New York Rent Laws

Rent Regulation "Reform" Act of 1993

The following analysis was written by Andrea T. Novick of the firm Finder, Novick, Kerrigan & Anderson. It's important to realize this interpretation of the "Rent Regulation Reform Act of 1993" was written shortly after the legislation was enabled. Current interpretations may (or may not) vary and are often influenced by ongoing litigation. The reader is cautioned to seek the advice of an attorney familiar with this area of law if faced with high rent or high income vacancy decontrol. ======================================================= THE EFFECT OF THE 1993 LATE REGISTRATION AMENDMENT IN DETERMINING LAWFUL RENTS Andrea T. Novick, Esq. Finder, Novick, Kerrigan & Anderson New York, New York October 15, 1993 THE EFFECT OF THE 1993 LATE REGISTRATION AMENDMENT IN DETERMINING LAWFUL RENTS The definition of both a Legal Regulated Rent as well as an Initial Legal Registered Rent depends upon the landlord's registration of the rent with the Division of Housing and Community Renewal (hereinafter DHCR). These definitions of the legal rent are unchanged by the recent amendments to the rent regulatory laws. The recent amendment(1) regarding rent registration only eliminates the penalty, previously imposed on the landlord for his failure to register, in those situations where the rent charged by the landlord is otherwise lawful. Thus if a landlord charges a tenant the Legal Regulated Rent, which the Rent Stabilization Code (hereinafter RSC) defines as: The initial legal registered rent as adjusted in accordance with this Code or the rent shown in the annual registration statement filed 4 years prior to the most recent registration statement (or if more recently filed, the initial registration statement), plus in each case, any subsequent lawful increases and adjustments (2) the landlord will not be found to have overcharged a tenant simply because he failed to file a registration statement. However, if the landlord charged the tenant an illegal rent, the new law does not apply to him. That is because the amendment to the law provides: ...PROVIDED THAT INCREASES IN THE LEGAL REGULATED RENT WERE LAWFUL except for the failure to file a timely registration, the owner, upon the service and filing of the late registration, shall not be found to have collected an overcharge at any time prior to the filing of the late registration. (Emphasis added) Thus, only in those situations where the landlord has been charging the legal (albeit unregistered) rent and the tenant is not therefore being prejudiced, does the new amendment apply. Unlawful rents will not be so sanctioned: THE LAW REMAINS UNCHANGED FOR ALL OTHER SITUATIONS. o So if a landlord registers a rent-stabilized apartment in 1984 and 1985 at $500 a month, and doesn't register the apartment in 1986, 1987 and 1988 but charges the tenant an ILLEGAL RENT increase in 1986 of $600 a month for that year and then $700 a month in 1987 and $800 a month in 1988 and then late registers the apartment in 1988 for the years 1988, 1987, 1986, the new law does not apply and the landlord is given no amnesty for his failure to register because the increases in the Legal Regulated Rent were unlawful. o If the landlord registers that same rent-stabilized apartment in 1984 and 1985 at $500 a month and again doesn't register the apartment in 1986, 1987 and 1988 but charges the tenant lawful increases, in accordance with the Rent Guidelines Board's increases for those years during which the apartment is not registered (for purposes of the hypothetical $520 is the lawful rent for 1986 and 1987, after applying guideline increases, and $545 for 1988) and then late registers in 1988 for the years 1988, 1987 and 1986, the new law applies and the landlord will not be found to have overcharged the tenant for the years he collected the lawful lent Guidelines increases without registering. THE AMENDMENT PERMITTING LATE REGISTRATION ONLY APPLIES TO GRANT THE LANDLORD IMMUNITY FROM A FINDING OF OVERCHARGE - IT DOES NOT ALTER THE DEFINITION OF A LEGAL REGISTERED RENT. If in the above hypothetical the landlord, who registers the rent- stabilized apartment in 1984 and 1985 at $500 a month and not only fails to register the apartment for 1986, 1987 and 1988 but fails to CHARGE the tenant the lawful rent guidelines increases in 1986, 1987 and 1988 and then late registers the apartment in 1988 for 1988, 1987 and 1986, the landlord cannot in 1989 collect the difference between the $500 a month he collected for 1986 and 1987 and the $520 the legal rent would have been in 1986 and 1987 had he registered nor can he collect the difference between the $500 per month he collected in 1988 and the $545 the rent would have been in 1988 had he registered because the amnesty provided by the amendment only applies to protect a landlord from the consequences of an overcharge. The definition of the Legal Regulated Rent found in the law is unchanged. The new law only applies to grant immunity against the finding of overcharge (owner "shall not be found to have COLLECTED an overcharge"(3) for failure to