Automatic deregulation of RS

[gingerginger]

First, let me express my gratitude for all of the amazing posts and replies on this website. It has been very helpful. The archived cases are super helpful.

My question is regarding deregulation of a rent stabilized apartment once it crosses a deregulation threshold before HSTPA of 2019.

I have read the Rent Act of 2011 and 2015, and more from the past, but cannot find the words that state exactly that an apartment is automatically deregulated even if the landlord did not deregulate it on purpose.

Can you help direct me to where I should be looking? Should I be looking at lawsuits cases? Or a specific law or amendment?

I have read in one example, if a tenant's legal regulated rent is above the deregulation threshold for their rent stabilized apartment, then after they move out, the next tenant's apartment can be deregulated, but is this a must or can be?

What happens if the landlord did not want to deregulate the apartment, and continue with a rent stabilized lease with lower preferential rent and a higher regulated rent?

Thanks in advance.

[TenantNet]

We had written an entire reply, then there was a problem and it crashed. Don't have time to re-write it now. Bottom line, we think deregulation was always an option (not required) if the legal rent exceeded the threshold. I don't think there is the wording you seek.

[gingerginger]

Thank you for your quick reply! This is helpful.

[gingerginger]

If it helps anyone else, found this NY Times Q&A (from 2005 or 2007) which may support your comment that deregulation was always an option:

https://www.nytimes.com/2005/02/27/real ... ation.html

Q. I live in a rent-stabilized apartment and pay $1,950 a month. With my next lease renewal, which comes in 2007, the rent will exceed $2,000. Does that mean my apartment is removed from stabilization at the time of the lease renewal in 2007, or will the apartment be taken out of stabilization at the beginning of the next renewal in 2009? . . . Ryo Hayashi, Manhattan.

A. Lucas A. Ferrara, a Manhattan real estate lawyer, said that occupied rent-regulated apartments in which the legal rent is $2,000 or more may be deregulated only if the tenant's adjusted gross annual household income exceeds $175,000 in each of the two preceding calendar years. (A vacant stabilized apartment is deregulated if the rent is $2,000 or more.)

If the letter writer's annual household income is less than $175,000, the landlord cannot deregulate the apartment just because the rent reaches $2,000, Mr. Ferrara said. Even if the writer met the income threshold for two years running, and the rent reaches $2,000, deregulation is not automatic.

"A landlord is required to serve a tenant with an income certification form on or before May 1 of a given year," Mr. Ferrara said, adding that if, after the form is returned, the landlord believes the apartment is eligible for deregulation, he must file a deregulation petition with the State Division of Housing and Community Renewal no later than June 30 of that same year.

If a tenant does not respond within 30 days, the landlord can file the petition, and the agency asks state tax officials to review the tenant's tax returns. "If a landlord misses this window period, the process is delayed until the following year," he said.

So if the rent reaches $2,000 on or before May 1, 2007, and the landlord has served the income certification form and determined that the tenant's household income exceeded $175,000 in the preceding two years, the landlord can apply for deregulation until June 30.

But if the rent reaches $2,000 after May 1, the landlord would have to wait until the next year to file the certification form and the deregulation petition. The deregulation becomes effective only when the state agency issues a deregulation order.

[TenantNet]

That talks about High Income Deregulation, which is a different animal than High Rent Deregulation.

[gingerginger]

Thank you for helping me see that they are different situations.

Found this, pasted below. Could this be a "smoking gun" to prove that deregulation is not automatic? I added the asterisks to highlight the text:

***

"[A]partments [are] not automatically deregulated when the tenant was paying over $2000 a month" (Tribeca M. Corp. v. Haller, 2003 NY Slip Op 51271(U), (Civ Ct, NY County 2003). "The courts required the landlords to file the appropriate documents with the DHCR, serve notice on the tenant, or obtain a DHCR determination that the apartments are not subject to rent regulation" (id.).

***

https://casetext.com/case/anderson-v-ny ... bsd-realty

Anderson v. N.Y. State Div. of Hous. & Cmty. Renewal & 192 BSD Realty, 2023 N.Y. Slip Op. 31970 (N.Y. Sup. Ct. 2023)
Opinion
Index No. 500086/2021
06-12-2023
CHERYL ANDERSON, Petitioner, In a Proceeding Pursuant to Article 78 of the CPLR v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL and 192 BSD REALTY LLC, Respondent.

