PARKER v. 66 ST NICHOLAS PLACE LLC (2026)

Order, Supreme Court, New York County (Paul A. Goetz, J.), entered on or about April 9, 2025, which, to the extent appealed from as limited by the briefs, granted defendant 66 St. Nicholas Place, LLC's motion pursuant to CPLR 1021 to substitute the 66–74 St. Nicholas Place Owner LLC as defendant in the action, unanimously modified, on the law, to grant the motion to the extent of directing joinder of 66–74 St. Nicholas Place Owner LLC as a defendant in the action, to reinstate the complaint against defendant 66 St. Nicholas Place, LLC as a party defendant, and otherwise affirmed, without costs.

The motion court should have granted joinder of the new owner as a party defendant rather than substitute the new owner for the former owner (see CPLR 1018).  The motion court correctly determined that the new owner was a proper party because in rent stabilization actions such as this, absent specific, statutorily-prescribed circumstances (generally, purchase at a judicial sale), the “current owner shall be responsible for all overcharge penalties, including penalties based upon overcharges collected by any prior owner” (Rent Stabilization Code [9 NYCRR] § 2526.1[f][2][i];  see Matter of Gaines v New York State Div. of Hous. & Community Renewal, 90 N.Y.2d 545, 549 [1997] ).  Carryover liability, therefore, “is the general rule, not the exception” (Le Bihan v. 27 Wash. Sq. N. Owner LLC, 205 AD3d 616, 617 [1st Dept 2022] ).

Substitution of a new owner should be denied where, as here, it would be “prejudicial to plaintiff, who seeks treble damages for defendant's alleged willful rent overcharges” (Charlton v. 92 Pinehurst Ave. LLC, 242 AD3d 504, 504 [1st Dept 2025] ).  Here, granting substitution rather than joinder would result in tenants having to seek discovery from the former owner, as a nonparty, with respect to the central question in the case;  i.e., whether the prior owner knowingly engaged in fraudulent conduct under the rent laws (id.).  Joinder rather than substitution was also proper given that the purpose of carryover liability is to prevent future owners from escaping the consequences of their predecessors' actions and not to impose obstacles to tenants in active litigation (see e.g. Matter of Gaines v New York State Div. of Hous. and Community Renewal, 90 N.Y.2d 545, 549 [1997] ).