Greenwood v Maxtor Realty Corporation
Attorneys and Parties
Brief Summary
Residential landlord-tenant: alleged rent overcharges and fraudulent deregulation of a rent-stabilized apartment while receiving J-51 tax abatement benefits.
Found no fraud (no scienter), declined to apply the Rent Stabilization Code default formula, limited overcharge damages to $5,058, and denied treble damages and a rent freeze.
The judgment limiting damages to $5,058 and denying treble damages and a rent freeze was reversed; the damages and remedies issues were remitted for trial.
Subsequent statutory amendments, L 2024, ch 95, § 4 [adopting a standard that plaintiffs need only show the landlord knowingly engaged in a fraudulent scheme to deregulate under the totality of the circumstances; no need to prove all elements of common-law fraud], apply retroactively and create triable issues precluding a summary limitation of damages.
Background
Tenants began renting the apartment in 2006. In 2018 they sued alleging rent overcharges and a fraudulent scheme to deregulate while the landlord received J-51 benefits, invoking Roberts v Tishman Speyer Props., L.P., 13 NY3d 270. The parties disputed the legal regulated rent, the base date rent, and whether the Rent Stabilization Code (9 NYCRR) §§ 2522.6(b)(3) and 2526.1(g) [default formula to set legal regulated rent when the rent history is unreliable/tainted by fraud; overcharge calculation and remedies, including potential treble damages] should apply. In 2022, the landlord moved for summary judgment; tenants cross-moved for summary judgment on overcharges.
Lower Court Decision
The Supreme Court, Kings County, denied the landlord’s motion and granted tenants’ motion only to the extent of setting damages at $5,058, holding tenants failed to prove fraud because scienter was not shown, and denying treble damages and a rent freeze. A January 13, 2023 judgment awarded $5,058.
Appellate Division Reversal
The appeal from the order was dismissed because entry of judgment terminated the right to a direct appeal, but the issues were reviewed on the appeal from the judgment under CPLR 5501(a)(1) [permits review of issues raised by an order upon appeal from the final judgment]. The court reversed the judgment, vacated the $5,058 damages determination, and remitted for a trial on whether the landlord knowingly engaged in a fraudulent deregulation scheme under L 2024, ch 95, § 4 [revised, retroactive standard for fraudulent deregulation]. The court held the lower court erred in limiting recovery and in denying treble damages and a rent freeze on summary disposition; those issues must be decided after trial. One bill of costs was awarded to plaintiffs.
Legal Significance
Confirms the retroactive application of the 2024 amendments (L 2024, ch 95, § 4) to fraudulent deregulation claims, lowering the proof standard from common-law fraud elements to whether the landlord knowingly engaged in a fraudulent scheme under the totality of the circumstances. Where triable issues exist, courts should not summarily limit overcharge damages or foreclose enhanced remedies; application of the Rent Stabilization Code default formula and treble damages must be determined at trial.
Post-2024, tenants alleging fraudulent deregulation need not prove all elements of common-law fraud; showing knowing participation in a deregulation scheme under the totality of the circumstances can suffice. Summary rulings that cap overcharge damages and deny treble damages or a rent freeze are improper when factual disputes remain.