An illusory tenancy occurs when the lease tenant of a rent stabilized apartment does not actually live in the apartment, but has placed another tenant/subtenant there in order to somehow circumvent the requirements of the rent stabilization code. For example, the lease tenant might have illegally taken a payoff from the real tenant in exchange for the apartment, sort of like a ticket scalper. Or perhaps the lease tenant is a relative of the landlord, and is allowing the landlord to charge an illegally high rent so that both can profit at the expense of the real tenant.

The victim of such a scam may file a "Tenant's Complaint of Owner's Failure to Renew Lease and/or Failure to Furnish a Copy of a Signed Lease" (DHCR Form RA -90) with DHCR. It is possible that DHCR may deny the lease tenant the right to a renewal lease and require the owner of the building to recognize the subtenant as the actual tenant.

Note, however, there may be a potential for this situation to backfire. If the landlord is not in collusion with the scam, the landlord may declare the occupant of the apartment an illegal subletter, and seek his or her eviction. Therefore, it is very important for the victim of an illusory tenancy to seek legal advice before doing anything.

The lease tenant can be socked with an overcharge complaint from the subtenant, so this is a very dangerous game. If the subtenant can prove that the building owner received part or all of the overcharge, the owner will also be responsible for refunding the rent overcharge.