OPINION OF THE COURT
Chief Judge Kaye.
We are asked in this appeal to establish the legal regulated rent for an apartment improperly removed from rent stabilization.
Defendant 390 West End Associates is the owner of the Apthorp, a residential apartment building on the Upper West Side of Manhattan. In the early 1990s, the owner hit upon a scheme to remove a number of its apartments from the protect [178] tions of rent regulation by taking advantage of the statutory exemption for nonprimary residences (see Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26-504 [a] [1] [f]). Having included in its leases a provision that the tenants would not use the apartments as primary residences, 390 offered at least six such leases charging rent far in excess of the legal stabilized rent. Several of these apartments were immediately subleased to third parties who would also agree not to primarily reside in the apartment. In nearly every case, however, either the tenant or subtenant—despite representations to the contrary—used the apartment as a primary residence.
In December 1992, defendant Shlomo Baron entered into such a lease. Under its terms, Baron agreed to rent a four-room apartment—for which the previous tenant had paid a stabilized rent of $507.85 per month—for an initial monthly rent of $2,400, with increases beginning after three years. Baron then immediately subleased the apartment to Cynthia and David Thornton for $3,250 per month, increasing to $3,500 after two years and then to $3,750 after three.
Baron was represented in these transactions by his daughter and son-in-law, Zipora and Bernard Weber, themselves rent-stabilized tenants at the Apthorp. Indeed, the Webers acted as agents for at least two other tenants—one of them Baron’s son—who similarly conspired with the owner to circumvent rent stabilization by leasing apartments as nonprimary residences above the regulated rent, so as then to sublease the apartments at even higher rents. In this way, both the owner and the prime tenants earned profits far above what the Rent Stabilization Law allowed.
In an effort to obtain judicial sanction of these arrangements, in 1993 the owner sought and won declaratory judgments that these apartments, as nonprimary residences, were exempt from rent stabilization. In each case the owner, as plaintiff, filed an action against its tenant (named as defendant) seeking declaratory relief. Filing no answer, the purported defendant instead quickly entered into a stipulation with the plaintiff agreeing to the entry of a consent judgment upholding the terms of the parties’ bargain. Although no justiciable controversy actually existed, the parties thus endeavored to use the courts to achieve their joint purpose of freeing the apartments from regulation. Further, having obtained judicial endorsement of the leases, the owner then filed annual rent registration statements setting [179] forth the agreed-upon rents and listing the apartments as temporarily exempt from rent stabilization (see Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26-517 [a]).
A lease provision purporting to exempt an apartment from rent regulation in exchange for an agreement not to use the apartment as a primary residence is against public policy and void (see Draper v Georgia Props., 94 NY2d 809 [1999]; Rent Stabilization Code [9 NYCRR] § 2525.3 [b]; § 2520.13). In 1999, the owner moved to vacate the Baron consent judgment and restore the subject apartment to rent stabilization. Although the parties differ with respect to 390’s motive for bringing this motion—the owner claims that it sought simply to comply with the law, while the subtenant ascribes more nefarious purposes— the judgment was ultimately vacated (see 390 W. End Assoc. v Baron, 274 AD2d 330 [1st Dept 2000]).
Meanwhile, in 1996, the Thorntons commenced the present action against Baron and the Webers, claiming rent overcharges under the Rent Stabilization Law. Although the Thorntons made false written statements to the contrary at the time they signed their sublease, the record reveals that they have used the subject apartment as their primary residence since the commencement of their subtenancy. Supreme Court thus determined that Baron’s tenancy was illusory and that the Thorntons were the actual tenants of the apartment, which should never have been removed from rent stabilization.
In November 2000, the Thorntons amended their complaint to name the owner as a defendant, adding a cause of action to compel the owner to offer them a rent-stabilized lease at $507.85 per month—the regulated rent immediately preceding Baron’s illusory tenancy. In response, the owner conceded that the apartment was subject to rent stabilization, but contended that the legal rent was to be calculated from a base date rent of $2,496— the rent reflected in the annual registration statement filed in 1996, four years before plaintiffs filed their amended complaint. Supreme Court, however, adopted neither view. Rather, the court ruled that the legal rent must be fixed based on the default formula used by the Division of Housing and Community Renewal (DHCR) to set the base date rent in overcharge cases [180] where no reliable rent records are available.1 The Appellate Division split over this question, with the majority endorsing Supreme Court’s methodology and the dissent accepting plaintiffs’ view that the legal regulated rent should be that in effect at the commencement of the illegal Baron lease in 1992 ($507.85). We now affirm.