Wayne P. Saitta Judge
Unpublished Opinion
MS #1 and MS #2
PRESENT: Hon. Wayne P. Saitta, Justice. 
DECISION AND ORDER
Wayne P. Saitta Judge

The following papers numbered on this motion: NYSCEF Doc Numbers
Notice of Motion/Order to Show Cause/ Petition/Cross Motion and Affidavits (Affirmations) Annexed ................1-3, 35, 31
Answering Affidavit (Affirmation)..........................................................................................................................22, 37
Reply Affidavit (Affirmation)..................................................................................................................................38, 48
Supplemental Affidavit (Affirmation) Pleadings -Exhibits.........................................................................................4-16, 26-27, 32-33, 39-40

Petitioner, CHERYL ANDERSON, brings this CPLR Article 78 Petition challenging a New York State Division of Housing and Community Renewal's ("DHCR") Order and Opinion Granting Petition for Administrative Review ("PAR") issued November 6, 2020, revoking the Rent Administrator's Order, issued October 10, 2018, which found a rent overcharge. Petitioner seeks an Order vacating DHCR's PAR Order and restoring the  Rent Administrator's Order. At issue is whether DHCR's PAR decision to revoke the Rent Administrator's Order Finding Rent Overcharge and finding that the subject apartment is not subject to rent stabilization was arbitrary or capricious.

Respondent DHCR cross-moves to remand the Article 78 proceeding to DHCR for further review and processing of the PAR.

Respondent 192 BSD REALTY LLC (Respondent Landlord) is the owner and landlord of the subject building, 192 Jefferson Street, Brooklyn, NY 11206. Petitioner is the current tenant of Apartment 2R ("the Apartment") in the subject building. Petitioner moved into the Apartment in March of 2014 as the roommate of the prior tenant, Lawrence Quintana. Respondent DHCR is the New York State Administrative Agency responsible for enforcing the Rent Stabilization Law and Code.

On May 31, 2013, Mr. Quintana filed a rent overcharge complaint with DHCR. On October 4, 2018, DHCR's Rent Administrator issued an Order Finding Rent Overcharge determining that the subject apartment was subject to Rent Stabilization, that the collectible rent was $1,675.00 per month, and that Mr. Quintana was owed $6,150.00 which includes $4,100.00 in treble damages.

On November 2, 2018, Respondent Landlord filed a PAR challenging the Rent Administrator's Order. The Petition argued that DHCR properly found that the subject apartment was exempt from rent stabilization because, pursuant to Section 2526.1(a)(3)(iii) of the post-2014 Rent Stabilization Code ("RSC"), the apartment was vacant on the base date and the first tenant thereafter signed a lease with a preferential rent of $1,650.00 and a rider claiming that the legal regulated rent had exceeded the $2,000.00 vacancy deregulation threshold. On February 12, 2020, DHCR's Deputy Commissioner issued an Order remanding the proceeding to the Rent Administrator. 

On November 6, 2020, DHCR's Deputy Commissioner issued an Order granting Respondent's PAR and determined that the subject apartment is not subject to Rent Stabilization and therefore DHCR does not have jurisdiction to consider the rent overcharge complaint or the tenant's subsequent Affirmation of Non-Compliance.

Petitioner then commenced this CPLR Article 78 proceeding challenging the November 6, 2020, PAR Order. It is well settled that an entity subject to an administrative decision may challenge such determination pursuant to Article 78 of the CPLR. Under Article 78, this Court has the power to grant Petitioner the relief it is entitled to (CPLR § 7806). However, this Court cannot vacate an administrative decision if the decision was rational and not arbitrary and capricious (Pell v. Board of Education of Union Free School, 34 N.Y.2d 222 [1974]). If the reviewing court finds that the agency determination has a rational basis, the determination must be sustained (Matter of Navaretta v. Town of Oyster Bay, 72 A.D.3d 823 [2d Dept 2010]). Additionally, an agency's interpretation of the statutes and regulations that it administers is entitled to deference and must be upheld if reasonable (508 Realty Assocs., LLC v. New York State Div. of Hous. &Cmty. Renewal, 61 A.D.3d 753, 755 [2d Dept 2009]).

