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Tenants Not Compelled to Bring a Plenary Action to Enforce a Fair Market Rent Appeal Award Because They Withheld Rent Until the Principal Balance of the Award Was Fully Credited to Them—Therefore Tenants Were Not Entitled to Prejudgment Interest Pursuant to CPLR 5001 (a)

The Second Department determined tenants who had been awarded a rent refund in a fair market rent appeal (FMRA) were not entitled to pre-judgment interest on the award.  The tenants had exercised their right under the Rent Stabilization Code to withhold rent until the principal balance of the FMRA award was fully credited.  Therefore, the tenants did not need to start a plenary action for prejudgment interest pursuant to CPLR 5001 (a) because there was no principal balance owing them:

“A tenant compelled to bring a plenary action to enforce a fair market rent appeal order is entitled to . . . prejudgment interest under CPLR 5001(a) computed from the date of the Rent Administrator’s order … ” … . However, where a tenant is not otherwise compelled to commence an action to enforce a fair market rent appeal award, the tenant is not entitled to recover interest on the award … . Prior to the commencement of this action, the plaintiffs exercised their right under the relevant provision of the Rent Stabilization Code (see 9 NYCRR 2522.3[d][1]) to withhold payment of rent until the principal balance of the FMRA award was fully credited to their account. The FMRA award was fully credited to the plaintiffs’ account by June 2007, after which the plaintiffs resumed paying rent. Thus, contrary to the plaintiffs’ allegations, there was no principal balance of the FMRA award due and owing to them. Under these circumstances, the plaintiffs were not compelled to commence this action to enforce their FMRA award. Thus, the plaintiffs are not entitled to the relief they sought in the complaint, including the alleged principal balance, prejudgment interest, or an award of an attorney’s fee. Eisner v M & E Rubin LLC, 2014 NY Slip Op 03477, 2nd Dept 5-14-1

 

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