmation ¶ 51 n 1.)

In Harvey, the tenant entered into possession pursuant to a rent stabilized lease in 2020, after the HSTPA was enacted. Harvey obtained counsel and interposed an amended answer in November 2022, claiming that the rent charged exceeded the lawful rent, and that she had been overcharged arising from "an unexplained rent increase that nearly doubled the rent for the subject apartment prior to the occupancy . . . [of] the prior tenant[.]" (NYSCEF Doc No. 6, amended answer ¶ 17, in W. Pierre Assocs. LLC v Harvey, Civ Ct, NY County, index No. LT-303449-22.) Harvey did not assert fraud. Thereafter, Harvey moved for leave to conduct discovery seeking disclosure from 2014 forward. The landlord cross-moved for summary judgment dismissing respondent's overcharge claim on the basis that, in the absence of fraud, respondent was limited to discovery to four years prior to the interposition of her overcharge claim. The Housing Court agreed with the landlord and struck respondent's claim that the rent charged was unlawful based on an unexplained, significant increase in rent. The Appellate Term agreed with the Housing Court and held that pre-HSTPA law applied to the tenant's overcharge claim because the triggering substantial increase in rent occurred pre-HSTPA and the respondent had not alleged fraud. (W. Pierre Assocs. LLC v Harvey, 81 Misc 3d 139[A], 2024 NY Slip Op 50052[U] [App Term, 1st Dept 2024].)

The Appellate Division, First Department reversed the Appellate Term and reinstated respondent's overcharge claim. In so doing, the Appellate Division found no harm in allowing the Housing Court to look back past the pre-HSTPA statute of limitations to identify the last reliable rent in order to reconstruct the rent by applying lawful increases to that rent. Because "the tenant raised a question of fact as to whether the rent history is unreliable," the landlord's motion for summary judgment was denied, and, a the tenant was granted leave to conduct [*13]discovery.(W. Pierre Assocs. LLC v Harvey, 241 AD3d at 414.) The court found "no cause . . . to engage in a constitutional retroactivity analysis in the application of the HSTPA in this 2022 nonpayment proceeding, as the tenant's first lease commenced December 1, 2020, after the HSTPA's enactment, and no pre-HSTPA overcharge is alleged (emphasis added)[.]" (Harvey, 241 AD3d at 413 [internal citation omitted].) FN18

Neither Hoyte nor Harvey lend support to respondent's argument that it is proper to utilize the post-HSTPA methodology of reconstructing the rent based on the most recently reliable registered rent, and then use that newly created rent to calculate overcharge damages. This court interprets Hoyte to suggest that when the methodology for calculating damages is procedurally the same both pre-HSTPA and post-HSTPA -- e.g. an overcharge based on a rent reduction order -- the damages are based on the same calculus, thus a landlord will not be heard to claim prejudice. As for Harvey, the court did not specifically grapple with whether overcharge damages can be calculated based on the post-HSTPA methodology that runs afoul of the pre-HSTPA methodology.

Here, respondent advances that Harvey stands for the proposition that it is proper to calculate current nonfraudulent overcharge damages by reconstructing the rent from the last reliable pre-HSTPA rental registration. In this way, respondent seeks to apply the more liberal provisions of the HSTPA and simultaneously avoid unconstitutional retroactive effect. Ostensibly, this adds up. However, upon closer examination of the pronouncements in the relevant controlling authorities, this court finds that the argument is flawed.

Syllman v New York State Div. of Hous. and Community Renewal, 233 AD3d 975 (2d Dept 2024), and Syllman v New York State Div. of Hous. and Community Renewal, 233 AD3d 977 (2d Dept 2024)

Syllman v New York State Div. of Hous. and Community Renewal, 233 AD3d 975 (2d Dept 2024) (hereinafter "Syllman I") involved a pre-HSTPA MCI increase which the tenant claimed had negatively affected his current legal regulated rent. The tenant commenced a CPLR Article 78 proceeding to challenge a DHCR-approved MCI increase in December 2018 based on capital improvements made to the roof and building façade. In July 2020, DHCR sustained its determination after an administrative appeal. In so doing, the Rent Administrator reasoned:

