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Renewal Lease with 2%/4% increase instead of 0%/2%

NYC Rent Regulation: Rent Control/Rent Stabilized, DHCR Practice/Procedures

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Renewal Lease with 2%/4% increase instead of 0%/2%

Postby Jeffnet » Sat Apr 22, 2017 11:06 am

Hello,

I recently received my renewal lease, as my current lease expires on July 31st.

For my entire tenancy, I have been receiving a preferential rent for every renewal.

The new lease states an increase for one year of what equals to 2% per month, and for a two year lease, the new amount is equal to what is a 4% increase.

From my understanding, this year's increase - for leases renewed up until September 30th, 2017, is 0% for 1 year and 2% for a 2 year lease.

All of this is stated on part 5 - Lower rent to be charged, if any.

However, on Part 2, it has the higher legal rent listed, and it states for the one year lease, the increase is 0.00%, and for a two year lease, it is 2.00%.

So, what I do not understand, is, why am I being charged an amount in part 5 that is equal to a 2% increase for one year, instead of $0? Same for the two year renewal.

Am I missing something here? Is there another provision for this year's renewals that I don't yet know about?

Nor is there any explanation from the LL for this increase.

I called the landlord's office and they didn't get back to me yesterday. I called later in the afternoon and received a message from them on my way home from work (so I didn't get to talk to them) telling me that they will call me next week to discuss the lease.

In my message to them, I let them know what this year's increase is for 1 and 2 year leases (0% and 2%). I also said that I will probably return the lease renewal to them, as it appears to be invalid.

On last year's lease, which also had a 0% increase for last year, I was not charged anything over the amount the year before. The 0% option is what I took last time.

In the event that the LL does not admit a mistake, and demands this increase over this year's guidelines, what should I then do? Should I return the lease to them with a letter explaining what the problem is? Or should I sign it and then fight it?

Any help is appreciated!
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby TenantNet » Sat Apr 22, 2017 11:32 am

Putting aside the preferential rent issue, the current RGB percentage increases for rent stab tenants is 0% for 1 year leases and 2% for 2 year leases. Your understanding is correct.

LLs are permitted to add the permitted RGB increase to the higher legal rent, and they can also add the percentage to the lower preferential rent. See For the rules on preferential rents, see http://www.nyshcr.org/Rent/FactSheets/orafac40.pdf - and look at the examples where the RGB increase is applied to both the legal rent and the preferential rent.

Did you look at what the LL gave you on your original lease as to the preferential rent? If you didn't get the rider in the correct form, the lower rent can be good for the duration of the tenancy.

Part 2 on the form should list the legal rent (usually the higher amount) and Part 5 is where the preferential rent is listed. Is the renewal offer on an official DHCR RTP-8 form? No other form is permitted.

And have you looked at your rent history with DHCR to see if what they started with was entirely legal to begin with?

You have two choices. You can sign the form as is, then file with DHCR for both an overcharge and for failure to provide a lease, or

You can return the unsigned lease offer to the LL. Do so with a written explanation and send by cert. mail, asking him to make the corrections and return the lease offer to you. Keep copies of everything including envelopes that have postmarks. If the LL refuses to do that, then in our opinion, he can't raise the rent until he gives you a proper lease offer.

of course understand that if you refuse, the LL might take you to court. I don't think he would win, but stranger things have happened and there are judges who hate tenants. OTOH, DHCR doesn't like tenants either.
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby Jeffnet » Sat Apr 22, 2017 11:48 am

Thank you for your quick reply, TenantNet.

The lease is on form RTP-8.

The legal rent on Part 2 is about $600 higher than what I currently pay. Part 5 has the preferential rent + the 2% and 4% increase.

There is also a cover letter which also demands an additional security equal to 2% or 4% equal to one month.

The original lease was back in 1996, and I don't think I have it anymore. Preferential rent has been in effect since then, and as far as I know, every renewal has been in compliance with the RGB increases - except for this one.

There are no pending MCIs or improvements done to the apartment, either. So, I am perplexed as to what is going on.

I guess I have to speak to the LL, and see what their response it.

Again, thanks for your reply.
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby TenantNet » Sat Apr 22, 2017 12:59 pm

The problem is what happens when/if the PR ends (assuming the LL gave you the proper rider). If I understand correctly, the LL is adding the 2/4% to the legal rent, not what you pay (or is it both?). Either way, it's not legal.

He's probably banking that you do nothing if it's added to the legal rent and not the PR.

I'd try to get his explanation in writing. If you speak with him, try to record it. He might incriminate himself.

Is your existing security equal to the legal rent or the PR? I would only pay security increase in accordance with the RGB percentage.

I would look long and hard for the original lease.
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby Jeffnet » Sat Apr 22, 2017 1:40 pm

Thank you for the reply!

