Under New York law, if a landlord obtains J-51 tax benefits from New York City, the landlord must treat its tenants as rent stabilized. In this case, the owner failed to do so and for years treated our client as deregulated and charged rents exceeding that allowable under rent stabilization. Our client commenced a rent overcharge case in the Supreme Court.
There, the determination of whether rent overcharges would be computed on the basis of the rent charged four years earlier than when the complaint was filed, or whether that rent was unreliable and DHCR’s default formula would be used, would turn on whether our client could establish a fraudulent scheme to deregulate his apartment. To do so, Adam Leitman Bailey, P.C. sought permission to serve a judicial subpoena duces tecum on DHCR seeking the building-wide rent roll registrations. Recognizing that the information would show its untoward conduct, the landlord moved for a protective order to suppress the production of the DHCR information. The Supreme Court denied the landlord’s motion and it appealed to the Appellate Division, First Department.
Adam Leitman Bailey, P.C. successfully defended the order on appeal. Based upon Adam Leitman Bailey, P.C.’s arguments, the Appellate Division rejected the landlord’s contention that the records were utterly irrelevant to any proper inquiry, which is the standard necessary to suppress, and found, to the contrary, that the records sought were relevant in determining whether the landlord engaged in a fraudulent scheme to deregulate the client’s apartment, and others in the building as well as whether the landlord re-registered any of the apartments while it was receiving J-51 benefits. This information, the Court concluded, would establish whether fraud could be shown.