The decision dated November 6, 2020, granting the PAR, must be reversed because it is based on an erroneous interpretation of the Rent Stabilization Law and the Court of Appeals holding in Altman v. 285 West Fourth LLC, 31 N.Y.3d 178 [2018].

The Deputy Commissioner stated that the apartment was deregulated because the first rent agreed to after the vacancy exceeded $2,000.00.

However, the Rent Stabilization Law provides that an apartment becomes deregulated after a vacancy when the legal stabilized rent was $2,000.00 or higher at the time of the vacancy, or when an apartment becomes vacant and the available statutory increases applicable to the  apartment after the tenant's vacancy raise the rent to $2,000.00 or more (Altman v. 285 West Fourth LLC, 31 N.Y.3d 178).

"Rent Stabilization Law § 26-504.2(a) provides that deregulation will apply to:
any housing accommodation which becomes vacant on or after [April 1, 1997] and before the effective date of the rent act of 2011 and where at the time the tenant vacated such housing accommodation the legal regulated rent was two thousand dollars or more per month; or, for any housing accommodation which is or becomes vacant on or after the effective date of the rent regulation reform act of 1997 and before the effective date of the rent act of 2011, with a legal regulated rent of two thousand dollars or more per month (Rent Stabilization Law § 26-504.2[a] [emphasis added])" (id. at 184-185).

Thus, it is the legal stabilized rent at the time of the vacancy plus any legally applicable increases, not the first post vacancy rent agreed to, that determines whether the apartment is deregulated.

Here, as in Altman, the vacancy increase should be considered in determining the legal regulated rent at the time of the vacancy if applicable. The base date is May 31, 2009.

Respondent Landlord claims that the apartment was vacant on this date and therefore is entitled to a vacancy increase of 16% which was the vacancy increase percentage for a one-year lease at the time of the alleged vacancy in May of 2009.

Petitioner argues that there is no proof in the record that the apartment was vacant on the base date. Respondent Landlord submitted a one-year lease beginning August 15, 2009 as proof that the apartment was vacant on the base date since a lease did not begin until August of 2009.

However, Respondent Landlord did not file a rent registration for the year 2008 and then filed as "Exempt" in 2009. As there is no rent history for 2008, it cannot be determined whether the apartment was in fact vacant on the base date. 

Even assuming the apartment was vacant on the base date and Respondent Landlord is entitled to the vacancy increase of 16%, the last recorded rent history was $1,266.00 in 2007. Applying the 16% vacancy increase to the last recorded rent would bring the rent to $1,468.56 which does not bring the legal regulated rent over the $2,000.00 threshold to deregulate the apartment and Respondent Landlord never demonstrated that the legal regulated rent went over the $2,000.00 threshold to deregulate the apartment.

Further, Respondent Landlord did not file rent registration in 2008 to demonstrate that the legal regulated rent went over the $2,000.00 threshold to deregulate the apartment.

Instead, Respondent Landlord filed the apartment as "Exempt" in 2009 without demonstrating how it became exempt. Therefore, the legal regulated rent is frozen at $1,266.00 which was the last recorded rent registration in 2007.

***
"[A]partments [are] not automatically deregulated when the tenant was paying over $2000 a month" (Tribeca M. Corp. v. Haller, 2003 NY Slip Op 51271(U), (Civ Ct, NY County 2003). "The courts required the landlords to file the appropriate documents with the DHCR, serve notice on the tenant, or obtain a DHCR determination that the apartments are not subject to rent regulation" (id.).

***

Owners of rent-stabilized buildings must file an annual registration containing "the current rent for each housing accommodation not otherwise exempt [from rent stabilization], a certification of services, and such other information as may be required by the DHCR" (RSC [9 NYCRR] § 2528.3[a]). The failure to "properly and timely" comply with the registration requirement results in the rent being frozen at the amount of the  legal regulated rent in effect on the date of the last preceding registration statement (id. at § 2528.4).

By reason of the foregoing, this Court finds that the apartment is still subject to Rent Stabilization, that DHCR's determination was arbitrary and capricious, and that the legal regulated rent remains the last registered rent of $1,266.00.

