In the 1980's, a Brooklyn brownstone containing 7 units was converted to 4 units. None of the units were ever registered with the DHCR. A duplex unit was occupied by the owners from 1998 to 2008. In 2008, these owners sold the building, and the new owners rented the duplex to new tenants. They were given a "market" lease and paid the rent demanded for 4 years. In 2012, a Housing Court Judge determined that the tenants were rent stabilized and ordered a trial on rent overcharge. After trial, Housing Court Judge McClanahan found, in Chun v. Raywood, that the legal rent had to be set based on the DHCR's "default formula," a calculation used when no reliable rental history records are available, and ordered the owners to refund the amount overpaid for the past 4 years, plus interest. Under the "default formula" the rent could be set on the basis of the lowest rent stabilized rent for a comparable apartment in the same line of apartments, or on other alternative formulas that would generally result in a lower rent.
Class Action law suits allow claims to be brought on behalf of many people who have been adversely affected by the actions of the defendant. Often times the individual claims are small but in the aggregate can be huge. For example, a credit card company that charged a fraction of a percent more than allowed by law may owe one million customers $10 each. Not enough for any individual to sue but as a class of one million, another matter altogether.
On November 21, 2012, a Civil Court Judge in Brooklyn issued a ruling in favor of the tenants in Chun v. Raywood. At issue in the case was whether a duplex apartment in a brownstone, renting for over $2,500 per month, was subject to rent stabilization. The Court determined that the apartment was rent stabilized because: (1) the building had seven units until the 1980's, when it was converted to a four-unit building, and (2) the apartment was owner-occupied for several years before being rented to the tenants. Generally a building must have a minimum of six units for the apartments to be rent stabilized, but the rule is that when the number of units was above six on the effective date of the law, a reduction in the number of units does not affect their stabilized status. Also, the practice of "high rent/vacancy deregulation" does not apply to an apartment that was owner-occupied immediately before it is rented to a new tenant. The Court's decision was published in the New York Law Journal.
In order for an apartment to be subject to rent stabilization, along with a number of other criteria, it must be located in a building that contains six or more apartments.