The increase, both 2% and 4%, is NOT being added to the legal (higher rent), but it IS being added to the lower preferential rent that I am paying.

And that's what I don't understand.

So, I will be paying preferential rent + 2% increase for one year (if I choose the one-year lease). Which, of course, is not in compliance with the RGB guidelines.

Security requested is equal to preferential rent. They're asking a 2% security increase for one year and a 4% security increase for two years.

I just don't understand what is going on here!!
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby TenantNet » Sat Apr 22, 2017 2:54 pm

OK, so I misunderstood (or you misstated). Clearly illegal. Any 2/4% increase is illegal whether it's on the legal rent or PR until Sept. 30th. The RGB will vote in June for the percentages that will apply from Oct. 1, 2017 onward.

You can ask the LL what is his legal basis for adding the 2/4%. For me, I would send it back to the LL, certified, along with a copy of the RGB order and ask for a corrected lease offer with the correct percentages.

See the reverse side of the RTP-8 form for instructions and follow them exactly. Keep in mind that the longer the LL fails to comply, then the longer it might be until you have any increase. My LL hasn't given me a lease in several years, so my rent simply doesn't go up.

When he does make the offer, you should have the choice which percentage to apply, this year's rate, or the rate in effect when the offer is made.

I would suggest you not sign it and not pay it. The LL is either being stupid or thinks you are.
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby Jeffnet » Mon Apr 24, 2017 2:31 pm

Thank you for the most recent reply.

I just spoke to the LL. They told me that the 0% and 2% increase only applies to the higher "Legal Rent" and not "Preferential Rent." So, since I get the preferential rent, they claim they can raise it above the RGB guidelines. I asked them where do they get this info from, and they said that they have researched it and have gotten it from a variety of sources. I asked them to give me one, but they could not.

They claim that they are charging either 2% or 4% this year to all tenants because of an increase in property taxes, water charges, and other miscellaneous expenses. They also said that they are painting the basement and have put in new light fixtures (after about 40 years). So, they need the increase.

I told them that if they are doing any building-wide improvements, they should request an increase through an MCI.

I also said that the building is not often maintained well, and that they do not deserve an increase, and I gave them specifics. Their reasoning for not maintaining the building well is that "they are not a high-class Manhattan building." So, they don't have to maintain to decent standards. Or so they think. (This is a building in Brooklyn). Which I think is totally ridiculous to say.

They also told me that if I don't like it, I can always leave. They know they can get several hundred dollars a month more for the apartment.

I have been trying to research this issue myself, but I cannot find a clear answer if a LL can charge more than the RGB increases for preferential rents.

The summary of guidelines adopted on June 27th 2016, is silent on the matter.

However, on nyc.gov, I found the following statement:

For leases beginning between October 1, 2016, through September 30, 2017, the rent increase for rent stabilized apartment and loft renewals will be:
•1-year lease: 0% for tenants paying the "legal regulated rent" for their apartment as established by the rent stabilization laws.
•2-year lease: 2%

However, if a tenant is paying a "preferential rent," which an owner agrees to charge and is lower than the legal regulated rent that the owner could lawfully collect, the owner may be allowed to increase the rent up to the "legal regulated rent," even if the increase is greater than the rent increase guidelines that are in effect.

So, does the above statement mean that the LL can raise the prefrential rent to whatever they want, as long as it doesn't exceed the legal rent?

At this point, I don't know what to do - because they may be entitled to an increase in preferential rents, as it's not clear at all.

Thank you for any response!!
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby TenantNet » Mon Apr 24, 2017 3:51 pm

I just spoke to the LL. They told me that the 0% and 2% increase only applies to the higher "Legal Rent" and not "Preferential Rent."


As far as we know, that's not true. You can call DHCR to see what their opinion is. See the DHCR fact sheet where the same RGB percentage is applied to both the Legal Rent and the Pref Rent.

If the DHCR waffles on this, that means their Fact Sheet is erroneous.

Our opinion is that while the LL can end the Pref Rent (if there was the proper rider), and have you start paying the full legal rent, he can't come up with an arbitrary figure that's in-between ... other than the RGB increases.

I would ask them for any of their sources - in writing. You do this so down the road you have a letter asking them for their citations. Chances are they won't give you one as chances are they are lying. But there may be people of that opinion, that they can raise it to some arbitrary number.

All the things they cite - property taxes, water, etc. - are figured into the RGB deliberations. I would also ask them - again in writing - for their reasons for the increase. You want them to put it in writing what they told you. That goes to bad faith on their part as they clearly are trying to get around the RGB.

Of course maintenance is the law whether in Manhattan or BK. They had 40 years of RGB increases that were way above the cost of living.