WHEREFORE, it is ORDERED that Petitioner' Petition is granted; and it is further
ORDERED, that Respondent DHCR's November 6, 2020, order (Administrative Review Docket No. IS210034RK) is vacated;

and it is further ORDERED, Respondent DHCR's dismissal of Petitioner's December 3, 2018, rent overcharge complaint is reversed and remanded to DHCR for determination;

and it is further ORDERED, that Respondent DHCR's cross-motion is denied.
This constitutes the decision and order of the Court.

[gingerginger]

Could this prove that the landlord was supposed to follow a specific procedure (before 2009) in order to deregulate a rent stabilized apartment? And if the landlord did not do this, and if the landlord did not willfully deregulate a rent stabilized apartment, then could this help a case to prove that an apartment is still rent stabilized?

Here is the link:
https://law.justia.com/codes/new-york/2 ... 504.2.html

*** b. The owner of any housing accommodation that is not subject to this law pursuant to the provisions of subdivision a of this section or subparagraph k of paragraph 2 of subdivision e of section 26-403 of this code shall give written notice certified by such owner to the first tenant of that housing accommodation after such housing accommodation becomes exempt from the provisions of this law or the city rent and rehabilitation law.
***

* § 26-504.2 Exclusion of high rent accommodations.

a. "Housing accommodations" shall not include any housing accommodation which becomes vacant on or after April first, nineteen hundred ninety-seven and where at the time the tenant vacated such housing accommodation the legal regulated rent was two thousand dollars or more per month, or any housing accommodation which is or becomes vacant on or after the effective date of the rent regulation reform act of 1997 with a legal regulated rent of two thousand dollars or more per month.

This exclusion shall apply regardless of whether the next tenant in occupancy or any subsequent tenant in occupancy actually is charged or pays less than two thousand dollars a month.

Provided however, that this exclusion shall not apply to housing accommodations which became or become subject to this law (a) by virtue of receiving tax benefits pursuant to section four hundred twenty-one-a or four hundred eighty-nine of the real property tax law, except as otherwise provided in subparagraph (i) of paragraph (f) of subdivision two of section four hundred twenty-one-a of the real property tax law, or (b) by virtue of article seven-C of the multiple dwelling law.

This section shall not apply, however, to or become effective with respect to housing accommodations which the commissioner determines or finds that the landlord or any person acting on his or her behalf, with intent to cause the tenant to vacate, engaged in any course of conduct (including, but not limited to, interruption or discontinuance of required services) which interfered with or disturbed or was intended to interfere with or disturb the comfort, repose, peace or quiet of the tenant in his or her use or occupancy of the housing accommodations and in connection with such course of conduct, any other general enforcement provision of this law shall also apply.

b. The owner of any housing accommodation that is not subject to this law pursuant to the provisions of subdivision a of this section or subparagraph k of paragraph 2 of subdivision e of section 26-403 of this code shall give written notice certified by such owner to the first tenant of that housing accommodation after such housing accommodation becomes exempt from the provisions of this law or the city rent and rehabilitation law.

***
Such notice shall contain the last regulated rent,
the reason that such housing accommodation is not subject to this law or the city rent and rehabilitation law,

a calculation of how either the rental amount charged when there is no lease or the rental amount provided for in the lease has been derived so as to reach two thousand dollars or more per month,

a statement that the last legal regulated rent or the maximum rent may be verified by the tenant by contacting the state division of housing and community renewal, or any successor thereto,

and the address and telephone number of such agency, or any successor thereto. Such notice shall be sent by certified mail within thirty days after the tenancy commences or after the signing of the lease by both parties, whichever occurs first or shall be delivered to the tenant at the signing of the lease.

In addition, the owner shall send and certify to the tenant a copy of the registration statement for such housing accommodation filed with the state division of housing and community renewal indicating that such housing accommodation became exempt from the provisions of this law or the city rent and rehabilitation law, which form shall include the last regulated rent, and shall be sent to the tenant within thirty days after the tenancy commences or the filing of such registration, whichever occurs later.
***

* NB Expires April 1, 2009

[gingerginger]

Also found this on your website:

***
(J) UPON THE ISSUANCE OF AN ORDER OF DECONTROL BY THE
DIVISION, HOUSING ACCOMMODATIONS WHICH

(Does "upon" mean that DHCR needed to have issued an order, based on the action of a landlord to trigger deregulation? And therefore, If "J" is a no, then "K" is also a no?)

