The new laws that became effective on June 14, 2019 represent a tectonic paradigm shift, swinging the pendulum towards greater tenant protections while severely limiting–or in some instances abolishing benefits enjoyed by landlords of rent stabilized apartments for decades, including: vacancy bonuses, MCI increases, individual apartment improvements increases, high rent and high income vacancy decontrol to name a few. Kucker & Bruh, LLP is ready to assist our clients to navigate through the omnibus changes.
The state authorized 20% vacancy allowance has been repealed together with the longevity increases previously permitted. Additionally, the Rent Guidelines Board is now prohibited from promulgating any vacancy allowances or longevity increases as well as any low rent bonuses for rents below a certain rent level. The additional vacancy allowance for a second succession has also been eliminated.
Luxury Decontrol has been repealed. The repeal encompasses both “high rent” and “high income” decontrols. The law does not re-regulate any apartments previously decontrolled. It is likely that all pending Luxury Decontrol applications at the DHCR will be dismissed. Issues concerning appeals of granted applications were not addressed.
The law deems the preferential rent paid by a tenant to now become the legal rent upon which future renewal increases must be based. If, however, the tenant vacates the legal regulated rent may be charged to a vacancy tenant.
The law expands the statute of limitations to six (6) years from the present four (4). However, a longer lookback period will be allowed to determine a “reliable” registered rent upon which to base the calculations of the current rent. The DHCR or a court may use all the available rental history to make its determinations. The law now specifically gives the court concurrent jurisdiction with the DHCR to determine rent overcharge.
The law expands a landlord’s exposure to treble damages to the full six (6) year period of overcharge. This is a dramatic expansion from the previous limit of two (2) years of treble damages contained in the prior law. Additionally, the prior safe harbor procedure of refunding the overcharge to the tenant prior to the time the landlord’s answer to the complaint was due has been eliminated and cannot be considered as a defense to the assessment of treble damages. The law now also mandates that reasonable attorneys fees “shall” be assessed in a rent overcharge proceeding, changing the language from “may” in the prior law.
Rent control tenants rent can now only be raised either by the lesser of 7.5% or the average of the one (1) year Rent Guideline Board increases. By way of example, that would currently equal 0.75 of 1 percent. Fuel adjustment surcharges have now been eliminated and must be removed from the rent. Upon vacancy of a rent controlled tenant a landlord may still charge the next stabilized tenant a fair market rental subject to the tenant’s right to file a fair market rent appeal within 90 days of service upon the tenant of an Initial Registration Form. If no Initial Registration Form is served the new tenant now has (6) years to file a fair market rent appeal.
A landlord may only seek one (1) unit for owner occupancy by him or herself or for their immediate family as a primary residence. The landlord must now demonstrate “immediate and compelling” necessity instead of the less restrictive “good faith” standard employed previously. Additionally, a landlord is barred from bringing such a proceeding if the tenant is over 62 years of age, is disabled or has occupied the apartment for 15 years. A new cause of action for wrongful eviction, declaratory and injunctive relief has been created against a landlord who makes a fraudulent statement concerning the proposed use of an apartment.
Not-for Profit Landlords
Where apartments are rented by a not-for-profit landlord for the reason of providing those apartments to persons at risk of being homeless, those affiliated subtenants shall be deemed to be tenants.
Major Capital Improvement (MCI) Increases
The new law:
Limits approvals to work for essential building functions and other improvements (e.g., heat, plumbing, windows, roofing); excluding maintenance;
Limits spending to a DHCR schedule of reasonable costs for improvements to be promulgated;
Prohibits approval where the owner has hazardous violations on the building;
Adjust the annual cap for MCI rent increases approved within the prior seven years and new MCIs to 2% per year collectability effective on the commencement date of the first renewal commencing after 6/14/19;
Makes MCI rent increases prospective only and repeals the previous provisions allowing retroactivity of payment;
Requires DHCR to audit and inspect work on a minimum of 25% of approved MCIs annually;
Amortizes MCI increases over a 12 year period for buildings of 35 units or less and 12.5 years for other buildings;
Makes all MCI increases temporary and eliminates the increase after 30 years;
Makes buildings with less than 35% regulated tenants ineligible for MCI increases.
Individual Apartment Increases
The new law limits IAI increases:
Three (3) improvements in any 15 year time period but only up to $15,000 in compensable costs. This commences with improvements performed after 6/14/19
Amortizes compensable cost over 14 years for smaller buildings of 35 units or less (1/168 of the cost) and 15 years for all other larger buildings (1/180 of the cost)
Work must be performed by licensed contractors without a common ownership between the landlord and the contractor
These surcharges will expire in 30 years, must be removed from the rent
Electronic filing for IAI’s where tenants are in occupancy commences 6/14/20
This applies to both regulated and unregulated tenancies. A provision was added to allow a warrant of habitability complaint or a complaint of duty of repair under the Multiple Dwelling Law as a basis to contest the commencement of any proceeding including one for the non-payment of rent, as being retaliatory in nature. A legal fees provision for successful action by the tenant was added.
