It appears you are using Adblock. Please disable Adblock to best experience our website.

Decided and Entered: July 23, 2026

Index No. 160546/17|Appeal No. 5669|Case No. 2025-03022|

Before: Moulton, J.P., Mendez, Rodriguez, Rosado, Hagler, JJ.

Order, Supreme Court, New York County (Lynn R. Kotler, J.), entered on or about April 18, 2025, which denied plaintiffs' motion for summary judgment, unanimously modified, on the law, to grant plaintiffs' motion for summary judgment as to liability with respect to the eight apartments that defendants deregulated after the Court of Appeals decided Roberts v Tishman Speyer Props., L.P. (13 NY3d 270 [2009]), to remand for a trial to determine whether under the totality of the circumstances defendants knowingly engaged in a fraudulent scheme to deregulate an additional 23 apartments before the Court of Appeals decided Roberts, and otherwise affirmed, without costs.

This appeal involves plaintiffs' second motion for summary judgment as to liability with respect to 31 apartments located in a building at 260 Convent Avenue in Manhattan. It is uncontested that the apartments were improperly deregulated during the owner's receipt of J-51 benefits. Of the 31 apartments at issue, defendants deregulated 23 apartments before Roberts v Tishman Speyer Props., L.P. (13 NY3d at 280) established that apartments could not be removed from rent stabilization during the owner's receipt of J-51 tax benefits.^FN1 Defendants deregulated an additional eight apartments after the Court of Appeals decided Roberts.^FN2

Well-settled law provides that the 2024 amendments to the Rent Stabilization Law and Code (L 2024, ch 95) (the 2024 Legislation) require courts to evaluate whether the totality of the circumstances reflects a landlord's knowing engagement in a fraudulent scheme to deregulate apartments, whether before or after Roberts.

Applying this standard, Supreme Court erred in denying plaintiffs' motion for summary judgment with respect to the eight apartments that defendants deregulated after the Court of Appeals decided Roberts. The court correctly denied plaintiffs' motion for summary judgment with respect to the 23 apartments that defendants deregulated before the Roberts decision because plaintiffs failed to eliminate triable issues of fact.

However, the court erred in concluding that the doctrine of law of the case required it to deny plaintiffs' motion with respect to the 23 apartments. Based on this change in law, neither this Court's 2023 order nor our 2024 denial of plaintiffs' motion for renewal pose any impediment to the result here, as neither constitutes law of the case in these circumstances (see e.g. 435 Cent. Park W. Tenant Assn. v Park Front Apts., LLC, 235 AD3d 568, 570 [1st Dept 2025] [where motion to renew raised questions relating to the new rent laws, this Court "decline[d] to address those issues before the motion court has had the opportunity to do so"]). Consequently, we remand for a trial to determine whether defendants knowingly engaged in a fraudulent scheme to deregulate the 23 apartments under the totality of the circumstances.

Discussion

The standard for summary judgment is well established. On a motion for summary judgment, all facts are considered in the light most favorable to the nonmoving party (see Vega v Restani Constr. Corp., 18 NY3d 499, 503 [2012]). The movant has the initial burden to make a prima facie showing of entitlement to judgment as a matter of law (id.). If the movant fails to make the showing, the motion must be denied regardless of the sufficiency of the opposing papers (id.). If the showing is made, the burden shifts to the nonmoving party to establish the existence of a triable issue of fact (id.).

With respect to the eight apartments that defendants deregulated post-Roberts, plaintiffs met their prima facie burden of demonstrating that defendants knowingly engaged in a fraudulent scheme to deregulate the eight apartments under the totality of the circumstances. In opposition, defendants failed to raise a triable issue of fact.

In support of their motion for summary judgment, plaintiffs submitted the New York State Division of Housing and Community Renewal (DHCR) rent history for the building. The rent history and other evidence in the record shows numerous unexplained rent increases. For example, with respect to the eight apartments that the defendants deregulated post-Roberts, the record reflects that apartments 34 and 54 were last registered as rent-stabilized on August 21, 2009; apartments 4, 21, 53, and 72 were last registered as rent-stabilized on July 1, 2010; apartment 23 was last registered as rent-stabilized on August 1, 2011 at a monthly rent of $2,009.57 under a lease expiring on August 31, 2012; and apartment 105 was last registered as rent-stabilized on July 25, 2014 at a monthly rent of $855.45 with an actual monthly rent paid of $156.

Plaintiffs also submitted a copy of a "deregulation rider" for apartment 45 to support their motion. The rider states, in relevant part, "Tenant understands and acknowledges that the apartment is a 'deregulated apartment'. . . . The Apartment is not subject to any form, manner or provision of rent regulation whatsoever." Plaintiffs' counsel, who reviewed defendants' document production, submitted an affirmation stating that prior to June 8, 2016, when defendants finally started providing rent regulated leases, "copies of that rider were provided to each incoming tenant."

