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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.
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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
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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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