ROHLFING v. 75 ST NICHOLAS PLACE LLC (2026)

Order, Supreme Court, New York County (Paul A. Goetz, J.), entered April 8, 2025, which, to the extent appealed from as limited by the briefs, granted the CPLR 1021 motion of defendant 75 St. Nicholas Place, LLC (75 St. Nicholas Place) to substitute 75 St. Nicholas Place Owner LLC (Owner), as the defendant in the action, unanimously modified, on the law and in the exercise of discretion, to grant the motion only to the extent of joining Owner as a defendant in the action, and reinstating the complaint against 75 St. Nicholas Place as a party defendant, and otherwise affirmed, without costs.

Supreme Court should have granted joinder of Owner, the new owner of the building in which plaintiffs are the tenants, as a party defendant rather than substituting it for 75 St. Nicholas Place, the former owner of the building (see CPLR 1018).  The court correctly determined that Owner was a proper party because in rent stabilization actions, absent specific, statutorily prescribed circumstances (generally, a purchase at a judicial sale), the current owner is responsible “for all overcharge penalties, including penalties based upon overcharges collected by any prior owner” (Rent Stabilization Code § 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] ).  As none of the exceptions exist here, carryover liability applies (see Le Bihan v 27 Washington 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 plaintiffs, who seek treble damages for 75 St. Nicholas Place's alleged willful rent overcharges (see Charlton v. 92 Pinehurst Ave. LLC, 242 AD3d 504, 504 [1st Dept 2025] ).  Granting substitution rather than joinder would prejudice plaintiff tenants who would have to pursue 75 St. Nicholas Place as a nonparty for discovery as to the central question in the case — that is, whether 75 St. Nicholas Place knowingly engaged in fraudulent conduct under the rent laws (id.).  Joinder rather than substitution was also the proper result 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, 90 N.Y.2d at 549).