A recent decision of the Appellate Division has emphasized the burden a landlord faces when confronted with a rent overcharge claim. In the case of Chekowsky v. Windemere Owners, LLC, 2014 N.Y. Slip Op. 01139 (1st Dept. 2014) a tenant had sued her landlord for rent overcharge. In starting the lawsuit the tenant claimed that her free market apartment should have been rent stabilized and that she was being charged a monthly rent that far exceeded what was permissible under the law. The apartment had been rent stabilized but after the prior tenant had vacated the landlord performed renovations to the apartment in a scope large enough that the landlord believed it had the right to deregulate the apartment.

As the law stands now, when a rent stabilized apartment is vacant and after taking permissible vacancy increases and performing individual apartment improvements, should the legal rent reach the threshold of $2,500/month, the apartment is deregulated. Individual apartment improvements are the key.

A landlord may raise a rent stabilized apartment’s legal rent during a period of vacancy by 1/60th cost of any renovations that are performed. When a tenant reviews the rental history for an apartment and sees that the prior tenant paid much less than $2,500 the new tenant may well be suspicious of whether the landlord spent enough money on renovations to reach the $2,500 threshold.

Here, after taking the permissible vacancy increase, the landlord needed to have spent $53,541 in renovations in order to reach $2,500 as a legal monthly rent. After the tenant sued and the landlord had answered the lawsuit, the tenant moved for summary judgment. The tenant claimed that the landlord could not show $53,541 in renovations and that absent such proof that the tenant had to be rent stabilized as a matter of law. The landlord opposed by providing canceled checks that totaled only $33,200. The tenant claimed that the failure to show $53,541 in renovations operated as an admission that the renovations were not sufficient.

The trial judge ruled that even in the absence of proof as to the amount of the renovations that the judge could not rule for the tenant as a matter of law. The judge decided that there would have to be a trial to determine the apartment’s status.

The Appellate Division reversed and held that the tenant was entitled to judgment as a matter of law. The Appellate Division based its decision on the fact that the landlord failed to provide proof of payment of the necessary $53,541. The Appellate Division also ruled that the failure of the landlord to provide an affidavit from a person with knowledge who could explain how the money was spent was a further impediment for the landlord.

When a landlord is sued for rent overcharge and the rent being charged will only be sustained by proving that a certain amount of renovations were performed, the landlord needs to provide proof in certain forms:

This case provides a look at what will happen to a landlord who spends a massive amount of money improving an apartment but who fails to prove that it spent enough. The money spent is gone and the landlord is left with an apartment that has its rent rolled back to the previous level. Further, the tenant will now be rent stabilized and the landlord will be writing a check to the tenant for tens and tens of thousands of dollars.