Court Affirms Tenants’ Choice of Forum for Rent Overcharge Claims

In a second decision concerning rent overcharge issued on April 2, 2020, New York’s highest court ruled that rent-stabilized tenants were entitled to bring overcharge claims against building owners either before the NY State Division of Housing and Community Renewal (DHCR) or before a court. In Collazo v. Netherland Property Assets LLC et al., the Court of Appeals cited the provision found in the Housing Stability and Tenant Protection Act of 2019 (HSTPA) that, “[t]he courts and [DHCR] shall have concurrent jurisdiction, subject to the tenant’s choice of forum,” and rejected the lower court’s dismissal of overcharge claims initiated there based on its finding that the DHCR had primary jurisdiction over those claims and was better equipped to resolve the factual and legal questions presented.

Most rent overcharge claims by rent-stabilized tenants, or tenants alleging that their housing units were improperly deregulated by landlords, are commenced by filing a rent overcharge complaint form with the DHCR, which generally processes such claims through paper submissions only and without in-person appearances by the parties. However, in the years following the Court of Appeals’ 2009 decision in Roberts v. Tishman Speyer Props. LP, a good number of overcharge claims concerning rent-stabilized tenancies have been raised instead either in complaints commenced in State Supreme Court or in defenses and counterclaims raised in housing court proceedings. In some cases, tenants in one or more buildings have acted together to commence lawsuits where they have sought class action status.

As a matter of law, courts unquestionably have had “concurrent jurisdiction” with the DHCR to decide overcharge claims. One of the likely reasons that tenants have pursued overcharge claims in court rather than before the DHCR is the sheer volume of pending DHCR complaints and that agency’s painfully prolonged processing periods. Despite the greater expense of going to court, many tenants and their legal counsel may have reasoned that court processing could be faster, provide for more in-depth fact-finding through discovery, and present opportunities for supervised, face-to-face negotiation and possible settlement.

However, in some cases, courts had decided that the DHCR would be a more appropriate forum for determination of overcharge issues. As stated by the Appellate Division in a lower Collazo case ruling, “the questions raised about the applicability of the rent stabilization law and the proper amount of rent is within the agency’s specialized experience and technical expertise.”

Unfortunately, by punting overcharge claims to the DHCR, courts have increased the delay in resolving these disputes. Tenants have had to recast their claims before the DHCR, and to join the Office of Rent Administration’s overloaded dockets. To the detriment of both sides, some of the court decisions calling for the DHCR to decide tenant overcharge claims have been issued six months or more after these cases were commenced, and in response to interim motions by one side or the other. HSTPA, while appearing to state the obvious, chose to underscore that overcharge claims should be decided in the chosen forum. The Court of Appeals affirms that a court cannot override a tenant's choice of forum.

The High Court’s Collazo decision also addressed a second issue, upholding as unsupported by sufficient factual allegations the dismissal of tenants’ additional claim based on the existence of consumer-oriented, deceptive acts under General Business Law Section 349.  

The Collazo decision, as well as the Court’s decision in Regina Metropolitan Co., LLC v. DHCR (decided the same day and discussed in my prior Contributor’s Corner piece), can be expected to have significant effects on overcharge claims pending before the DHCR and New York’s courts.