timely register). Since the landlord in this hypothetical did not "collect" the overcharge, the amendment has no application. This is analogous to and consistent with the application of Multiple Dwelling Law 325, which provides that no rent shall be recovered by a landlord of a multiple dwelling who fails to comply with the registration requirements of 325, but that if a tenant of an unregistered apartment pays rent which he had the right to withhold (because of the landlord's failure to register) the landlord does not have to return the rent. Thus the landlord in the hypothetical, who collects $500 per month for 1984 through 1988 and then in 1988 late registers the rant for 1988 at $545 and for 1987 and 1986 at $520, cannot sue the tenant in Housing Court for the extra $20 a month in 1986 and 1987 or the extra $45 a month in 1988 even though he late registers, because LATE REGISTRATION DOESN'T CHANGE THE LEGAL RENT -- IT ONLY GRANTS THE LANDLORD IMMUNITY FROM A FINDING OF OVERCHARGE. The definition of the Legal Regulated Rent as described in the Rent Stabilization Law and Code remains unchanged and depends upon registration as part of its definition. THE AMENDMENT'S APPLICATION TO AN INITIAL LEGAL REGISTERED RENT IN THE SITUATION WHERE AN EXISTING RENT-STABILIZED APARTMENT IS INITIALLY REGISTERED IN 1984 AND IN THE SITUATION WHERE THE APARTMENT FIRST BECOMES SUBJECT TO RENT STABILIZATION AS A RESULT OF VACANCY DECONTROL. The two most common situations where an Initial Legal Registered Rent arises is 1) the initial registration in 1984 of an existing rent-stabilized apartment; 2) the initial registration of an apartment which first becomes subject to rent stabilization after a rent-control tenant vacates (vacancy decontrol). The law requires a landlord to file the initial registration within ninety days (in the case of an existing rent-stabilized apartment, registration was supposed to take place within ninety days of April 1, 1984;(4) in the case of a vacancy-decontrolled apartment, the landlord must not only register but serve the tenant with a particular notice within ninety days after the housing accommodation first becomes subject to the RSL(5). Only in the latter situation, where the apartment has become rent stabilized as a result of vacancy decontrol, must the landlord: within 90 days after the housing accommodations become subject to the RSL, give notice in writing by certified mail to the tenant of each such housing accommodation on a form prescribed by the DHCR for that purpose, reciting the Initial Legal Registered Rent for the housing accommodation and the tenant's right to file an application for adjustment of the Initial Legal Registered Rent within 90 days of the certified mailing to the tenant of the notice pursuant to section 2522.3 of this Title. Thus in the particular situation where an initial rent-stabilized rent is first being established, the statutory scheme contemplates the tenant's meaningful participation in the creation of that initial rent. The distinction between these two types of initial rents is critical. Take an apartment that became rent stabilized in 1979. The landlord never registers the apartment in 1984 when registration first goes into effect. The landlord, however, collects only legal rent guidelines increases from the tenant. Under the new law, if the landlord first files his initial 1984 registration statement in, say, 1989, the result will probably be that the legal rent for that apartment will either be the rent as reflected in the 1984 registration statement or, if challenged, the rent charged and paid on April 1, 1980 plus lawful increases (RSC 2521.1(b)(1))(6). Assuming, as we do for the purposes of this hypothetical, that the landlord only charged lawful guidelines rent increases (after April 1, 1984 or after April 1, 1980 if the rent is challenged), the landlord will probably be entitled to amnesty under the new law. The fact that the landlord had been required under the existing law to register with the DHCR within ninety days apparently may now be cured if the landlord late registers, assuming that the increases collected by the landlord have all been lawful. The provisions of the amended legislation, however, can never apply to a vacancy decontrol situation. That is because the NEW AMENDMENT ONLY APPLIES TO SITUATIONS WHERE THE RENT CHARGED IS LEGAL, but for the landlord's failure to register. The only way a landlord can create an Initial Legal Registered Rent, when an apartment first becomes rent stabilized after the vacatur of a rent-controlled tenant, is by serving the first rent-stabilized tenant with a notice in writing by certified mail reciting, INTER ALIA, the Initial Legal Registered Rent for the apartment, the prior rent-controlled rent, as well as the tenant's right to file an application for adjustment of the Initial Legal Registered Rent within 90 days of the certified mailing. RSC 2523.1. That notice must be given to the tenant within 90 days after the housing accommodation becomes subject to the Rent Stabilization Law. RSC 2523.1. The new amendment permits a landlord to cure his