Last April, the Court of Appeals sent shockwaves through the landlord-tenant world when it ruled that the brazenly pro-tenant changes to rent overcharges contained in the Housing Security and Tenant Protection Act of 2019 were unconstitutional to the extent they applied retroactively. See Regina Metropolitan Co., LLC v DHCR, 35 NY3d 332 (2020). Regina held that the legislature could not change the rules of the game after the fact. This meant that all pre-June 2019 overcharge claims would be decided under the more landlord-friendly old rules.
The decision immediately prompted spirited discussion as to whether the HSTPA’s other retroactive provisions would be similarly found unconstitutional. We now know the answer is “yes.”
In Harris v Israel, 2021 NY Slip Op 00796 (1st Dep’t), the Appellate Division, First Department, relying on Regina, held that the HSTPA’s changes to the Rent Stabilization Law provision for “owner’s use” could not be applied retroactively. Prior to the HSTPA, the Rent Stabilization Code allowed a landlord to recover possession of a stabilized apartment if he or she could prove that either they, or an immediate family member, intended in “good faith” to use the apartment as their primary residence. The HSTPA replaced the “good faith” standard with “immediate and compelling necessity,” a considerably more difficult burden. See L 2019, ch 36, Part I § 5. Crucially, the HSTPA applied the standard to all pending cases, thereby making it effectively retroactive.
The First Department noted that in prior cases, the Court of Appeals had sanctioned the retroactive application of other amendments to owner’s use cases. See, e.g., Cirella v Joy, 69 NY2d 973 (1987). Nevertheless, it followed the reasoning of Regina and held that the prior “good faith” standard applied. Given that the Harris decision seemingly contradicts prior Court of Appeals case law on retroactivity, there is a good chance that the First Department will grant leave to appeal. It seems only right that the Court of Appeals should sort this out.
It is possible, if not likely, that Harris is merely the beginning. There are numerous other areas where the HSTPA is potentially vulnerable to a Regina retroactivity challenge. For example, DHCR has issued rulings retroactively undoing non-final high income [“luxury”] deregulation orders based upon the HSTPA’s elimination of such deregulation. There are also several changes to the rules governing rent increases for major capital improvements that were retroactively changed by the HSTPA.
The courts will be busy for some time sorting this all out.
