In S* v. L* N* Realty Corp., the tenant, ES, claimed rent overcharge and that his unit was rent regulated, while the defendant-respondent, L* N* Realty Corp. argued that the apartment was properly deregulated and that no rent overcharge had occurred.
The Appellate Division, First Department, ultimately affirmed the lower court’s decision to grant summary judgment in the landlord's favor, dismissing the tenant’s complaint. Central to the ruling was the legal framework surrounding "first rent"—a principle that applies when a landlord reconfigures and merges apartments in a way that eliminates their prior identities, thereby allowing a new market rate rent to be established. The appellate court found that the combination of two rent-stabilized units (9RH and 10RH) into a single two-bedroom apartment met these criteria. Importantly, the architectural changes extended beyond merely removing a wall; there were substantial alterations to the layout and plumbing, reinforcing that the new unit qualified for first rent.
Further, the landlord successfully demonstrated that the apartment had been legally deregulated before the tenant occupied it in 2015. Under the Rent Act of 2011, deregulation could occur if a unit reached a legal rent threshold of $2,500 post-vacancy. In this case, the sum of the prior rents from the two individual units exceeded that threshold, making the deregulation valid.
Finally, the court found that the landlord was entitled to unpaid rent, as the tenant’s dispute over the apartment’s status had led to an ongoing refusal by the landlord to cash rent checks. Since the apartment was deemed lawfully deregulated and no rent overcharge was found, the tenant remained liable for the owed rent.
Reconfiguration, rent, and the rule of law -- there was no reshaping tenant protections here.
# # #
DECISION