"The petitioner's claim that the Administrator inaccurately determined the room count of Apartment 3C is meritless. As noted above, a DHCR inspection was conducted of the petitioner's apartment in order to verify the interior layout, and based on the report of this inspection, the Administrator properly determined, pursuant to established DHCR policy, that Apartment 3C consists of three rooms. It is noted that DHCR's Policy Statement 93-2, which establishes the definition of a room for MCI purposes, has been in effect since 1993 and has been consistently applied to MCI cases since its inception, and accordingly, the petitioner's claim that a different method of determining the room count should apply in this case is rejected. . . . Fundamental principles of the administrative review process and Section 2529.6 of the Rent Stabilization Code prohibit a party from raising an issue on appeal which was not raised below though it could have been so raised, and therefore, by law the petitioner's claim regarding the total room count for the building may not be considered on appeal." (NYSCEF Doc No. 5, July 9, 2020 DHCR Order and Opinion Denying Petition for Administrative Review Docket No. HM110001RT, in Syllman v New York State Div. of Hous. and Community Renewal, et al., Sup Ct, NY County, index No. 703447/2021.)

The Supreme Court dismissed the tenant's petition, and the Appellate Division, Second Department affirmed the Supreme Court finding that DHCR's determination on review was not arbitrary and capricious, observing that "[i]f a determination is rational it must be sustained even if the court concludes that another result would also have been rational." (Syllman I, 233 AD3d at 976 [internal citations and quotation marks omitted].) Importantly, MCI increases are assessed to a tenant's apartment by multiplying the approved increase by the number of rooms in the apartment.FN19 This methodology remains unchanged by the HSTPA.

In September 2020, the tenant filed a separate administrative proceeding at DHCR to recalculate the proper legal regulated rent for his apartment, claiming once again that the DHCR had applied an erroneous room count when calculating his rent based on the MCI increase. DHCR affirmed its own decision:

"Here, the record supports that the tenant initiated the proceeding below for the purpose of determining the legal regulated rent for the subject apartment. Pursuant to Regina the Agency policy with respect to the instant matter, is that as this proceeding was commenced prior to the enactment of the [HSTPA], the examination of rental history is limited to the four-year period prior to the filing of the petitioner's complaint, as it does not appear that a substantial indicia of a fraudulent scheme to deregulate exists Moreover, the rent stabilized status of the subject unit was not at issue The Commissioner therefore finds that the Rent Administrator correctly determined the base [*14]date and calculated the legal regulated rent accordingly." (NYSCEF Doc No. 27, DHCR Order and Opinion Denying Petition for Administrative Review Docket No. IU110016RT, in Syllman v New York State Div. of Hous. and Community Renewal, et al., Sup Ct, NY County, index No. 703447/2021.)

The tenant challenged DHCR's decision in a separate Article 78 proceeding. The Supreme Court found DHCR was correct when it declined to consider the rent history past the four-year statute of limitations for the purposes of determining the legal regulated rent. The tenant appealed to the Appellate Division and won. (Syllman v New York State Div. of Hous. and Community Renewal, 233 AD3d 977 [2d Dept. 2024] ["Syllman II"].) The Appellate Division reversed the Supreme Court's dismissal of the Article 78 petition on the grounds that DHCR had erred by limiting the examination of the apartment's rental history to "the four-year period prior to the filing of the petitioner's complaint in the administrative proceeding and [erred in determining] that the issue of the room count for the tenant's apartment had been determined in the MCI proceeding [Syllman I, supra]." (Syllman II at 977-978.)

