William Grey v. LIC Development Owner, L.P.
Attorneys and Parties
Brief Summary
Rent-stabilized overcharge claims in a building receiving Real Property Tax Law (RPTL) 421-a benefits, addressing the treatment of rent concessions before and after the Housing Stability and Tenant Protection Act (HSTPA) and the legality of early occupancy license agreements that purported to bypass rent-stabilization protections and altered renewal intervals.
Pre-HSTPA concessions tied to specific months did not affect the legal regulated rent and thus did not constitute overcharges, but post-HSTPA concessions supported overcharge and related declaratory/injunctive relief; the court otherwise declined to grant classwide relief tied to the early occupancy license agreements.
Modified to declare the early occupancy license agreements void, grant summary judgment for class members who received renewal leases at unauthorized intervals caused by the licenses, vacate rent increases taken at unauthorized intervals, and impose a rent freeze until registrations are corrected; otherwise affirmed, including denial of defendant’s motion to renew.
The licenses required tenants to waive rent-stabilization protections and were void as against public policy under Rent Stabilization Code (RSC) §§ 2200.15, 2520.13 [agreements waiving rent-stabilization protections are void]; the unlawful alteration of lease intervals deprived tenants of the statutory choice between one- or two-year terms, which affects Rent Guidelines Board (RGB) increases under Rent Stabilization Law (RSL) § 26-511(c)(4) [mandates RGB adjustments tied to lease terms], warranting vacatur of unauthorized increases and a rent freeze under RSL § 26-517(e) [requires rent to be frozen until rents are registered correctly]. Pre-HSTPA, rent concessions were permissible under RSC § 2521.1(g) [for RPTL 421-a buildings, the initial legal regulated rent is the initial adjusted rent charged and paid, not higher than the HPD-approved rent], but post-HSTPA, RSC § 2521.1(a) [defines preferential rent as a charged rent lower than the legal regulated rent] and DHCR’s revised guidance supported treating concessions as preferential rents leading to overcharges.
Background
Plaintiff, on behalf of a class of tenants in a rent-stabilized building receiving Real Property Tax Law (RPTL) 421-a tax benefits [tax abatement program that affects initial regulated rents in qualifying new construction], challenged two landlord practices: (1) rent concessions reflected in leases, and (2) the use of pre-lease early occupancy license agreements that purported to exempt occupancy from rent-stabilization laws and allowed termination on short notice, with the rider controlling over inconsistent lease terms. Before the Housing Stability and Tenant Protection Act (HSTPA) (L 2019, ch 36) [2019 reforms to New York’s rent laws] took effect on June 14, 2019, the owner offered month-specific rent concessions; after HSTPA, similar concessions continued. The owner also issued renewal leases keyed to intervals resulting from the early occupancy period rather than the statutory one- or two-year terms. Plaintiff sought classwide summary judgment for rent overcharges and declaratory/injunctive relief.
Lower Court Decision
The Supreme Court, New York County (April 4, 2025) granted in part and denied in part both sides’ summary judgment motions. It held that pre-HSTPA concessions tied to specific months did not reduce the legal regulated rent, relying on DHCR Fact Sheet 40 and Burrows v 75-25 153rd St., LLC, and therefore did not create overcharges. It further held that post-HSTPA, DHCR’s revised guidance and Rent Stabilization Code § 2521.1(a) supported treating concessions as preferential rents generating overcharges and granted plaintiff corresponding relief. The court did not invalidate the early occupancy licenses beyond their concessions. On August 8, 2025, the court denied defendant’s motion to renew.
Appellate Division Reversal
The Appellate Division modified. It agreed that pre-HSTPA concessions (tied to specific months and within DHCR’s limit) did not create overcharges, and that post-HSTPA concessions supported overcharge relief. But it further held the early occupancy license agreements were void because they required tenants to waive rent-stabilization protections (RSC §§ 2200.15, 2520.13) and improperly allowed termination and altered statutory lease intervals. The court declared the licenses void, ordered that any renewal leases issued at unauthorized intervals be corrected to proper one- or two-year terms, vacated any rent increases taken at those unauthorized intervals, and imposed a rent freeze under RSL § 26-517(e) until registrations are corrected. It affirmed the denial of defendant’s motion to renew, finding no new facts or change in the law under CPLR 2221(e)(2) [renewal requires new facts not previously offered that would change the determination or a change in the law].
Legal Significance
Clarifies that, even in 421-a buildings, month-specific concessions pre-HSTPA did not affect the legal regulated rent, but post-HSTPA concessions may function as preferential rents leading to overcharges under DHCR’s revised guidance. More broadly, any early occupancy agreement that purports to exempt rent-stabilized occupancy or alter statutory lease intervals is void as against public policy, and courts will unwind unauthorized RGB increases and impose a statutory rent freeze until proper registrations are filed.
Landlords cannot use early occupancy licenses to sidestep rent-stabilization protections or alter lease terms; such agreements are void, unauthorized increases are vacated, and a rent freeze applies until the rents are correctly registered, while the treatment of rent concessions turns on the pre- versus post-HSTPA regime.