The Appellate Division, First Department, has just issued a major new decision with potentially disastrous results for rent-regulated tenants who file inaccurate tax returns or other documents in which they represent their residence as somewhere other than their apartment. In Ansonia Associates LP v. Unwin, the tenant filed federal tax returns in which she took a 100% business deduction for her rent even though she actually resided in the apartment. The court ruled that, as the tax returns were filed under penalty of perjury, the tenant was now prohibited from claiming that the apartment was her residence.

This case has potentially seismic implications for primary residence cases, especially those involving live-work lofts or apartments where tenants carry on home occupations. If you are deducting 100% [or other disproportionate share] of the rent on your taxes, you should amend your returns immediately.

Beyond this, the decision may implicate tenants who file tax returns from their weekend homes or who take a homestead exemption in another state, most commonly Florida. It is also not inconceivable that this could be extended to representations on mortgage documents, which are also signed under penalties of perjury. It is common for tenants financing a second home to unthinkingly take out a “primary residence” mortgage in order to secure a lower rate. That is, they sign under penalty of perjury that the house will be their primary residence. In light of Unwin, this now may put rent-regulated apartments at risk. The same could apply to the even more mundane practice of saving on auto insurance by registering the car at the upstate house when, in reality, it is garaged in the city.

The message the court is sending is unmistakable: tenants who are benefiting from rent regulation must be scrupulously honest. Tenants who try to have it both ways – to take advantage of the rent laws while also simultaneously benefiting from a claim to live elsewhere – are putting their actual homes in peril.

July 7, 2015