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New York Rent Control Limitations on Increases

January 17, 2018 Posted in Landlord/Tenant Law

In New York City alone, there are a substantial number of rent-regulated apartment units, with roughly 27k rent controlled apartments and 1.03M rent stabilized apartments as of a 2014 housing survey, and many more such units scattered statewide.  The regulations surrounding rent control units (and more generally, rent regulated units) can be quite complicated to understand for the layperson.  Due to the regulations affecting rent-regulated properties in the state of New York, ownership of a rent-controlled property is seen as a liability by some landlords.

Everything could change, however, when a tenant vacates the property.  As a landlord, certain questions are likely to come up.  When a tenant vacates a rent-controlled property, what happens to the status of the property?  To what extent may you — the landlord — raise prices, if at all?

To better understand how New York landlord tenant law affects your property and your right to raise the rental rate for the next tenant, we’ll have to consider the basics first.

Rent Control and Rent Stabilization

Rent-stabilized units are different than rent controlled units.

The rental rate that a landlord may charge for rent controlled units is limited by law, and the provision of services by the landlord may also be regulated.  There is a legal cap on the rental rate that may be allowed for a rent controlled unit.  The rate is first determined for a particular rent controlled unit, and then every two years, the rent may be increased by a set amount.  Once the rent reaches the legal cap, no more increases are allowed.

In the state of New York, rent-stabilized units allow tenants and landlords to negotiate a rate, but only if the rate falls below a certain threshold (a unit where the market rent is greater than $2.7k may be exempt from rate stabilization).  With rent stabilization, the annual rent increase is regulated.  You may not increase the rent beyond the limits decided upon by the rent guidelines board.

When the Tenant Vacates

When your tenant vacates their rent controlled unit, you’re in luck!  Once vacated, a rent controlled unit is no longer subject to rent control, and may become a rent stabilized unit or may be deregulated altogether.

Raising Prices

One the tenant vacates the rent controlled unit, the unit will become either rent-stabilized, or will be deregulated (i.e., if the rental rate is above $2.7k or if the building has fewer than six units).

If deregulated, then you must serve the first deregulated tenant with a high-rent vacancy deregulation notice and must show them that the unit is permanently exempt from rent regulation.

With deregulated units, you may set the rent at any rate you so choose, even at above-market prices.  With rent-stabilized units, however, your tenant may file a fair market rent appeal.  So, what is a fair market rent appeal?

Fair market rent appeals may only be filed by your first rent-stabilized tenant.  The appeal challenges the rent that you negotiated with the tenant.  The Division of Housing and Community Renewal of New York will consider the negotiated rent in the context of the rental guidelines, the rates for similarly-situated apartments that were de-controlled, and other factors, such as property improvements.  If the fair market rent appeal fails, then the initial negotiated rate will apply.

If you are the landlord of a formerly rent controlled unit, and have questions or concerns about the status of the unit and your right to raise rental rates for your next tenant, then you should consult with an attorney who has experience handling New York landlord tenant law.  Let the skilled attorneys at Griffin Alexander, P.C. assist you!

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