Four-Year Rent-Overcharge Statute of Limitations Does Not Apply Where There Is Fraud

The First Department noted that the four-year statute of limitations for rent-overcharge actions does not apply where fraud in involved, because the fraud renders the underlying lease void:

We are not persuaded that plaintiffs’ overcharge claim is barred by the four-year statute of limitations. As we noted in Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin. (68 AD3d 29, 32, affd 15 NY3d 358, 366 [2010] [citations ommitted]), “while the applicable four-year statute of limitations reflects a legislative policy to alleviate the burden on honest landlords to retain rent records indefinitely,’ and thus precludes us from using any rental history prior to the base date, where there is fraud . . . the lease is rendered void[,]” and the legal rent is to be determined by the default formula … . We went on to note that “[s]anctioning the owner’s behavior on a statute of limitations ground can result in a future tenant having to pay more than the legal stabilized rent for a unit, a prospect which militates in favor of voiding agreements such as this in order to prevent abuse and promote enforcement of lawful regulated rents'” … . We thus hold that the four year statute of limitations is not a bar in a rent overcharge claim where there is significant evidence of fraud on the record… . Conason v Megan Holding LLC, 2013 NY Slip Op 05956, 1st Dept 9-24-13