Defeating Overcharge Claims After Grimm Decision

Don't wait till you're hit with a rent overcharge complaint to get your old lease files in order. That's the advice of New York City attorney Erez Glambosky, who warns, “Since the 2010 Court of Appeals decision in Grimm v. DHCR, if a tenant submits a ‘colorable claim of fraud’ in connection with an overcharge complaint, the four-year rule will be ignored, and the DHCR will examine the apartment's rent history to establish a base date.”

Glambosky recommends that owners scan their old leases so that there's an electronic record going back as far as possible in case the issue of fraud is raised and an owner must provide leases going back more than four years. “The Grimm decision has made owners more fastidious and detailed in their record keeping, and I predict there will be a continued focus on this, which will include investing resources in data management, including electronic record storage, so that dated leases are readily accessible and easy to store,” he says.

The state of lease files is particularly important to consider before buying an apartment building. “For prospective purchasers of multifamily properties with regulated units, where the property's current manager doesn't necessarily keep good records, it's critical to make a review and analysis of all available leases—not just those four years prior to purchase—during due diligence,” Glambosky warns.

Leases, however, aren't the only records owners and managers need to manage carefully. For a complete checklist of documents you need when preparing to answer a rent overcharge complaint, as well as a further discussion of the Grimm decision, see “Gather Necessary Documents When Answering Overcharge Complaints,” from the Insider's July 2012 issue.