Only one question is before us: How is the legal regulated rent of the apartment to be established? As the courts below recognized, the Rent Regulation Reform Act of 1997 (RRRA) (L 1997, ch 116) clarified and reinforced the four-year statute of limitations applicable to rent overcharge claims (see Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26-516 [a]) by limiting examination of the rental history of housing accommodations prior to the four-year period preceding the filing of an overcharge complaint (see Matter of Gilman v New York State Div. of Hous. & Community Renewal, 99 NY2d 144, 149 [2002]; L 1997, ch 116, § 33). “Where the amount of rent set forth in the annual rent registration statement filed four years prior to the most recent registration statement is not challenged within four years of its filing, neither such rent nor service of any registration shall be subject to challenge at any time thereafter” (Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26-516 [a]).
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OPINION OF THE COURT
Chief Judge Kaye.
We are asked in this appeal to establish the legal regulated rent for an apartment improperly removed from rent stabilization.
Defendant 390 West End Associates is the owner of the Apthorp, a residential apartment building on the Upper West Side of Manhattan. In the early 1990s, the owner hit upon a scheme to remove a number of its apartments from the protect [178] tions of rent regulation by taking advantage of the statutory exemption for nonprimary residences (see Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26-504 [a] [1] [f]). Having included in its leases a provision that the tenants would not use the apartments as primary residences, 390 offered at least six such leases charging rent far in excess of the legal stabilized rent. Several of these apartments were immediately subleased to third parties who would also agree not to primarily reside in the apartment. In nearly every case, however, either the tenant or subtenant—despite representations to the contrary—used the apartment as a primary residence.
In December 1992, defendant Shlomo Baron entered into such a lease. Under its terms, Baron agreed to rent a four-room apartment—for which the previous tenant had paid a stabilized rent of $507.85 per month—for an initial monthly rent of $2,400, with increases beginning after three years. Baron then immediately subleased the apartment to Cynthia and David Thornton for $3,250 per month, increasing to $3,500 after two years and then to $3,750 after three.
Baron was represented in these transactions by his daughter and son-in-law, Zipora and Bernard Weber, themselves rent-stabilized tenants at the Apthorp. Indeed, the Webers acted as agents for at least two other tenants—one of them Baron’s son—who similarly conspired with the owner to circumvent rent stabilization by leasing apartments as nonprimary residences above the regulated rent, so as then to sublease the apartments at even higher rents. In this way, both the owner and the prime tenants earned profits far above what the Rent Stabilization Law allowed.
In an effort to obtain judicial sanction of these arrangements, in 1993 the owner sought and won declaratory judgments that these apartments, as nonprimary residences, were exempt from rent stabilization. In each case the owner, as plaintiff, filed an action against its tenant (named as defendant) seeking declaratory relief. Filing no answer, the purported defendant instead quickly entered into a stipulation with the plaintiff agreeing to the entry of a consent judgment upholding the terms of the parties’ bargain. Although no justiciable controversy actually existed, the parties thus endeavored to use the courts to achieve their joint purpose of freeing the apartments from regulation. Further, having obtained judicial endorsement of the leases, the owner then filed annual rent registration statements setting [179] forth the agreed-upon rents and listing the apartments as temporarily exempt from rent stabilization (see Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26-517 [a]).
A lease provision purporting to exempt an apartment from rent regulation in exchange for an agreement not to use the apartment as a primary residence is against public policy and void (see Draper v Georgia Props., 94 NY2d 809 [1999]; Rent Stabilization Code [9 NYCRR] § 2525.3 [b]; § 2520.13). In 1999, the owner moved to vacate the Baron consent judgment and restore the subject apartment to rent stabilization. Although the parties differ with respect to 390’s motive for bringing this motion—the owner claims that it sought simply to comply with the law, while the subtenant ascribes more nefarious purposes— the judgment was ultimately vacated (see 390 W. End Assoc. v Baron, 274 AD2d 330 [1st Dept 2000]).
Meanwhile, in 1996, the Thorntons commenced the present action against Baron and the Webers, claiming rent overcharges under the Rent Stabilization Law. Although the Thorntons made false written statements to the contrary at the time they signed their sublease, the record reveals that they have used the subject apartment as their primary residence since the commencement of their subtenancy. Supreme Court thus determined that Baron’s tenancy was illusory and that the Thorntons were the actual tenants of the apartment, which should never have been removed from rent stabilization.
