On June 14, 2019, Governor Andrew Cuoma signed a historic packet of legislation, dubbed the “Housing Stability and Tenant Protection Act of 2019″, ushering in major changes to rent regulation in New York City. The legislation marks the most sweeping changes to the rent laws since 1993, when the Republican-controlled legislature enacted a slew of pro-landlord provisions, most of which are swept away by the HSTPA. It’s the most pro-tenant reform since the Emergency Tenant Protection Act of 1974.
What does the new legislation do? This post attempts to answer this question by highlighting the most significant provisions for NYC tenants.
A. Vacancy Decontrol Is Gone.
Perhaps the most consequential change is the elimination of “vacancy decontrol.” Under prior law, when a rent-stabilized apartment became vacant, it was subject to decontrol — i.e., it became a free-market apartment — if the rent was above a certain threshold. Most recently, that threshold was a little under $2800. This created an enormous incentive for landlords to recover possession of regulated apartments — by hook or by crook. Landlords brought untold numbers of dubious eviction cases claiming non-primary residence or purportedly seeking the apartment for themselves or a family member. If the landlord succeeded in evicting the tenant, or bought them out, the landlord got a windfall.
Vacancy decontrol is now gone. Upon a vacancy, a rent-stabilized apartment remains regulated regardless of the rent level.
B. High Rent-High Income [“Luxury”] Deregulation Is Gone.
Under prior law, a landlord could deregulate an occupied apartment if the rent was above the threshold and the aggregate income of the tenant and other occupants exceeded $200,000 for two consecutive years. This procedurally confusing provision resulted in some tenants losing their homes as a result of technicalities or a temporary spike in income.
Luxury deregulation is now gone. Tenants can retain their rent regulatory status regardless of their income.
C. Vacancy Rent Increases Are Drastically Curtailed.
The vacancy decontrol provisions created an enormous incentive for landlords to raise rent to the magic threshold by any means possible. And the former law gave them many ways to accomplish this task. Under prior law, upon a vacancy, a landlord was entitled to as many as three different rent increases: i. a vacancy increase of as much as 20%; ii. a “longevity bonus” of 0.6% for every year certain long-term tenants had been in occupancy; and iii. an increase based on the purported cost of apartment renovations [“IAIs”]. The new law eliminates the vacancy increase and longevity bonus and radically limits IAI increases.
The paring of IAIs is especially important, as they were a blatantly abused form of rent increase. Fraud was rampant. [Think Fred Trump.] Under prior law, upon a vacancy, a landlord could raise rents by either 1/40th [< 35 units] or 1/60th [35 or more units] the cost of renovations. Those increases are now 1/168th and 1/180th. [Not a typo!] Moreover, the total cost of improvements is capped at $15,000 for any 15-year period and any increase phases out after 30 years. This means that, at most, a landlord can now only get an IAI increase of either $83 or $89 per month, depending on the size of the building. And, if it takes this increase in year one, a landlord cannot get another IAI increase for 15 years. This is a seismic change from prior law where IAI increases of $1000 or more a month were common and occurred whenever an apartment turned over, not every 15 years.
D. Major Capital Improvement [“MCI”] Rent Increases Are Drastically Curtailed.
Under prior law, one of the most effective means of obtaining substantial rent increases was through major capital improvements [“MCIs”]. Landlords would undertake — or claim to undertake — replacement or repair of a building-wide system [e.g., new roof or elevator, repointing] and then pass the costs along to stabilized tenants as a permanent rent increase. There was no cap as to the total rent increase, just a rule that the increase was phased in such that in any given year the rent increased no more than 6% as a result of the MCI. As with IAIs, the MCI system allowed for often huge rent increases, sometimes totaling several hundred dollars per month.
The new law alters MCIs such that the annual rent increase is limited to 2% and does not become a permanent part of the rent, phasing out after a period of 30 years. The new law also requires the NYS Division of Housing and Community Renewal to annually audit 25% of all MCI increase applications, an oversight function that should reduce fraud.
E. Owner’s Use Cases Are Reined In.
One of the most abused provisions of rent stabilization has been “owner’s use.” That’s a section of the law that allowed a landlord to evict a tenant if the landlord had a “good faith” intention to recover one or more apartments for their own use or that of an immediate family member. Many of these cases were bogus, constituting an effort by landlords to intimidate a tenant into taking a buyout.
Under the new law, good faith intent no longer cuts it. A landlord must now show “an immediate and compelling necessity,” an exceedingly high standard. A landlord is also limited to recovering only one apartment for owner’s use. Finally, any tenant who has resided in the building for 15 years or longer, like the lderly and disabled under current law, is now entitled to relocation to a comparable stabilized apartment in the neighborhood. Good luck with that!
The cumulative impact of these changes effectively eliminates owner’s use as a means of evicting a stabilized tenant.
F. Preferential Rents Are No More.
The new law reforms the “preferential rent” process whereby a landlord charges a tenant a rent below the legal regulated rent but reserves the right to increase the rent up to the full legal level upon lease renewal. The new law requires landlords to offer preferential-rent tenants renewal leases based upon the lower preferential rent, thereby abolishing the “sticker shock” of a sudden increase to the higher — often much higher — legal rent.
G. Overcharges Are Expanded.
The new law represents a major overhaul of the rent overcharge process. It expands the period for which a tenant can recover overcharges from four years to six years. It also extends the period for which landlords are potentially liable for treble damages from two years to six years. It requires DHCR to use the most “reliable” rent registration in determining the legal rent, unlike the old law which arbitrarily designated the registration filed four years earlier. This will make it much easier for tenants to prove overcharges.
The law also makes it clear that tenants can pursue overcharges either at DHCR or through the courts. Finally, it makes an award of legal fees to a prevailing tenant mandatory, not discretionary.
H. Rent Control.
Under the new law rent controlled tenants will no longer be subject to arbitrary 7.5% annual rent increase. The new formula uses a five-year average of increases under rent stabilization.
I. Housing Court Reforms.
The new law imposes numerous pro-tenant reforms in the Real Property Actions and Proceedings Law [“RPAPL”]. It extends the time for tenants to answer petitions, to cure violations and to obtain an attorney. It limits the circumstances under which the court can order a tenant to pay rent while a case is pending. The new law also extends the court’s discretion to stay a tenant’s eviction from six months to one year.
Even market tenants benefit from the new law. They are now entitled to prior written notice if a landlord does not intend to renew their lease or wants to impose a rent increase of more than 5%. Security deposits are now limited to one month’s rent.
Landlords are barred from relying only on tenant “blacklists” as a basis to deny a tenant’s rental application.
The law makes it more difficult for landlords to evade rent regulation by converting buildings to coops or condos. It abolishes “eviction plans” and requires that at least 51% of tenants in occupancy agree to purchases.
Stayed tuned for follow-up posts discussing the impact of the new law going forward.
Dated: June 17, 2019