Notice of Rent Increase Or Non-Renewal To Unregulated Residential Apartments
Written notice must be given to all unregulated tenants where the landlord intends to either offer to renew the tenancy at a rental in excess of 5% of the prior rent or if the landlord intends not to renew the tenancy. The failure to give such notice will allow the tenant to remain in legal occupancy until said notice has been given in the time provided for in the statue has expired. The notice provisions are as follows:
Where the tenant has occupied the apartment for less than one year and does not have at least a one (1) year lease, 30 days;
Where the tenant has occupied the apartment for more than one (1) year but less than two (2) years but has a lease of at least one (1) year but less than two (2) years, 60 days;
If the tenant has occupied the unit for more than two (2) years or has a lease of at least two (2) years, 90 days.
Duty To Mitigate Damages
The law has added a new mitigation of damage requirement for all residential tenancies whether regulated or unregulated. The law provides that the landlord take reasonable and customary actions to re-rent at fair market value or at the rate agreed to during the lease which is being breached, whichever is lower. Once re-rental has occurred the breaching tenant’s lease will be deemed terminated.
A landlord may not refuse to lease to a tenant based on prior landlord tenant actions. If a landlord uses a tenant screening service or inspects court records and thereafter refused to lease to a tenant, a rebuttable presumption will arise that the landlord has violated this statute.
Month to Month Tenancies
Both residential and commercial tenants have been granted additional notice provisions by the new law. The provisions are identical to those contained in Notice of Rent Increase or Non-Renewal section above.
Late fees in residential units both regulated and unregulated are limited to $50.00 or 5% of the rent whichever is less. You must provide at least 5 days grace before you can assess a late fee.
Credit Check Fees
The cost to the tenant is limited to $20.00 or the actual cost of the credit check, whichever is less.
Non-Payment of Rent
The law implements a procedure whereby the landlord or its agent authorized to collect rent, must give a 5 day notice to the tenant by certified mail that the tenant’s rent has not been received. The law does not appear to allow the landlord’s counsel to serve such a notice. While a rent demand can be issued immediately after the mailing of this notice, a landlord’s failure to serve the 5 day notice is an affirmative defense to any subsequent non-payment proceeding. This section applies to all residential tenants both regulated and unregulated.
The new law also mandates that:
The tenant receives a fourteen (14) day demand for rent. This applies to all tenancies whether residential or commercial;
Oral rent demands are prohibited;
The rent demand and any subsequent non-payment summary judgment be for only rent and no other additional charges. This applies to both regulated and unregulated tenancies;
The tenant’s time to answer a non-payment petition has increased from five (5) days to ten (10) days;
In the event of a tenant default or judgment for the landlord, the marshal must now give a fourteen (14) day notice of eviction, an increase from the prior (6) business days
Rent deposits have been severely restricted by the new law and almost no penalties remain for the tenant’s failure to make the deposit. A tenant now has a right to an automatic 14 day adjustment the first time the case is noticed for trial. A tenant facing eviction, may in the discretion of the court, receive a one (1) year stay of eviction for good cause but must pay the reasonable value of rent for the apartment as use and occupancy during the stay period.
The law extends the period to place a holdover on the court’s calendar from the prior 5 to 12 days to 10 to 12 days. A tenant need not answer three (3) days before the first court date. If the landlord is successful in a holdover proceeding the tenant’s time to statutorily cure is increased from the prior ten (10) days to thirty (days).
A new criminal offense of wrongful eviction has been created. The penalties for illegally evicting a tenant or harassing a tenant out of a dwelling unit make a landlord subject to prosecution for a Class A Misdemeanor and fines of $1,000.00 to $10,000.00
A security deposit for any residential tenant whether regulated or unregulated is limited to one month’s rent and must be returned within 14 days of the end of the occupancy.
After signing an initial lease with the tenant, a landlord must offer the tenant the opportunity to inspect the apartment with the landlord or its agent. If the tenant requests the inspection the landlord and the tenant must execute a written agreement attesting to the property’s conditions and specify defects or damages.
A landlord must also notify the tenant within a reasonable time prior to the expiration of the tenancy of his right to have the landlord inspect the premises and after such inspection the landlord must provide the tenant with an itemized statement specifying repairs or cleaning that will form the basis of a reduction of the tenant’s security deposit.
The tenant must also be given the opportunity to cure any defects it has been found to have created prior to the expiration of the tenancy.
Eviction plans are now barred. A non-eviction plan cooperative must now obtain written purchase agreements from at least fifty-one percent of tenants actually in occupancy of the building. Senior citizens and disabled persons will retain rights to remain at not unconscionable rent increases even if they are in occupancy of non-regulated units.
Units that were eligible for deregulation under the 421-a(16) program (extension of affordable housing commitments within existing 421-a buildings) shall continue to be eligible for deregulation. These are “market rate” units within a building under the program that can be deregulated upon the vacancy of an existing stabilized tenant with a legal regulated rent above the then current deregulation threshold, even though the 421-a extended benefits are still in place at the time of re-rental.