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Division of Housing & Community Renewal

Governor David A. Paterson today unveiled a package of proposed amendments to New York's rent laws that would help to restore stability and certainty to a chaotic housing market. The amendments would modify and extend the State's rent laws - due to expire in 2011 - for eight years, reduce the rate at which apartments become deregulated, provide additional protections for tenants, and address a recent Court of Appeals decision that left many questions about the status of thousands of deregulated apartments.

"This series of rent regulation proposals seeks to create a rational framework for resolving issues surrounding rent regulation, while protecting both tenants and owners of New York's regulated buildings," Governor Paterson said. "During these difficult times it is essential that we do all we can to preserve rent regulation while restoring certainty to the rent regulation system and making it more transparent, manageable and equitable."

The Governor's proposed legislation is in part a response to last year's decision by the Court of Appeals (Roberts v. Tishman Speyer) which determined that approximately 40,000 rent regulated apartments in more than 4,000 buildings receiving J-51 tax benefits from New York City had been improperly deregulated. As a result of this decision, the owners and tenants of these units are uncertain about their legal rent. Without certainty, owners, lenders and municipalities cannot determine the value of the building, which impacts owners' efforts to sell, finance or collateralize properties, as well as adding difficulty for municipalities to accurately assess the buildings. This legislation would remove that uncertainty and allow the State to quickly and fairly determine the legal rents for those 40,000 units.

The proposed legislation would also modify and extend the State's rent laws, which are scheduled to expire next year. The amendments make the system more equitable and more transparent for both tenants and owners, would help the State preserve affordable housing stock and would allow the Division of Housing and Community Renewal (DHCR) to better manage the regulatory system.

DHCR Commissioner Brian Lawlor said: "The legislation Governor Paterson is proposing will protect all rent regulated tenants in New York State for an additional eight years, provide incentives to owners to quickly provide refunds and rent reductions to tenants in apartments that were inappropriately decontrolled and also slow the deregulation of rent stabilized apartments. Owners who do not comply with this law will face substantial penalties for overcharges including treble damages and interest."

Details of the legislation include:

Increasing the High Rent Vacancy and High Rent/High Income Threshold: Under current law, an apartment may be deregulated when a tenant's rent exceeds $2,000 a month and the tenant's income for the past two consecutive calendar years exceeds $175,000, or when an apartment with a legal rent of $2,000 or more becomes vacant. The $2,000 figure was established in 1993 and has never been adjusted in the intervening 17 years. Under the Governor's proposed legislation, the threshold rent amount would increase to $3,000 per month, to be adjusted annually by the rent guideline percentage increase for a one year lease. This amount represents an adjustment of the original threshold to reflect the change in the cost of living. This legislation would reduce the rate at which apartments become deregulated.

Roberts Decision: In order to address the uncertainty for owners and tenants arising as a result of the Roberts v. Tischman Speyer decision, and to provide a simple mechanism for handling a large number of potential rent overcharge complaints, the proposed legislation would require owners to give tenants notice of their new status within 90 days of the statute's enactment, and pay any overcharge within six months of that date. The payment would be the difference between the rent actually charged and the rent that would have been charged if the apartment had remained regulated, for the four years prior to the Court's October 22, 2009 decision. Tenants who do not agree to this amount and choose to challenge the owner would be required to file a complaint with DHCR and be bound by a four-year statute of limitations from the date the complaint was filed. If an owner made the refund offer in good faith then no treble damages or interest on the overcharge would be awarded. Penalties are generally required in circumstances where an owner is found to have collected a rent in excess of the legal rent. Going forward, owners could apply for deregulation under the same circumstances that they previously could prior to the Roberts decision, but at the higher rent threshold specified in the new legislation.

Individual Apartment Improvements: Tenants may be charged an increased rent when individual apartment improvements (IAIs) are made by an owner. If the tenant is in occupancy, the tenant must consent to the improvements. However, if the apartment is vacant, a new tenant enters not necessarily knowing what improvements, if any, were made, making it difficult for the tenant to understand the basis for the increased rent. The proposed legislation would require an owner to notify the tenant that improvements had been made and to describe the improvements. Failure to provide such notice would result in the apartment remaining rent regulated at the last legal regulated rent until such notice is given. This section of the legislation would enable a tenant to challenge the IAI if the tenant believes the rent increase is not warranted.

Preferential Rent: An owner may, under present law, rent an apartment at a "preferential rent" - a rent below the legal rent. In such a situation a tenant may be hesitant to challenge the higher legal rent for fear of losing the perceived benefit of the preferential rent, and would be bound by the unchallenged legal rent when the rent is raised. Under this legislation, DHCR would still look back at the legal rent in effect four years prior to the filing of a complaint, but if at that time a preferential rent was in effect, the look-back period for calculating the legal rent would be extended back to the last legal rent in effect prior to a preferential rent. This proposal would effectively extend the period to review the rent history in order to correctly determine the legal rent for the subsequent tenant.

Exit Notice: Often, a tenant taking up residency after an apartment has purportedly been deregulated is unaware of the circumstances surrounding the deregulation and thus cannot determine whether to challenge it. Under this proposal, the owner would be required to provide written notice to DHCR and to the first tenant assuming residency after deregulation that the apartment has been deregulated and the basis for the deregulation. That would allow the tenant to determine if the deregulation is appropriate. Failure to provide such notice would result in the apartment remaining rent regulated at the last legal regulated rent until such notice is given.

Four-Year Limitations period for Rent Overcharges: If a tenant feels that he or she was overcharged in rent, the law currently permits the review of the rental history for the four years prior to when a complaint is made for purposes of determining whether there has been an overcharge. This proposal would address certain exceptions to the four-year look-back period that were created by judicial decision, and would clarify that there are only six specified exceptions to the four-year review period. This proposal would reduce inconsistent judicial decisions.

Rent Regulation Extended: The laws covering rent regulation expire on June 15, 2011. The Governor's proposed legislation would extend the laws for eight additional years, until June 15, 2019.

There are approximately one million apartments covered by rent regulation in New York City and other municipalities in Nassau, Westchester, Rockland, Albany, Rensselaer, Rochester, Schenectady, and Erie Counties. The 2008 Housing Vacancy Survey reported that more than 20 percent of the rent regulated households have incomes that are at or below the poverty level. The average rent regulated household expends 40 percent of its income on rent. More than 15 percent of rent regulated households are receiving some form of public assistance. Over the last three years, DHCR has issued decisions in more than 70,000 cases, including approximately 2,100 orders providing tenants with overcharge awards totaling $9.6 million.

Last Updated: 05/26/10