The DHCR recently adopted 27 amendments to the Rent Stabilization Code despite strenuous opposition from both owner and tenant representatives. Although the amendments are effective immediately, it is expected that DHCR will postpone implementation of many provisions until DHCR has a chance to prepare and promulgate new forms and instructions.
“The scope of changes will impact owners in a variety of ways,” said Blaine Z. Schwadel, Rosenberg & Estis, P.C. “We urge caution during this period of transition as there appears to be conflict within the new rules, among other things that they may require paperwork retention dating further back than requirements under previous regulations.”
Rosenberg & Estis, P.C., has prepared a brief summary of select amendments that are expected to be most significant on a daily basis.
Tenant Protection Unit: The TPU is formally empowered “to investigate and prosecute violations” of the rent laws on its own initiative. This means that even in the case where no tenant has filed a complaint, TPU can demand documents and information to investigate compliance with the RSL.
Harassment: The definition of harassment is expanded to include filing false documents and/or making false statements that interfere with, or are intended to interfere with, a tenant’s quiet enjoyment and use and occupancy of his apartment, or are intended to cause the tenant to vacate the apartment or not exercise any rights afforded him. The TPU can use this new definition in its investigation and prosecution.
Amending Registrations: Rent registrations may only be amended after an administrative proceeding establishes the propriety of such amendment. Owners are required to commence such proceedings when they file an amended registration.
Missing Registrations: Failure to register now results in a complete rent freeze, including a bar on collection of any MCI rent increase and/or statutory vacancy allowances.
Individual Apartment Improvements:
a. Lease riders must detail the calculation of rent increases, including IAI increases.
b. Upon a new tenant’s request made within 60 days of execution of the vacancy lease, Owners are required to provide the tenant with documentation to support the new rent and any IAI increase.
c. The failure to provide the lease rider and/or the IAI documentation can result in rent overcharge proceedings and other penalties.
Major Capital Improvements:
a. MCI rent increases will not be allowed for conversions from master metering to individual metering.
b. MCI applications will be dismissed if the building has one or more immediately hazardous violations of record when the MCI application is filed. The application can be re-filed within 60 days.
First Deregulated Tenant:
a. Owners are required to give the first deregulated tenant a written notice certified by the owner, stating the basis for the deregulation, the rent computation, and the last regulated rent, along with a statement advising the tenant that the last legal rent can be verified by contacting DHCR.
b. The owner is also required to provide the first deregulated tenant with a copy of the exit rent registration, which shall include the last regulated rent.
Statute of Limitations: The four-year overcharge look-back period may be pierced in many situations, such as where there is an allegation of fraud, an un-restored rent reduction order, an apartment that was vacant or exempt on the base date, or a preferential rent that goes back beyond the base date.
Preferential Rents: Legal rents and preferential rents must both be set forth in every lease pursuant to which a preferential rent is charged. Owners must maintain and provide to DHCR upon request the rent history of the apartment from immediately prior to the first preferential rent to present.
Default Formula: Where the rent on the base date cannot be determined or was the result of fraud, or a full rent history from the base date is not provided, the rent will be established at the lowest of:
a. the lowest rent for a comparable unit in the building in effect on the date the complaining tenant first occupied the apartment, or
b. the complaining tenant’s first rent reduced by the applicable vacancy and longevity allowances, or
c. the last registered rent of the prior tenant if within the last four years, or
d. if none of the first three options is available or appropriate, DHCR will compute the rent based on data compiled by DHCR.
Deemed Leases: Tenants who do not execute renewal leases may not automatically be charged a guideline rent increase based upon a deemed lease except in very specific circumstances. Instead, they will be treated as holdover tenants and the owner may commence a proceeding to recover possession of the apartment. Therefore, if an owner charges an increase for a deemed lease it could be found to be a rent overcharge.
Decrease in Services:
a. Tenants are no longer required to first provide notice of the alleged defective condition to the owner before filing a complaint with DHCR.
b. Service decrease orders will preclude future MCI and vacancy bonus increases until they are restored.
c. An owner’s time to respond to a service decrease complaint is drastically reduced in many situations.
Representatives of Rosenberg & Estis, P.C. will continue to monitor changes to the code as they affect the properties and businesses of owners, and members of the firm are available to discuss the impact of recent changes.