Our opinion is the RGB says the LL can increase the rent to the Legal Rent from the Pref Rent, and only if they follow DHCR procedures as to the language in the rider.

I'd say next step is getting an opinion from DHCR (record it if you can), and getting legal advice from a tenant attorney that knows about Pref Rents.
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby Jeffnet » Tue Apr 25, 2017 2:48 pm

Thank you for your reply again.

Just to update...I sent all of the information, copy of the lease, RGB order, etc., to the legal services provided to employees as a benefit through my job.

An attorney called me back. He concurs with the LL that they can raise the preferential rent to what they want, as long as it doesn't exceed the legal rent.

Naturally, this is not encouraging, and I totally agree with you that it looks like the LL is acting somewhat in bad faith by not providing any reasons whatsoever. And that it appears they are trying to get around the RGB.

My options here may be limited. The increase isn't huge, but I do not think they have earned more than the guidelines allow, due to some of the existing conditions in the building.

I may still write a letter requesting the reason why they are taking this action, as well as their sources to validate this. I'm interested in seeing how they respond - maybe I can even negotiate it down a bit if it sounds disputable, or if I list some of the on-going deficiencies in the building.

I guess next time I have to worry if they will abandon the preferential rent altogether....
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby TenantNet » Tue Apr 25, 2017 3:09 pm

95% of attorneys don't know what they are talking about. You need a TENANT attorney, not someone as part of your job benefits.

Did you call DHCR? As bad as they are, I'd still see what they say over some lawyer who is not involved in tenant matters every day.

As far as I know, this is an unsettled issue and have not seen any case decisions on point.

I also understand the rationale that 2% is better than a complete lifting of the Pref Rent, but there are other potential consequences if that view is accepted.

One major issue with PRs is that the so-called legal rents are not legal, just inventions of the LL. I'd research the rent history to see how it got where it is.

And of course PRs are nothing more than legalizing tenant harassment.

Just published today: https://goo.gl/j9i9Zc
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby BubbaJoe123 » Wed Apr 26, 2017 12:54 pm

I heard back from DHCR on this topic, and they referred me to Fact Sheet 26 (Guide to Rent Increases for Rent Stabilized Apartments in New York City). Section 2a states:

When a tenant signs a renewal lease, the legal regulated rent adjustment for the renewal lease will only be the adjusment for a one or two-year lease cited in the chart below. However, if the owner is collecting a preferential rent and continues to offer it upon renewal, the owner can increase it by the New York City Rent Guidelines Board adjustment or any amount that does not bring the preferential rent above the newly
increased legal regulated rent.


http://www.nyshcr.org/Rent/FactSheets/orafac26.pdf
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby TenantNet » Wed Apr 26, 2017 1:36 pm

That might resolve that question. DHCR certainly carries weight.

However, I have recently seen a letter from a well-known tenant attorney who appears to think otherwise. As far as I know, this question has not been litigated or any decision issued by any court directly on point.

God forbid that DHCR could be wrong!
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby Jeffnet » Wed Apr 26, 2017 2:21 pm

Thanks for the replies.

So...what's the best course of action to take now? Should I still send a letter to the LL asking for a reason as to why they are raising the rent beyond the RGB increases? If they simply refer me back to the DHCR excerpt that has already been quoted, then I might not have much to stand on - even though there may not be any litigation one way or the other that can be used as reference to show that what they are doing is improper.


BubbaJoe123 wrote:I heard back from DHCR on this topic, and they referred me to Fact Sheet 26 (Guide to Rent Increases for Rent Stabilized Apartments in New York City). Section 2a states:

When a tenant signs a renewal lease, the legal regulated rent adjustment for the renewal lease will only be the adjusment for a one or two-year lease cited in the chart below. However, if the owner is collecting a preferential rent and continues to offer it upon renewal, the owner can increase it by the New York City Rent Guidelines Board adjustment or any amount that does not bring the preferential rent above the newly
increased legal regulated rent.


http://www.nyshcr.org/Rent/FactSheets/orafac26.pdf
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby BubbaJoe123 » Tue May 02, 2017 11:07 am

Well, what to do know is up to you. A few thoughts:

There are two key issues here:

1. Is the DHCR correctly interpreting the statute by saying that increases on pref rents can be any amount up to the legal rent?
2. Are the preferential and legal rents on your lease valid?

To challenge #1, you'd probably need to hire an attorney. I doubt that's worth it, honestly.
For #2, check your past leases to confirm that the landlord included both the legal and preferential rent on every lease. If he didn't (and just showed the pref rent), then the pref rent BECAME the legal rent. Most landlords are more competent than this, but by no means all. Also, check the history of that legal rent, to see if it's been correctly calculated.