Syllman II did not involve issues of fraud or deregulation, and there was no dispute that the apartment was rent stabilized. Critically for the Appellate Division, Second Department, Syllman did not seek damages for an overcharge. Reasoning that the tenant sought only "a calculation of the legal regulated rent and not damages for prior overcharges," the Appellate Division found that "the application of the [HSTPA] would not have the same problematic retroactive effect as in [Regina]," which held that Part F of the HSTPA cannot "be applied retroactively to overcharges that occurred prior to [its] enactment." (Syllman II at 979; Regina, 35 NY3d at 363.) As suggested in Regina, application of the HSTPA to prospective rent setting has no impermissible retroactive effect because the statute "neither alter[s] . . . preexisting liability nor impose[s] a wholly unexpected new procedure." (Regina, 35 NY3d at 365-366, citing Raynor v Landmark Chrysler, 18 NY3d 48, 57 [2011].) In other words, because the calculation of overcharge damages was not implicated, setting a new legal rent prospectively only would not impermissibly trample on the landlord's settled expectations of the monetary liability it could incur for improper pre-HSTPA conduct. The proceeding was remitted to DHCR for "a new determination of the legal regulated rent for the apartment in accordance with [the holdings in Syllman II] and in the related appeal in [Syllman I]." (Syllman II at 979.)

What Is Different, and What Is the Same?

Nothing in the HSTPA or prior law limits the lookback period to determine if a premises was improperly deregulated, fraudulently or not. Both the prior law and the HSTPA provide a default formula to assess penalties for overcharges that are a result of a fraudulent scheme to evade the rent stabilization laws. Both the prior law and HSTPA provide for the same methodology for calculating increases based on, e.g. approved MCIs (Syllman), and for the calculation of overcharge damages based upon a previously issued and still viable rent reduction order (Hoyte). In such cases, the HSTPA "does not make unlawful conduct that was lawful when it occurred," because it "only reaches [] conduct already prohibited[.]" (Landgraf v USI Film Prods., 511 US 244, 282 [1994].)

Under pre-HSTPA law, an overcharge resulting from improper but nonfraudulent deregulation warranted nothing more than the four-year lookback provision to find the base date upon which to calculate rent overcharge damages. (Regina, 35 NY3d at 359-360.) In contrast, under the HSTPA, the base date is now as far back as one can see to locate the last "reliable" [*15]rent registration even if that rent is decades old. Under pre-HSTPA law, a landlord was protected by the statute of limitations with respect to record retention requirements. In contrast, the HSTPA now extends the retention period by two years, and "an owner's election not to maintain records shall not limit the authority of [DHCR] and the courts to examine the rental history and determine legal regulated rents." (Regina, 35 NY3d at 368 [internal citation and quotations marks omitted].)

The Emerging Rule

From the little precedent available on this issue, the court gleans an emerging rule which may serve to resolve the tension between the public policies of finality and repose, and the public policy embedded in the HSTPA. That is to say: Post-HSTPA overcharge damages arising from nonfraudulent pre-HSTPA conduct will, in most cases, offend the public policy of repose exalted by the Regina Court unless damages are assessed utilizing a procedure that was previously known. With some case specific exceptions discussed above, this court interprets Syllman II and Harvey to stand for the proposition that, where fraud is not present, when setting the legal regulated rent the court "shall consider all available rent history which is reasonably necessary" to determine and set the legal regulated rent prospectively. Syllman II and Harvey gave life to the prospective rent setting remedy -- portended but not directly addressed in Regina — which is intended to manage concerns of overcharging and a shortage of affordable housing. (Regina, 35 NY3d at 383.) As observed in Regina:

"Part F contains no statement of legislative findings. Such a statement is contained elsewhere in the legislation, noting the continuing housing emergency; the need "to prevent speculative, unwarranted and abnormal increases in rents"; the acute shortage of housing accommodations caused by high demand and decreased supply; and the need, with respect to those being charged market rents, to avoid profiteering and other disruptive practices (L 2019 ch 36, Part G, § 2)." (Id.)

While Regina, Syllman II, and Harvey, did not reach the question of whether a reconstructed rent can give rise to post-HSTPA overcharge damages -- or, in other words, whether overcharge damages based on a reconstructed rent have an impermissible retroactive effect -- in this court's opinion, had the Regina, Syllman II and Harvey courts reached this issue, they would have been constrained by precedent to find that post-HSTPA overcharge damages are not available based on a reconstructed rent. This is because a tenant's total overcharge recovery based on a reconstructed rent would be greatly expanded beyond what was provided under the prior law. It follows that this limitation includes overcharge damages accruing during the four-year statute of limitations period that is applicable to a potentially improper and significant but nonfraudulent pre-HSTPA increase in rent, unless the calculation methodology is the same both before and after the passage of the HSTPA.

