Choi v Linc LIC L.L.C.
Attorneys and Parties
Brief Summary
Residential landlord-tenant law involving rent-stabilized housing, rent concessions, preferential rent treatment after the Housing Stability and Tenant Protection Act of 2019 (HSTPA), and whether a landlord may charge legal fees to a tenant without a court order.
The motion court denied both the landlord's motion for summary judgment and the tenant's cross-motion for summary judgment.
The Appellate Division modified the order to grant the tenant summary judgment on liability for his rent overcharge claims and related declaratory and injunctive relief, including overcharges based on improper rent concessions and attorneys' fees, and remanded for calculation of damages, including treble damages.
The landlord's six-month COVID-19 rent concessions operated as an unlawful preferential rent rather than a permissible concession under current New York State Division of Housing and Community Renewal (DHCR) guidance, and the lease provision allowing the landlord to assess legal fees without a court order was unconscionable and barred by statute. The landlord also failed to rebut the statutory presumption that the overcharges were willful.
Background
Tenant Hyunseoung Choi sued landlord Linc LIC L.L.C. over rent overcharges in a rent-stabilized apartment. The dispute centered on a rent abatement agreement that gave six months of concessions tied to COVID-19 and on the landlord's assessment of attorneys' fees against the tenant's account without a court order. The landlord had advertised the apartment using the net effective rent after concessions. Tenant argued that the concessions functioned as a preferential rent and that future rent increases should have been calculated from the lower amount actually charged and paid. Tenant also challenged the legal-fee charges as unlawful.
Lower Court Decision
Supreme Court, New York County denied both sides' summary judgment motions, leaving the claims for overcharges, declaratory relief, injunctive relief, and damages unresolved.
Appellate Division Reversal
The Appellate Division held that the landlord's concession arrangement did not comply with post-HSTPA law or current DHCR guidance. Relying on Rent Stabilization Code (9 NYCRR) § 2521.2(a) [defines a preferential rent as existing when the amount of rent charged to and paid by the tenant is less than the legal regulated rent], the Court found that the landlord failed to rebut the tenant's showing that the concessions functioned as a preferential rent. Under Rent Stabilization Law of 1969 (RSL) (Administrative Code of City of New York) § 26-511(c)(14) [upon renewal of such lease, the amount of rent that may be charged and paid shall be no more than the rent charged to and paid by the tenant prior to renewal, as adjusted by the most recent applicable guidelines increases and any other increases authorized by law], renewal increases had to be based on the lower charged rent. The Court also held that the lease clause permitting the landlord to assess attorneys' fees based solely on its own view of tenant default, even without litigation or a court order, was unconscionable. It cited Real Property Law § 234-a(a) [prohibits landlords from assessing a lessee any fee, surcharge or other charges for legal services in connection with the operation or rental of a residential unit unless the owner, lessor or agent has legal authority to do so pursuant to a court order] and Rent Stabilization Law § 26-512(g) [similarly prohibits landlords of rent-stabilized apartments from assessing legal-service charges unless authorized by court order]. Finally, the Court ruled that the landlord had not overcome the presumption of willfulness under Rent Stabilization Law § 26-516(a) [a refund offered after commencement of the action is not evidence of lack of willfulness, and a landlord is liable for treble damages unless it proves by a preponderance of the evidence that the overcharge was not willful].
Legal Significance
The decision reinforces that, after the HSTPA, landlords cannot use post-2019 concession structures to avoid preferential-rent protections in rent-stabilized apartments. It also confirms that lease provisions attempting to shift attorneys' fees to tenants without a court order are unenforceable and can themselves create rent overcharges. The ruling further underscores that post-suit refunds do not defeat the statutory presumption of willful overcharge.
For rent-stabilized apartments, landlords must treat net effective rents created by improper concessions as the operative rent when calculating renewals, cannot charge legal fees absent court authorization, and face treble damages if they cannot prove an overcharge was not willful.