If the answers to #1 and #2 are correct, then I don't see how a "letter to the LL asking for a reason as to why they are raising the rent beyond the RGB increases" is really going to help you, since (again, assuming #1 is correct), the landlord can raise the rent (so long as he stays below the legal rent) for any reason, or no reason, and doesn't need to provide a rationale.

Bottom line, if the apartment really is several hundred dollars below what comparable apartments are going for, I would follow through on #2, but if that doesn't yield anything (i.e. the legal rent looks appropriately calculated, and the pref rent and legal rent have been correctly recorded in the leases), I would let it go, since, if you were to retain an attorney, and eventually win on #1, the benefit to you would be minor (maybe a small rebate on this year's rent), while the cost could be significant (LL decides to raise your rent to the legal rent on next year's renewal).
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Re: Renewal Lease with 2%/4% increase instead of 0%/2%

Postby Sky » Fri May 19, 2017 5:53 pm

From DHCR Fact Sheet 40 on Preferential Rents:

"In addition, the terms of the lease itself, may affect the owner’s right to terminate a preferential rent. If the lease agreement contains a clause that the preferential rent shall continue for the term of the tenancy, not just the specific lease term, then the preferential rent cannot be terminated for that tenancy (see Example #3). The preferential rent continues to be the basis for future rent increases. However, if the lease is silent and did not contain a clause that clarified whether the preferential rent was for the “term of the lease” or “the entire term of the tenancy”, then the owner may terminate the preferential rent at the time of the lease renewal.
(See Example #4)"

The above language differentiates between a preferential rent that is in effect for only a single lease term vs. a longer duration (a couple examples: a preferential rent agreement for 5 years, or in perpetuity until the tenant vacates the residence).

There's is no other benefit derived from a preferential rent other than the lowered rent.

If the preferential rent is not constrained by RGB increases, then the benefit of longer preferential rents are effectively nullified, insofar as rent increases beyond the present lease term would be dependent only on the landlord's whim, and not locked to the RGB increases. In such a scenario, a landlord could increase the rent by any amount (100%, 200%, etc.) as long as it didn't surpass the legal registered rent ... which would nullify any benefit of the preferential rent beyond it's present lease term. In such a scenario the LL could bypass, nullify, and invalidate a longterm preferential rent benefit through a single high percentage annual rental increase.

All the examples given in DHCR Fact Sheet 40 demonstrate that the preferential rent, like the legal registered rent, is determined by the RGB percentage rates.

Preferential leases can be offered as a form of concession (this is spoken of in Fact Sheet 40). If a concession of lowered rent were offered for example, a.) for 5 years, or b.) in perpetuity, it's monetary value is solely derived from the rent being constrained by the RGB increases for the entirety of its duration. Were subsequent years of preferential rents subject to the whims of a LL to arbitrarily increase rent renewal rates, it would effectively nullify the value and purpose of multiple-lease-term preferential rents, effectively making the preferential rents voluntary on the part of the LL and thus reverting the useful effective life of all preferential rents to a single lease term.

Preferential rents are offered for various reasons and not solely as consequence of the LL's inability to rent the apartment for the legal registered amount in the present market. A preferential rent can function as a concession, reimbursement, or compensation paid to a tenant and as such its value is derived from amount of the initial rent discount and also the duration that the preferential rent is in effect. As such, a preferential rent might be effective as an example, for 10 years, or in perpetuity. Any policy change on the part of DHCR to alter preferential rents from being restrained by RGB increases would arbitrarily, carelessly, and irresponsibly destroy their real present value to both tenants and landlords.



... regarding Fact Sheet 26:

I heard back from DHCR on this topic, and they referred me to Fact Sheet 26 (Guide to Rent Increases for Rent Stabilized Apartments in New York City). Section 2a states:

When a tenant signs a renewal lease, the legal regulated rent adjustment for the renewal lease will only be the adjusment for a one or two-year lease cited in the chart below. However, if the owner is collecting a preferential rent and continues to offer it upon renewal, the owner can increase it by the New York City Rent Guidelines Board adjustment or any amount that does not bring the preferential rent above the newly
increased legal regulated rent.



The above DHCR text appears vaguely worded to the degree that it doesn't accurately describe which situation it's referring to:
a.) Where a preferential rent had been offered for a fixed lease term only and whereby it expires with the ending of the previous lease term. The LL wishes to offer another preferential lease for the subsequent lease term, in which case the LL can add whatever percentage of rent increase he wishes, to arrive at a new preferential rent amount.
b.) Whereby a preferential rent is still in effect for x number of subsequent years and/or in perpetuity, and as such the rental increase is thus governed by the current RGB increase.
c) other?

if the purpose of the DHCR Fact Sheets are to provide clarity, this one certainly has failed to do so.

another preferential lease for the subsequent renewal term.
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