In November 2000, the Thorntons amended their complaint to name the owner as a defendant, adding a cause of action to compel the owner to offer them a rent-stabilized lease at $507.85 per month—the regulated rent immediately preceding Baron’s illusory tenancy. In response, the owner conceded that the apartment was subject to rent stabilization, but contended that the legal rent was to be calculated from a base date rent of $2,496— the rent reflected in the annual registration statement filed in 1996, four years before plaintiffs filed their amended complaint. Supreme Court, however, adopted neither view. Rather, the court ruled that the legal rent must be fixed based on the default formula used by the Division of Housing and Community Renewal (DHCR) to set the base date rent in overcharge cases [180] where no reliable rent records are available.1 The Appellate Division split over this question, with the majority endorsing Supreme Court’s methodology and the dissent accepting plaintiffs’ view that the legal regulated rent should be that in effect at the commencement of the illegal Baron lease in 1992 ($507.85). We now affirm.
Only one question is before us: How is the legal regulated rent of the apartment to be established? As the courts below recognized, the Rent Regulation Reform Act of 1997 (RRRA) (L 1997, ch 116) clarified and reinforced the four-year statute of limitations applicable to rent overcharge claims (see Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26-516 [a]) by limiting examination of the rental history of housing accommodations prior to the four-year period preceding the filing of an overcharge complaint (see Matter of Gilman v New York State Div. of Hous. & Community Renewal, 99 NY2d 144, 149 [2002]; L 1997, ch 116, § 33). “Where the amount of rent set forth in the annual rent registration statement filed four years prior to the most recent registration statement is not challenged within four years of its filing, neither such rent nor service of any registration shall be subject to challenge at any time thereafter” (Rent Stabilization Law of 1969 [Administrative Code of City of NY] § 26-516 [a]).
Here, plaintiffs filed their amended complaint—which named 390 as a defendant for the first time—in November 2000.2 This is not a situation where an order issued prior to the limitations period imposed a continuing obligation on a landlord to reduce rent, such that the statute of limitations would be no defense to an action based on a breach of that duty occurring within the limitations period. Thus, the apartment’s rental history before November 1996 may not be examined, and the $507.85 rent in effect in 1992 is of no relevance.3 That being so, the owner contends that the legal regulated rent should be established by [181] simple reference to the rental history as of November 1996, by which time an annual registration statement had been filed listing the $2,496 rent charged to Baron.4 We disagree.
Reflecting an attempt to circumvent the Rent Stabilization Law in violation of the public policy of New York, the Baron lease was void at its inception. Further, because the rent it purported to establish was therefore illegal, the 1996 rent registration statement listing this illegal rent was also a nullity. Under those circumstances, we agree with Supreme Court and the Appellate Division majority that the default formula used by DHCR to set the rent where no reliable rent records are available was the appropriate vehicle for fixing the base date rent here.5
The dissent would ignore defendants’ fraudulent conduct and fix the rent at an amount likely soon to result in the apartment’s permanent removal from rent stabilization, thereby rewarding the owner’s wrongdoing. Under the dissent’s rule, a landlord whose fraud remains undetected for four years—however willful or egregious the violation—would, simply by virtue of having filed a registration statement, transform an illegal rent into a lawful assessment that would form the basis for all future rent increases. Indeed, an unscrupulous landlord in collusion with a tenant could register a wholly fictitious, exorbitant rent and, as long as the fraud is not discovered for four years, render that rent unchallengeable. That surely was not the intention of the Legislature when it enacted the RRRA. Its purpose was to alleviate the burden on honest landlords to retain rent records indefinitely (see Gilman, 99 NY2d at 149), not to immunize dishonest ones from compliance with the law.
Although the subtenants who brought the overcharge complaint themselves had unclean hands, the principle we establish here will apply equally to innocent renters looking to succeed illusory tenancies. The dissent’s contrary rule would bring about the rapid removal of many apartments from rent [182] stabilization—at least six such illusory leases have come to light in the Apthorp alone—undermining the statute’s very purpose of preserving a stock of affordable housing. We cannot agree that the Legislature intended such a result.
We reach this conclusion not “so that one wrongdoer may benefit at the expense of another” (dissenting op at 183), but so that no wrongdoer may benefit at the expense of the public.
Accordingly, the order of the Appellate Division should be affirmed, without costs, and the certified question answered in the affirmative.