Appeals Court Backs Overcharged Tenant

A state appeals court has held that the “four-year rule,” which bars rent-stabilized tenants from collecting for rent overcharges that are more than four years old when they filed their complaint, does not count as a “statute of limitations” barring tenants from challenging such overcharges if they were included in the rent during those four years.On April 12, the Appellate Term of the First Department (covering Manhattan and the Bronx) upheld a December 1994 decision by Housing Court Judge Howard Malatzky (“Overcharge Victory,” Feb. 1995 Met Council Tenant) in Zafra vs. Pilkes. The case involved Simon Pilkes, a Manhattan man who filed an overcharge complaint in 1991, five years after the landlord had raised the previous tenant’s rent from $546 to $1,350. Pilkes had rented the apartment for $1,590 in 1987; his landlord argued that the four-year rule prevented the court from looking into the apartment’s rent history from before then.

The Appellate Term disagreed, ruling that while “an award for rent overcharge must be limited to the four-year period preceding interposition of the complaint. The statute does not preclude examination of the prior rental history of the apartment in order to determine whether a previous overcharge bears upon the four-year period.”

While the law does not require landlords to produce records from more than four years before the most recent rent-registration date, the court said that “the record-keeping provisions do not operate as a statute of limitations on challenges to prior unlawful rent increases. It may still be established, by testimony or other competent proof, that a previous rent increase was not permissible.”

In practice, this means that a tenant who filed an overcharge complaint this year on an apartment where the rent was illegally increased before 1992 can’t collect back rent or damages for rent paid before that year. But if the overcharge was factored into the rent paid since then (as would be inevitable in rent-stabilized apartments) the tenant can collect for what they paid during the last four years. For example, in an apartment where the current $900 a month rent is based on an illegal increase from $300 to $600 in 1989 and would have been $450 without the illegal increase, a tenant who filed this year can’t collect damages for the excess rent paid from 1989 to 1992. However, they can collect for the extra $450 they’re paying now and the total overcharge they’ve paid since 1992.

This decision is a major victory for tenants. Landlords and the state Division of Housing and Community Renewal have taken the position that the four-year cutoff bars the DHCR and the courts from even investigating the legality of rent increases that occurred more than four years prior to the tenant’s complaint. It is expected that DHCR will claim that this decision is not binding upon it because it was not a party to the Pilkes litigation.

All tenants with pending overcharge complaints at the DHCR should immediately write to the agency and demand that it examine the apartment’s entire rent history in light of the Pilkes decision. As Housing Court and DHCR have “concurrent jurisdiction” over most rent-overcharge complaints, tenants in Manhattan and the Bronx should litigate their overcharge complaints in Landlord-Tenant Court (by withholding rent, and when a non-payment proceeding is commenced, interposing a defense and counterclaim of rent overcharge), or by initiating a lawsuit in Civil Court (claims under $25,000) or Supreme Court (claims over $25,000).

Andrew Dwyer, formerly of South Brooklyn Legal Services, authored an amicus curiae (friend of the court) brief at the Appellate Term on behalf of Met Council, New York State Tenants and Neighbors Coalition and numerous other tenant and community groups. Raun Rasmussen, the director of South Brooklyn Legal Services’ housing unit, argued the appeal on behalf of the amicus curiae.

It is not clear at this time whether Pilkes’ landlord intends to appeal the decision.

Samuel J. Himmelstein represented Mr. Pilkes in Landlord-Tenant Court.