As further proof of a fraudulent scheme, plaintiffs submitted Mitchel Rothken's testimonial evidence from two separate actions. Rothken, a manager for the managing agent Beach Lane Management, Inc., was deposed in Jekielek v 260 Partners, LP, which involved another apartment in the subject building (see NY St Cts Elec Filing [NYSCEF] Doc. No. 96, deposition transcript of Mitchell Rothken, Jekielek v 260 Partners, LP, Sup Ct, NY County, index No. 161176/2017). In his testimony, Rothken acknowledged that he was aware of the Roberts decision when it came out; that "everybody in this business is familiar with [Roberts];" and that he believed that Mark Scharfman knew about it (Rothken deposition tr. at 37-38).^FN3 Rothken also acknowledged that he could have registered the apartment in Jekielek immediately after Roberts in 2009 (id. at 44). Yet, he explained that he did not do so because "[w]e were waiting then for transitional rules" (a reference to DHCR's "J-51 Rent Registration Initiative"), which he received in 2016 (id. at 39).^FN4

According to plaintiffs, Rothken's affidavit in Dadisman et al. v D-Day Realty and Mark Scharfman, which involved a separate building managed by Beach Lane, provided additional evidence of defendants' fraudulent scheme (see NYSCEF Doc. No. 70, Affidavit of Mitchell Rothken, Dadisman et al. v D-Day Realty and Mark Scharfman, Sup Ct, NY County, index No. 651450/2015). In his affidavit, Rothken avers that in June and July 2015, the defendants in Dadisman issued refunds to tenants and registered the previously deregulated apartments with DHCR "to rectify any overcharges as to each apartments in issue" (Rothken aff at ¶¶ 3, 6). This evidenced defendants' fraudulent scheme, plaintiffs argued, because defendants did not re-register the apartments here until June 8, 2016, a year after Rothken knew that he had to re-register the apartments in Dadisman. The fraudulent scheme was also apparent, plaintiffs argued, because when defendants finally re-registered the apartments in 2016, they registered apartments 4, 23, 26, 35, 45, 56, 62, 75, 82, 86, and 93 with rents higher than the amounts actually paid by the tenants, contradicting the 2016 DHCR guidance that defendants had long awaited.

In opposition to plaintiffs' prima facie showing, defendants did not rely on or discuss any evidence. Defendants merely annexed documents, including Rothken's affidavit, which they previously submitted in opposition to plaintiffs' first motion for summary judgment.

In paragraphs 3 and 4 of the affidavit, Rothken avers that:

"3. Prior to the commencement of this action, Owner re-registered the units that were improperly removed from rent stabilization based on a methodology that Owner understood was acceptable in 2016. For most units, Owner registered the rent being charged to the tenant in 2016. If the tenant was paying a preferential rent, Owner registered both the preferential rent and the legal rent.

"4. Owner did not use this re-registration method to escape responsibility for the improper deregulations. Owner's use of this method was instead based on Owner's good faith understanding of what was permissible under applicable law. Upon conclusion of this action, Owner will file updated registrations with DHCR to the extent necessary to be consistent with the Court's determination of the apartments' legal rents."

Although the affidavit addresses the owner's "method" of re-registration, it fails to explain why defendants deregulated the eight apartments in the first place, after Roberts established that owners "were not entitled to take advantage of the luxury decontrol provisions of the Rent Stabilization Law (RSL) while simultaneously receiving tax incentive benefits under the City of New York's J-51 program" (Roberts, 13 NY3d at 280).

Rather than relying on evidence to oppose summary judgment, defendants relied entirely on meritless legal arguments, which they reiterate on appeal. A fair reading of Rothken's testimony in Jekielek does notdemonstrate, as defendants argue, that he was not aware of the "significance" of Roberts. To the contrary, Rothken's testimony demonstrates that he understood the significance of Roberts considering his testimony that he recalled that Roberts "reached a conclusion and it basically told all of us who were relying upon an exact opposite position that the DHCR told us was the law."

Rothken's additional explanation that "nobody knew what to do because the Roberts decision was silent" related to "issues yet to be decided, including retroactivity, class certification, the statute of limitations, and other defenses that may be applicable to particular tenants" (Roberts, 13 NY3d at 287). Because the eight apartments were deregulated prospectively and not retroactively, it is inconsequential that this Court applied Roberts retroactively years later (see Gersten v 56 7th Ave. LLC, 88 AD3d 189, 198 [1st Dept 2011], appeal withdrawn 18 NY3d 954 [2012]).

Defendants' appellate argument, premised on general "post-Roberts confusion across New York City as to how Roberts should be applied," fares no better. "[O]ur jurisprudence holds that an owner may not flout the teachings of Roberts" (Montera v KMR Amsterdam LLC, 193 AD3d 102, 105 [1st Dept 2021]). We previously rejected the "reliance on a 'pre-Roberts'framework to justify [the defendants'] actions, given that the wrongdoing here occurred in 2010, after Roberts was decided" (Kreisler v B-U Realty Corp., 164 AD3d 1117, 1118 [1st Dept 2018], lv dismissed 32 NY3d 1090 [2018]). As previously explained, any post-Roberts confusion on how Roberts should be applied retroactively is not implicated with respect to the eight apartments.

