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Court of Appeals Authorizes Class Action to Recover Rent Overcharges

BY Stewart E. Sterk
January 31, 2015

Does Rent Stabilization Law section 26-516, which entitles tenants to treble damages for most rent overcharges, constitute a “penalty” within the meaning of CPLR 901(b), which provides that, subject to an exception, no action to recover a penalty may be maintained as a class action? The Court of Appeals addressed that question in Borden v. 400 East 55th Street Associates, L.P., (NYLJ 11/25/14, p. 22., col. 1), and held that so long as tenants waived the right to recover treble damages, tenants could use the class action mechanism to recover rent overcharges.

The Facts

In Roberts v. Tishman Speyer Props., Ltd., the Court of Appeals held that landlords who accepted tax benefits for a building pursuant to New York City's J-51 program could not deregulate any apartment in the building pursuant to the luxury decontrol laws. The court's holding in Roberts rejected DHCR's view that landlords were entitled to use the luxury decontrol laws if the tenant's unit was subject to rent stabilization separate and apart from landlord's acceptance of J-51 benefits. As a result, many landlords, in reliance on DHCR's position, had invoked the luxury decontrol laws to increase rents in apartments held by well-off tenants. In light of Roberts , landlords were not entitled to these increased rents.

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