When the Court of Appeals ruled in Roberts v. Tishman Speyer Properties,1 that apartments in buildings receiving J-51 tax benefits remain subject to rent stabilization and cannot be deregulated at least as long as the benefits are in effect, it left a number of issues unresolved. One of the biggest issues left open was how to establish a legal regulated rent where a landlord had charged “market” rent, rather than a rent-stabilized rent, while in receipt of J-51 benefits. The decision in 72A Realty v. Lucas,2 of Dec. 4, 2012, begins to provide an answer.3 In Lucas, the Appellate Division, First Department, rejected the “Four Year Rule” under which legal regulated rents (and overcharges) are calculated based upon the rent that was being charged on the “base date” defined as four years prior to a tenant filing a complaint or raising a defense of rent overcharge.4
Ruling in ‘Lucas’
Sandra Lucas moved into an apartment in September 2002 pursuant to market lease. At the time, the landlord was receiving J-51 tax benefits. When her lease expired in August 2008, the landlord refused to renew it and brought an expiration of lease holdover. Lucas argued that because the landlord was receiving J-51 benefits that she was rent-stabilized and also that she had been overcharged since she was being charged a market rent. The housing court, citing Roberts, found that she was rent stabilized and, applying the Four Year Rule, set the rent at $2,250, the amount paid in a market rent lease in effect in October 2004, four years prior to her raising the overcharge counterclaim.5