failure to timely register (assuming the landlord has otherwise complied with the law). THE NEW LAW DOES NOT PERMIT A LANDLORD TO CURE THE FAILURE TO TIMELY SERVE THE REQUISITE NOTICE REQUIRED ONLY IN THE VACANCY DECONTROL SITUATION. Thus, if the landlord did not serve, by certified mail, within ninety days after the housing accommodation first became subject to rent stabilization (after vacancy decontrol), a notice of the Initial Legal Registered Rent -- notifying the tenant of the previous rent-controlled rent and the tenant's right to file an application for adjustment -- the landlord failed to create an Initial Legal Registered Rent, which failure the new law has not permitted the landlord to cure. Indeed, this was precisely the effect of the holding of the Appellate Division decision in SMITTEN V. 56 MACDOUGAL ST. CO., 167 A.D.2d 205, 561 N.Y.S.2d 585 (A.D. 1st Dept., 1990). In that case the plaintiff was the first tenant in what was formerly a rent-controlled apartment after vacancy decontrol. The landlord failed to file an initial legal rent registration. The Appellate Division upheld the Supreme Court's holding that since the landlord failed to comply with the law with regard to the creation of an Initial Legal Registered Rent after vacancy decontrol, the only legal rent was the rent control rent. The necessity for the landlord's compliance with the law in this situation -- i.e., serving notice on the first stabilized tenant within ninety days of the housing accommodation's becoming subject to rent stabilization -- in order to create an initial rent was intended by the Legislature. The rent stabilization scheme carefully delineates a plan by which newly stabilized apartments may; first be brought into the rent stabilization system. Only in this instance is the landlord required to serve certain notices on the tenant apprising him/her of essential information in order to allow meaningful participation by the tenant in the establishment of that initial rent. Section 26-512 of the RSL defines the Initial Legal Regulated Rent and provides that for housing accommodations -which had been subject to rent control and became vacant thereafter, the initial rent is the rent reserved in the lease between the parties, subject to the tenant's challenge of that rent.(7) (See also RSC 2521.1[a][1].) RSL 26-512(b)(3) provides that for all other housing accommodations (i.e., except a housing accommodation which became stabilized after vacancy decontrol) the Initial Legal Regulated Rent is the rent reserved in the lease. Thus the Legislature made specific provision for the tenant's participation in the establishment of an initial rent only where the apartment was formerly subject to rent control. Certainly the amendments to the law were intended to remedy the situation where a landlord, who was honestly charging the legal rent and who charged proper guidelines increases thereon, could nonetheless be found to have overcharged the tenant solely because he failed to file a registration statement. Clearly, however, THE AMENDMENT WAS NOT INTENDED TO IMMUNIZE LANDLORDS FROM OVERCHARGE PENALTIES BY PERMITTING THEM TO BYPASS REGISTRATION ALTOGETHER. THEREBY DEPRIVING THE TENANT OF BOTH KNOWLEDGE OF THE RENT CONTROLLED RENT AS WELL AS THE RIGHT TO PARTICIPATE IN SETTING THE INITIAL RENT (BOTH AS REQUIRED IN A VACANCY DECONTROL SITUATION). Thus the Appellate Division recognized in SMITTEN, SUPRA, that a landlord's failure to abide by the statutory scheme -- which requires him to serve certified notice on the tenant within 90 days of the apartment's first becoming subject to rent stabilization in order to permit the tenant's meaningful participation in the creation of the initial rent -- results in the landlord's failure to create an initial rent with the result that the legal rent is the last rent under rent control. THE LEGISLATURE HAS NOT REMOVED THE REQUIREMENT OF RENT REGISTRATION FROM THE LAW BUT HAS ONLY ELIMINATED THE PENALTY FOR FAILURE TO REGISTER WHERE THE LANDLORD IS CHARGING A LEGAL RENT. THUS A LATE REGISTRATION CANNOT CHANGE THE LEGAL RENT FOR THE YEARS A LANDLORD FAILED TO TIMELY REGISTER. In conclusion, I believe the clearest way to interpret the amending language is to understand that it was intended to grant amnesty -- by removing the previously imposed penalty for failure to register, to wit, barring an owner from collecting any rent in excess of the legal registered rent if he/she doesn't file registration statements -- for those landlords who were charging and collecting the legal rent. Thus the Legislature now permits a law-abiding landlord to late register an apartment for the express purpose of relieving the landlord of the consequence of his failure to register. The new law only allows a landlord to late register so as to immunize the landlord from liability for an overcharge. The amendment does not, in any way, alter the definition of a Legal Regulated Rent or Initial Legal Registered Rent which still depends upon a timely and proper registration. Had the Legislature intended to redefine the Legal Regulated Rent or Initial Legal Registered