This "rule" flows from the incompatibility between pre-HSTPA and post-HSTPA procedures for calculating overcharge damages. Utilizing a reconstruction methodology that is specifically proscribed by the Court of Appeals in Regina but allowed under the HSTPA to calculate post-HSTPA overcharge damages based on nonfraudulent pre-HSTPA conduct -- i.e. the last reliable rent plus all subsequent lawful increases -- will have an impermissible retroactive effect because the monetary damages will be based upon a methodology that did not exist pre-HSTPA. "On the other hand," according to the Regina Court, "a statute that affects [*16]only the propriety of prospective relief or the nonsubstantive provisions governing the procedure for adjudication of a claim going forward has no potentially problematic retroactive effect even when the liability arises from past conduct." (Regina, 35 NY3d at 365 [internal citations and quotation marks omitted], citing Landgraf, 511 US at 273.) Simply put, allowing for monetary damages for pre-HSTPA conduct based on the new rent reconstruction methodology has an unconstitutional retroactive effect; however, a prospectively lower rent based on increases imposed by Rent Guidelines Board Orders which have not been retroactively altered is permissible.

Certainly, it could be argued that where a new legal regulated rent is set, a landlord may be prejudiced in the preparation of its case as a result of the passage of time and the unavailability of records now required by the HSTPA. That a court or DHCR "in determining legal regulated rent, shall consider all available rent history which is reasonably necessary to make such determinations," raises the specter of records that are not available because a landlord previously relied on a shorter record retention requirement.FN20 While setting the prospective rent lower than the rent currently charged may disturb a landlord's settled expectations regarding the return on their investment, Regina and its progeny are not disturbed by these results so long as landlords are protected from a monetary damages awards based on pre-HSTPA conduct which are calculated utilizing a procedure that was not available to tenants prior to the HSTPA, i.e. the reconstruction method. The public policy underlying principles of finality and repose has collided with the public policy underlying the rent stabilization laws.

Leave to Amend the Answer and for Discovery

Leave to amend pleadings under CPLR 3025 (b) should be freely granted "unless the proposed amendment (1) would unfairly prejudice or surprise the opposing party, or (2) is palpably insufficient or patently devoid of merit." (Inglese v City of New York, 237 AD3d 1077, 1078 [2d Dept 2025] [internal citations and quotation marks omitted].) "No evidentiary showing of merit is required under CPLR 3025(b). The court need only determine whether the proposed amendment is palpably insufficient to state a cause of action or defense, or is patently devoid of merit. A court shall not examine the legal sufficiency or merits of a pleading unless such insufficiency or lack of merit is clear and free from doubt." (Chinapen v Sookdeo, 237 AD3d 658, 659 [2d Dept 2025] [internal citations and quotation marks omitted].) Petitioner bears "the burden of establishing prejudice, which requires a showing that the party has been hindered in the preparation of [its] case or has been prevented from taking some measure in support of [its] position." (Lomeli v Falkirk Mgmt. Corp., 179 AD3d 660, 664 [2d Dept 2020] [internal citations and quotation marks omitted].)

As for respondent's motion for leave to conduct discovery, it would be error for the court not to allow for same as the plain language of the relevant statute provides that "nothing shall limit examination of rent history relevant to a determination as to . . . whether the legality of a rental amount charged or registered is reliable in light of all available evidence including but not [*17]limited to whether an unexplained increase in the registered or lease rents [] render[s] such rent or registration unreliable (emphasis added)[.]" (L 2019, ch 36, § 1, part F, § 5 [internal numeration omitted].)

