NYS Court of Appeals issues important HSTPA decision - by Michael Capozzi

On April 2^nd, 2020, the New York State Court of Appeals issued an important decision regarding the retroactive application of a significant portion of the Housing Stability and Tenant Protection Act of 2019 (HSTPA) concerning rent overcharge complaints for rent stabilized apartments. In Regina v. New York State Division of Housing and Community Renewal – a case primarily involving the method of calculating rents following improper luxury deregulation in a building receiving J-51 tax benefits – the court issued a 50-plus page decision (with an almost 50 page dissenting opinion) holding that the rent overcharge calculation amendments contained in the HSTPA cannot be applied retroactively to overcharges that occurred prior to their enactment.

The court recognized that it had no occasion to address the prospective application of any portion of the HSTPA. But because the overcharges in question occurred prior to the enactment of the HSTPA, the court was required to determine whether the overcharge amendments could properly be applied retroactively. The court found that the Legislature evinced a clear intent to apply the new law to pending rent overcharge claims – where the overcharge calculation issue was unresolved at the time the HSTPA was enacted. Thus, the court expanded its analysis to reach the landlord’s constitutional challenge to the retroactive application of the rent overcharge portion of the new law. In performing this analysis, the court found that the Legislature failed to offer any explanation, much less a rational one, for the retroactive application of the amendments. The court concluded that, “[r]ather than serving any of the policy goals of rent stabilization, retroactive application of the overcharge calculation amendments would merely punish owners more severely for past conduct they cannot change – an objective we have deemed illegitimate as a justification for retroactivity.” Therefore, the court held that the retroactive application of the rent overcharge amendments was unenforceable as violative of due process.

In light of this holding, the courts and the DHCR will apply the old law in cases involving rent overcharges occurring prior to the enactment of the HSTPA, to wit:

• Four year statute of limitations rather than six;
• The base date rent is the rent charged on the date four years prior to the filing of the complaint, rather than some unknown, later date;
• Examination of rental history is limited to a four-year look back period, rather than a much longer look back period; and 
• Treble damages are limited to two years rather than six.

As harsh and penal as the HSTPA may be going forward, landlords can at least breathe a little easier knowing that its conduct before June 14^th, 2019 will be subject to the prior, less punitive, provisions of the Rent Stabilization Law.

Michael Capozzi is a partner in the Landlord-Tenant Group at Ingram Yuzek, New York, N.Y.