Defendants' remaining appellate arguments fall flat. Defendants correctly point out that an apartment's deregulation after Roberts "does not necessarily establish a fraudulent scheme to deregulate an apartment unit" (Gomes v Vermyck, LLC, 238 AD3d 26, 48 [2d Dept 2025] [emphasis omitted]). They also correctly observe that the belated re-registration of an apartment "does not necessarily establish a fraudulent scheme to deregulate an apartment unit" and that even re-registering an apartment at improper rents allowing for higher percentages of rent increases in contradiction of DHCR guidance "does not necessarily establish fraud" (id. at 49). Certainly, a "good faith mistake" does not support a fraudulent scheme to deregulate an apartment (id. at 48).

Nevertheless "there are circumstances where a defendant's willful ignorance of the law may indicate a fraudulent scheme to deregulate an apartment unit," which "may be more likely where the defendant is a sophisticated property owner" (id. at 51; see also Montera, 193 AD3d at 107, citing Grady v Hessert Realty L.P., 178 AD3d 401, 405 [1st Dept 2019] ["(a)ssumptions regarding the regulatory status of an apartment may amount to 'willful ignorance, which constitutes willful conduct, particularly since defendants are sophisticated property managers and owners'"]). That the facts do not "necessarily" establish a fraudulent scheme to deregulate an apartment does not preclude a plaintiff from establishing such a scheme, as plaintiffs have done here.

Nor does the holding in Gomes compel a different result with respect to the eight apartments that defendants deregulated post-Roberts. The plaintiffs in Gomes failed establish a prima facie case under the 2024 Legislation because they failed to eliminate triable issues of fact as to when the defendant, a "small, family-owned entity" had "learned of Roberts and whether its deregulation of the subject apartment units was a result of confusion" (Gomes, 238 AD3d at 47-48). That confusion was evidenced by the owner's affidavit averring that he was "not a lawyer and [he] was unsure how to proceed, so [he] waited for DHCR to provide some guidance, which was not provided until January 2016, when DHCR sent out its J-51 Initiative FAQs" (id. at 48 n 4).

Here, by contrast, plaintiffs eliminated all issues of fact with respect to the eight apartments. Unlike the evidence in Gomes, Rothken's testimony in Jekielek establishes that defendants knew about Roberts when the decision came out in 2009 and understood that post-Roberts, luxury deregulation was impermissible during the owner's receipt of J-51 tax benefits. In short, defendants' meritless legal arguments do not raise issues of fact.

With respect to the remaining 23 apartments, plaintiffs sought summary judgment based on the evidence that the apartments were improperly deregulated prior to the Roberts decision, were not returned to rent-regulation until 2016, four years after Gersten held that Roberts applied retroactively (Gersten, 88 AD3d at 198), and for some apartments, were registered in amounts that exceeded the actual rent being paid, contradicting DHCR 2016 guidance. Plaintiffs present no evidence demonstrating that defendants' initial deregulation of the 23 apartments was fraudulent, apart from relying on defendants' delay in re-registering the apartments and/or re-registering the apartments at improper rents. This evidence alone is insufficient to eliminate triable issues of fact and demonstrate plaintiffs' entitlement to judgment as a matter of law (see e.g. Alekna v 207-217 W. 110 Portfolio Owner LLC, 241 AD3d 414, 416-417 [1st Dept 2025] [denying the plaintiff's motion for summary judgment under the 2024 Legislation where judgment was premised on the evidence that apartments were deregulated before the Roberts decision, were not promptly re-registered and/or were re-registered with improper rents]). Even if plaintiffs carried their prima facie burden, Rothken's testimony in Jekeilek, explaining defendants' delay in re-registering the apartments and his affidavit, stating that that the owner's method in re-registering the apartments was based on a good faith understanding, raises credibility issues for trial here (see Gomes, 238 AD3d at 47).

It is not a defense, as defendants argue, that many owners deregulated apartments in good-faith reliance on DHCR's guidelines before the Court of Appeals decided Roberts. That certain owners acted in good faith does not "preclude the possibility that even prior to Roberts some owners deregulated apartment units while receiving J-51 benefits as part of a fraudulent scheme" (Gomes, 238 AD3d at 46). As we recently observed in Alekna, "fraud in the regulatory context generally means consciously and knowingly charg[ing] . . . improper rent, which is consonant with the intent of the legislature to discourage and penalize fraud against the rent regulatory system itself, as well as against individual tenants" (Alekna, 241 AD3d at 417 [internal citations and quotation marks omitted]). Thus, a trial is warranted to determine whether defendants knowingly engaged in a fraudulent scheme to deregulate the remaining 23 apartments under the totality of the circumstances.

THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: July 23, 2026

Links to or from other sites do not signify endorsement or relationship with them.