CONCLUSION

Accordingly, it is hereby

ORDERED that respondent's motion for leave to amend the answer to include a fraudulent rent overcharge claim is DENIED for the reasons set forth in more detail above; and it is further

ORDERED that respondent's motion for leave to amend the answer to include a claim for rent overcharge damages is DENIED for the reasons set forth in more detail above; and it is further

ORDERED that respondent's motion to interpose a counterclaim for an order to correct is DENIED as no HPD violations are cited in the answer, nor do any violations currently exist (MDL 328 [3]). Moreover, an interlocutory hearing (while completion of discovery is pending) regarding whether the alleged conditions amount to Housing Maintenance Code violations that the court could independently place puts an unnecessary burden on the court and jeopardizes the summary nature of this already complex summary proceeding. (See e.g. Great Park Corp. v Goldberger, 41 Misc 2d 988, 989 [Civ Ct, New York County 1964]; see also V & J Inc. v 2320 Route 112, LLC, 13 Misc 3d 30, 31[App Term, 9th & 10th Jud Dists 2006] ["It is well settled that in a special proceeding, the trial court may at any time order a severance of counterclaims[.]"]) It is further

ORDERED that respondent is GRANTED leave to conduct discovery to enable the court to review all available rent history in order to determine if there was a proper basis for a significant increase in rent registered in 2007 rendering it a reliable basis upon which respondent's current rent was calculated; and it is further

ORDERED that respondent is GRANTED leave to interpose their first affirmative defense. Respondent has pleaded with specificity why she believes the building is being occupied in contravention of the certificate of occupancy in that the superintendent is using what is designated on the certificate of occupancy as a boiler and storage room as an apartment. (NYSCEF Doc No. 13, proposed amended answer ¶¶ 11-16.) In turn, petitioner has provided no authority for the proposition that it is proper to utilize a designated boiler and storage room for residential purposes. Failure to comply with a certificate of occupancy bars a property owner from collecting rent accruing during the period of noncompliance until such time as the building is back in conformity. On the record before the court, this proposed defense is not patently devoid of merit and petitioner, who has the responsibility of ensuring compliance, cannot credibly allege surprise; and it is further

ORDERED that respondent is GRANTED leave to interpose their second affirmative defense that the rent demand is defective. A rent demand pursuant to 711 (2) must be served upon a tenant 14 days prior to the commencement of a summary nonpayment proceeding. While failure to comply with a statutory condition precedent is not an affirmative defense, and "a mere denial of one or more elements of the cause of action will suffice to place them in issue," US Bank N.A. v Nelson, 169 AD3d 110, 113 (2d Dept 2019), by the same token, petitioner cannot be prejudiced or surprised by a detailed denial of the rent demand's propriety. Respondent's defense merely serves to alert petitioner to the details of her challenge; and it is further

ORDERED that respondent is GRANTED leave to interpose their third affirmative [*18]defense, a more detailed defense related to the warranty of habitability, and a first counterclaim for same which is directly related to the value of the apartment to respondent. Real Property Law § 235-b as written inextricably entwines the damages with the defense. Respondent should be careful to be as specific as possible; however, the defense is so well-known and so important, that even a poorly drafted pleading should not be dismissed for failure to state a cause of action when a cause of action can be discerned from the facts alleged; and it is further

ORDERED that respondent shall serve petitioner with the document demands filed as respondent's exhibits E and F, NYSCEF Doc Nos. 14-15, within seven (7) business days; and it is further

ORDERED that the proceeding is marked off the court's calendar for petitioner to produce documents pursuant to the document demands within 45 days of receipt of same from respondent as set forth above; and it is further

ORDERED that the parties shall make good faith efforts to resolve all discovery disputes outside of court and be able to demonstrate same to the court; and it is further

ORDERED that either party may restore this proceeding to the court's calendar by eight days' notice of motion for appropriate relief including motion practice pursuant to CPLR Article 31, or trial; and it is further

ORDERED that respondent shall serve petitioner with a copy of this decision and order by filing on NYSCEF with notice of entry within seven (7) business days.

This constitutes the decision and order of this court.

DATED: April 10, 2026

Brooklyn, NY

Karen May Bacdayan, JHC