***


http://tenant.net/Rent_Laws/RRRA93/rrra93.html

Sec. 4. Paragraph 2 of subdivision e of section 26-403 of the
administrative code of the city of New York is amended by adding
two new subparagraphs (j) and (k) to read as follows:

(J) UPON THE ISSUANCE OF AN ORDER OF DECONTROL BY THE
DIVISION, HOUSING ACCOMMODATIONS WHICH: (1) ARE
OCCUPIED BY PERSONS WHO HAVE A TOTAL ANNUAL INCOME IN
EXCESS OF TWO HUNDRED FIFTY THOUSAND DOLLARS PER ANNUM
IN EACH OF THE TWO PRECEDING CALENDAR YEARS, AS DEFINED
IN AND SUBJECT TO THE LIMITATIONS AND PROCESS SET FORTH
IN SECTION 26-403.1 OF THIS CHAPTER; AND (2) HAVE A
MAXIMUM RENT OF TWO THOUSAND DOLLARS OR MORE PER MONTH
AS OF OCTOBER FIRST, NINETEEN HUNDRED NINETY-THREE.
PROVIDED HOWEVER, THAT THIS EXCLUSION SHALL NOT APPLY
TO HOUSING ACCOMMODATIONS WHICH BECAME OR BECOME
SUBJECT TO THIS LAW BY VIRTUE OF RECEIVING TAX BENEFITS
PURSUANT TO SECTION FOUR HUNDRED EIGHTY-NINE OF THE
REAL PROPERTY TAX LAW.

(K) ANY HOUSING ACCOMMODATION WITH A MAXIMUM RENT OF TWO
THOUSAND DOLLARS OR MORE PER MONTH AT ANY TIME BETWEEN
THE EFFECTIVE DATE OF THIS SUBPARAGRAPH AND OCTOBER
FIRST, NINETEEN HUNDRED NINETY-THREE WHICH IS OR
BECOMES VACANT ON OR AFTER THE EFFECTIVE DATE OF THIS
SUBPARAGRAPH. PROVIDED HOWEVER, THAT THIS EXCLUSION
SHALL NOT APPLY TO HOUSING ACCOMMODATIONS WHICH BECAME
OR BECOME SUBJECT TO THIS LAW BY VIRTUE OF RECEIVING
TAX BENEFITS PURSUANT TO SECTION FOUR HUNDRED EIGHTY-
NINE OF THE REAL PROPERTY TAX LAW. THIS SUBPARAGRAPH
SHALL NOT APPLY HOWEVER, TO OR BECOME EFFECTIVE WITH
RESPECT TO HOUSING ACCOMMODATIONS WHICH THE
COMMISSIONER DETERMINES OR FINDS THAT THE LANDLORD OR
ANY PERSON ACTING ON HIS OR HER BEHALF, WITH INTENT TO
CAUSE THE TENANT TO VACATE, HAS ENGAGED IN ANY COURSE
OF CONDUCT (INCLUDING, BUT NOT LIMITED TO, INTERRUPTION
OR DISCONTINUANCE OF REQUIRED SERVICES) WHICH
INTERFERED WITH OR DISTURBED OR WAS INTENDED TO
INTERFERE WITH OR DISTURB THE COMFORT, REPOSE, PEACE OR
QUIET OF THE TENANT IN HIS OR HER USE OR OCCUPANCY OF
THE HOUSING ACCOMMODATIONS AND IN CONNECTION WITH SUCH
COURSE OF CONDUCT, ANY OTHER GENERAL ENFORCEMENT
PROVISION OF THIS LAW SHALL ALSO APPLY.

[gingerginger]

Hi,

Found this:
https://rentguidelinesboard.cityofnewyo ... ion-terms/

Deregulation:
Deregulation occurs by action of the owner when an apartment under either rent control or rent stabilization legally meets the criteria for leaving regulation. When an apartment is deregulated, the rent may be set at ‘market rate.’ There are two types of deregulation, High-Rent/High-Income Deregulation and High-Rent/Vacancy Deregulation. With passage of the Rent Laws of 2019, effective June 14, 2019, deregulation was abolished.