Rent and remove the requirement of registration from the definition thereof, it certainly would have done so. (Indeed prior to 1984, the definition of a legal rent had nothing to do with and was not dependent on registration.) Thus for purposes of defining or determining the Legal Regulated Rent or the Initial Legal Registered Rent, the Court must continue to rely on timely, proper registration. Nor does the amendment derail the process by which decontrolled apartments are to be brought into the rent stabilization system. In order to have created an Initial Legal Registered Rent for those apartments first coming into the system after vacancy decontrol, the landlord must have complied with the law by timely serving the first rent-stabilized tenant with notice of the rent- controlled rent and the right to participate in establishing a first stabilized rent. Otherwise he will have failed to create a lawful initial rent. THESE TWO SITUATIONS -- ON THE ONE HAND. DEFINING AND DETERMINING A LAWFUL RENT -- AND ON THE OTHER HAND. THE CONSEQUENCE TO A LANDLORD FOR COLLECTING LAWFUL RENT INCREASES WITHOUT HAVING REGISTERED -- MUST BE SEPARATELY VIEWED AND NOT CONFUSED. The new amendment has done nothing more than eliminate the penalty when a landlord's only crime was the failure to file a timely registration. atn\rentlaw ------------------- FOOTNOTES (1) The RSL 24-517(e), with the amended language in capital letters, reads as follows: The failure to file a proper and timely initial or annual rent registration statement shall, until such time as such registration is filed, bar an owner from applying for or collecting any rent in excess of the legal regulated rent in effect on the date of the last preceding registration statement or if no such statements have been filed, the legal regulated rent in effect on the date that the housing accommodation became subject to the registration requirements of this section. The filing of a late registration shall result in the prospective elimination of such sanctions AND PROVIDED THAT INCREASES IN THE LEGAL REGULATED RENT WERE LAWFUL EXCEPT FOR THE FAILURE TO FILE A TIMELY REGISTRATION, THE OWNER, UPON THE SERVICE AND FILING OF A LATE REGISTRATION, SHALL NOT BE FOUND TO HAVE COLLECTED AN OVERCHARGE AT ANY TIME PRIOR TO THE FILING OF THE LATE REGISTRATION. IF SUCH LATE REGISTRATION IS FILED SUBSEQUENT TO THE FILING OF AN OVERCHARGE COMPLAINT, THE OWNER SHALL BE ASSESSED A LATE FILING SURCHARGE FOR EACH LATE REGISTRATION IN AN AMOUNT EQUAL TO FIFTY PERCENT OF THE TIMELY RENT REGISTRATION FEE. (2) RSC 2520.6(f) (3) Quoting from amendment to RSL 26-517(e) reproduced at footnote at p. 1 herein. (4) RSC 2528.1 (5) RSC 2523.1 (6) RSC 2521.1(b)(1) provides: For those housing accommodations for which the tenant files a TIMELY CHALLENGE in accordance with section 2526.1(a)(3)(ii) of this Title (Overcharge Penalties) TO THE INITIAL LEGAL REGISTERED RENT, such rent shall be determined by the DHCR as follows: (1) for housing accommodations other than in hotels, THE RENT CHARGED AND PAID ON APRIL 1, 1980, PLUS THE LAWFUL INCREASES charged and paid up to March 31, 1984;... (Emphasis supplied) (7) RSC 26-512 states: a. NO OWNER of property subject to this law SHALL CHARGE or collect ANY RENT IN EXCESS OF THE INITIAL LEGAL REGULATED RENT OR ADJUSTED INITIAL LEGAL REGULATED RENT until the end of any lease or other rental agreement in effect on the local effective date until such time as a different legal regulated rent shall be authorized pursuant to guidelines adopted by a rent guidelines board. b. THE INITIAL REGULATED RENT for housing accommodations subject to this law on the local effective date of the emergency tenant protection act of nineteen seventy-four or which become subject to this law thereafter, pursuant to such act, shall be: (1) FOR HOUSING ACCOMMODATIONS WHICH WERE REGULATED PURSUANT TO THIS LAW OR THE CITY RENT AND REHABILITATION LAW prior to July first, nineteen hundred seventy-one, and which became vacant on or after such date and prior to the local effective date of the emergency tenant protection act of nineteen hundred seventy-four, THE RENT RESERVED IN THE last effective LEASE or other rental agreement; PROVIDED THAT SUCH INITIAL RENT MAY BE ADJUSTED ON APPLICATION OF THE TENANT pursuant to subdivision b of section 26- 513 of this chapter. (2) FOR HOUSING ACCOMMODATIONS WHICH WERE REGULATED PURSUANT TO THE CITY RENT AND REHABILITATION LAW ON THE LOCAL EFFECTIVE DATE of the emergency tenant protection act of nineteen seventy-four, AND THEREAFTER BECOME VACANT, THE RENT agreed to by the landlord and the tenant and RESERVED IN A LEASE or provided for in a rental agreement; PROVIDED THAT SUCH INITIAL RENT MAY BE ADJUSTED ON APPLICATION OF THE TENANT pursuant to subdivision b of section 26-513 of this chapter. (3) FOR HOUSING ACCOMMODATIONS OTHER THAN THOSE DESCRIBED IN PARAGRAPHS ONE AND TWO of this subdivision, THE RENT RESERVED IN THE last effective LEASE or other rental agreement. (Emphasis added) ===============================================================


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