preferred rent

[jwskatz]

Who can explain what this term means? Is it a legal term that I can use with my landlord in order to negotiate a new rent increase in my rent stabalized Brooklyn apartment? I would appreciate if it is a legal term if someone can direct me to information regarding this law.

[vicric]

"Preferential rent" is indeed a legal term, and quite a loaded one. See:

9 NYCRR 2521.2

That statute implies that once a preferential rent is negotiated between tenant and landlord, it supersedes the legal regulated rent until a new tenant takes possession.

However, two courts have overruled that interpretation:

Century Corp. v. Popolizio, 60 N.Y.2d 483 (1983), 470 N.Y.S.2d 346, 458 N.E.2d 805. (That's the Court of Appeals, in Albany.)

Missionary Sisters of the Sacred Heart v. NY State Division of Housing and Community Renewal, 283 A.D.2d 284 [1st Dept 2001], 724 N.Y.S.2d 742.

The courts ruled that the preferential rent may be limited in time only if the lease states: a) the legal regulated rent; b) a preferential rent lower than the regulated rent; c) a time-dependent reason for the lower rent, or simply the length of time for which the lower rent shall prevail.

If the lease cites the preferential as a percent discount -- say, 90% of the legal regulated rent -- then the landlord may collect the Board-approved increase at the end of the lease. (See Century Corp.) But if the preferential rent is a dollar amount, the landlord would have a difficult time collecting any increase until the explicitly stated time limit expires. (See Missionary Sisters.)

I am the original rent-stabilized tenant in the apartment I have just moved into. The lease specifies what it calls a "preferential rent," which will be $100 greater next year and another $100 greater in the third year, after which the legal regulated rent will prevail.

But the lease states no legal regulated rent! According to statute, the initial rent-stabilized lease must establish the initial regulated rent, subject to the tenant's Fair Market Rent Appeal.

Furthermore, the landlord had no way of knowing what the legal regulated rent will be in the future. Therefore there is no way of knowing whether the so-called "preferential" rent will be lower than the regulated rent two years from now.

That is, the lease effectively attempts to postpone any legal regulated rent for three years.

The landlord probably realized his error. His Initial Apartment Registration cites the "preferential" rent as the legal regulated rent, and he cites a two-year lease. Of course, I have challenged the registration with my Fair Market Rent Appeal. But the complexity of this issue -- the landlord's blunder is apparently unprecedented -- may take us to Housing Court when the present lease expires, in one year.

To check the status of my appeal go to:

http://dhcr.state.ny.us/CaseStatus/docket.asp

and type in the docket number QE410009TC.

Note that the DHCR has changed the nature of my appeal to "tenant challenge," or TC. I believe that's a new type of tenant action. I have located only six other such types -- four in Manhattan and two in Brooklyn -- all docketed in May 2002.