Could this prove that deregulation was not automatic for a rent stabilized apartment and needed the action of the landlord to take action to file for deregulation?

[gingerginger]

Also found this, which seems to refer to subparagraph K, that it is upon the action of the landlord / owner to deregulate the rent stabilized apartment:

https://nycadmincode.readthedocs.io/t26 ... n-26-504-2

Chapter 4 - RENT STABILIZATION Section 26-504.2
(from 1997 to 2011, expires April 1, 2015?)

b. The owner of any housing accommodation that is not subject to this law pursuant to the provisions of subdivision a of this section or subparagraph k of paragraph 2 of subdivision e of section 26-403 of this code shall give written notice certified by such owner to the first tenant of that housing accommodation after such housing accommodation becomes exempt from the provisions of this law or the city rent and rehabilitation law. Such notice shall contain the last regulated rent, the reason that such housing accommodation is not subject to this law or the city rent and rehabilitation law, a calculation of how either the rental amount charged when there is no lease or the rental amount provided for in the lease has been derived so as to reach two thousand dollars or more per month or, for a housing accommodation with a legal regulated rent or maximum rent of two thousand five hundred dollars or more per month on or after the effective date of the rent act of 2011, which is or becomes vacant on or after such effective date, whether the next tenant in occupancy or any subsequent tenant in occupancy actually is charged or pays less than a legal regulated rent or maximum rent of two thousand five hundred dollars or more per month, a statement that the last legal regulated rent or the maximum rent may be verified by the tenant by contacting the state division of housing and community renewal, or any successor thereto, and the address and telephone number of such agency, or any successor thereto

[gingerginger]

Found this on the Fordham Law Review 2021
http://fordhamlawreview.org/wp-content/ ... vember.pdf

page 7
footnote 33

33. “Deregulation occurs by action of the owner when an apartment under either rent control or rent stabilization legally meets the criteria for leaving regulation. When an apartment is deregulated, the rent may be set at ‘market rate.’” Glossary of Rent Regulation Terms, N.Y.C. RENT GUIDELINES BD.,

https://rentguidelinesboard.cityofnewyo ... ion-terms/

which refers to the link I posted from Sun Sep 24, 2023 1:26 am

[gingerginger]

Also found this from 2003:

NYC Rent Guidelines Board
Housing NYC: Rents, Markets and Trends 2003
page 139

https://rentguidelinesboard.cityofnewyo ... 03book.pdf

Deregulation: Also known as “Decontrol” or
“Destabilization.” Deregulation occurs by action of the
owner when an apartment under either rent control or
rent stabilization legally meets the criteria for leaving
regulation. When an apartment is deregulated, the rent may
be set at ‘market rate.’ There are two types of
deregulation, commonly referred to as Luxury Decontrol
(also High-Income High-Rent Decontrol) and Vacancy
Decontrol (also High-Rent Decontrol). See these terms
for details.

[TenantNet]

Look, I'm not going to read all this until later - and told you why. But at a minimum, please don't post passages with spaces between letters. Of you're doing OCR before posting, please correct it first. Thanks.

this: Deregulation
not this: D e r e g u l a t i o n

[gingerginger]

Sure thing. I am copying and pasting. The original text had the spacing between letters.

[gingerginger]

Found this:
https://www.landlordvtenant.com/article ... ewal-lease

Tenant of Improperly Deregulated Apartment Entitled to Rent-Stabilized Renewal Lease
September 24, 2023

To obtain high-rent vacancy deregulation in 2003, the landlord had to comply with RSL Section 26-504.2(b) and give notice to the first tenant after exemption and send that tenant a DHCR registration statement, indicating the last regulated rent, the reason the apartment no longer was rent regulated, a calculation of how the rent was calculated to exceed $2,000 per month, a statement that the last legal regulated rent may be verified by contacting the DHCR, and the DHCR's address.

"The high rent vacancy increase of an apartment was never automatic." The DHCR also found that the apartment was improperly registered in 2003.

65 Spring Realty LLC v. DHCR: Index No.
156324/2022, 2023 NY Slip Op 33023(U)(Sup.
Ct. NY; 8/30/23; Sattler, J)