Take Four Steps to Calculate Interest for Rent Overcharge Refunds

You probably know that if you promptly refund an overcharge to a tenant who has filed a rent overcharge complaint against you, the Division of Housing and Community Renewal (DHCR) shouldn’t order you to pay triple damages for the amount of the overcharge. There are numerous DHCR decision in which the DHCR denied or revoked triple damages tenants sought for rent overcharges because owners gave tenants rent credits or refunds, plus interest, while the tenants’ complaints were pending. But to avoid that penalty, your refund must also include interest on the overcharge amount. The interest is set by statute, and it is currently at 9 percent per year [NYCPLR §5004].

Calculating the exact amount of interest to refund to the tenant can get confusing. That’s because the 9 percent interest is based on a per-year amount, while most overcharge awards don’t cover exactly one year.

Four Steps to Take

Take the following steps to calculate the interest amount:

Step #1: Start with the first month that you collected a rent overcharge. Multiply the rent overcharge amount you collected that month by .0075 (this is the 9 percent annual interest rate, divided by 12).

Step #2: Multiply the number you get in Step #1 by the number of months from the date you first collected the overcharge for that month until the date you refunded the overcharge amount. This number is the interest you must pay for that month’s overcharge.

Step #3: For each subsequent month during which you collected a rent overcharge, repeat the same method of calculation set out in Steps #1 and #2. That is, multiply the rent overcharge amount you collected in the particular month by .0075 and then multiply that result by the number of months from the date you first collected the overcharge for that month until the date you refunded the overcharge amount.

Step #4: Add up the interest amounts you calculated using Steps #1, #2, and #3 for each month you collected an overcharge. This total is the interest amount you must refund to the tenant.

Example: On Jan. 21, 2017, you get a rent overcharge complaint that one of your tenants filed with the DHCR. After reviewing the apartment’s rent history, you discover that, starting on Sept. 1, 2015, you collected a rent overcharge of $54 a month and continued to collect this rent overcharge for the next 12 months. On Sept. 1, 2016, you renewed the tenant’s lease and the rent overcharge you collected from the tenant increased to $60 per month. You continued collecting this monthly $60 rent overcharge for five months. On Feb. 1, 2017, you reduced the tenant’s rent to the legal regulated rent, stopped collecting any rent overcharge, and returned the entire overcharge amount, plus interest, to the tenant.

Following the above steps, here’s how you would figure out the amount of interest you must give the tenant in addition to your refund of the actual overcharge amount:

Step #1: Start with September 2015 (the first month you collected a rent overcharge). Multiply the rent overcharge amount for that month ($54) by .0075. You get $0.405.

Step #2: Multiply $0.405 by 17, which is the number of months from the date you first collected the overcharge for that month (Sept. 1, 2015) until the date that you refunded the overcharge amount (Feb. 1., 2017). You get $6.89 (rounded up from $6.885).

Step #3: For each subsequent month during which you collected a rent overcharge, repeat the same method of calculation set out in Steps #1 and #2:

Oct. 2015:            $54 × .0075 = $0.405;

                                $0.405 × 16 = $6.48.

Nov. 2015:           $54 × .0075 = $0.405;

                                $0.405 × 15 = $6.08 (rounded up from $6.075).

Dec. 2015:           $54 × .0075 = $0.405;

                                $0.405 × 14 = $5.67.

Jan. 2016:            $54 × .0075 = $0.405;

                                $0.405 × 13 = $5.27 (rounded up from $5.265).

Feb. 2016:           $54 × .0075 = $0.405;

                                $0.405 × 12 =$4.86.

March 2016:        $54 × .0075 = $0.405;

                                $0.405 × 11 = $4.46 (rounded up from $4.455).

April 2016:          $54 × .0075 = $0.405;

                                $0.405 × 10 = $4.05.

May 2016:            $54 × .0075 = $0.405;

                                $0.405 × 9 = $3.65 (rounded up from $3.645).

June 2016:           $54 × .0075 = $0.405;

                                $0.405 × 8 = $3.24.

July 2016:            $54 × .0075 = $0.405;

                                $0.405 × 7 = $2.84 (rounded up from $2.835).

Aug. 2016:           $54 × .0075 = $0.405;

                                $0.405 × 6 = $2.43.

Sept. 2016:          $60 × .0075 = $0.45;

                                $0.45 × 5 = $2.25.

Oct. 2016:            $60 × .0075 = $0.45;

                                $0.45 × 4 = $1.80.

Nov. 2016:           $60 × .0075 = $0.45;

                                $0.45 × 3 = $1.35.

Dec. 2016:           $60 × .0075 = $0.45;

                                $0.45 × 2 = $ .90.

Jan. 2017:            $60 × .0075 = $0.45

                                $0.45 × 1 = $0.45.

Step #4: Add up the interest amounts you calculated for each month you collected a rent overcharge. You get a total of $62.67.