Rosenberg & Estis, P.C. recently prevailed in State Supreme Court in Kings County, successfully defending a Brooklyn property owner from false tenant claims of fraudulent rent overcharges. The ruling affirmed that there must be injury to a tenant to prompt application of the default formula mandated in cases of fraud. Jeffrey Turkel, member, and Zachary J. Rothken, of counsel, with Rosenberg & Estis, P.C. represented the owner of 81 Washington Street in Brooklyn before State Supreme Court Justice Carl Landicino.
Justice Landicino granted the owner full summary judgment against one plaintiff-tenant, and partial summary judgment, dismissing nearly all claims, against the other three plaintiff-tenants. The court roundly rejected the tenants’ claims that the owner engaged in a fraudulent scheme to overcharge the tenants despite having received J-51 tax benefits.
Specifically, Justice Landicino dismissed the plaintiff-tenants’ claims that the owner engaged in fraud by telling the plaintiffs they were receiving preferential rents when they were not, and by failing to disclose to them the correct legal regulated rents. Critically, Justice Landicino upheld past precedent that willfulness, injury and reasonable reliance remain requisite elements for a finding of fraud, not the mere submission of incorrectly high rents in DHCR filings, especially given the fact that the tenants commonly paid lower, preferential rents.
Justice Landicino accepted the owner’s claims that any inadvertent overcharges occurred due to the building owner’s mistaken belief that the units were no longer regulated, and that the owner made a good faith effort to promptly rectify its mistakes with refunds, including interest, and filing missing DHCR registrations as required.
“Although local and state laws in recent years have made life increasingly difficult for landlords, this case shows that fierce attorney advocacy on behalf of property owners ensures their rights are protected,” said Rothken.
“This victory underscores that fraud is not a term to be carelessly thrown around,” said Turkel. “Fraud has a clear legal definition, and not every rent overcharge constitutes fraud and qualifies for application of the default formula.”