New York’s first step towards rent regulation can be traced back to the 1920s.[1] The history of rent control in New York has been a battle between owners and tenants for quite some time. In general, rent controlled apartments must be in buildings of three or more units constructed on or before February 1, 1947 and tenants must have occupied their apartment since at least July 1, 1971.[2] Under rent control, the maximum rent is determined by statute, through the Maximum Base Rent formula.[3] The Maximum Base Rent formula allows a landlord to increase monthly rent charges in order to recoup the costs of owning the building.[4] In addition, hardship increases may be allowed in specific circumstances, including when there is substantial rehabilitation to the building, and to recover the cost of major capital improvements.[5] When a rent-controlled apartment becomes vacant, it is subject to rent stabilization, or, if it does not meet the requirements of rent stabilization, it is deregulated entirely. If a rent-controlled apartment becomes vacant, and the maximum legal rent exceeds $2,000.00 instead of remaining under rent stabilization, the unit is deregulated.
Under the NYC Rent Stabilization Law, rent-stabilized apartments are subject to certain statutory rent increases, including a 20% increase for a two-year lease upon vacancy.[6] In addition, rent Stabilization Law §26-504.2 [a] provides for the deregulation of rent-stabilized apartments that reach a threshold of legal regulated rent. Specifically, 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.”[7]
Owners have been abiding by Rent Stabilization laws for years but, when Richard Altman decided to sue his owner for illegally deregulating the unit he leased in 2003 by counting the 20% rent increase allowed by statute to push his rent over the $2,000.00 threshold, uncertainty spread throughout New York. For apartments involuntarily placed under rent regulation in New York City, those regulations were removed when a vacant apartment crossed a certain rent level. However, previously unresolved in the case law was whether, in order to effect deregulation, that rent level had to be reached during the tenancy of the last tenant prior to vacancy, or could be reached through implementation of various increases allowed to owners between two actual tenancies, such as the 20%.
Initially, in 2015 the New York Appellate Division for the First Department ruled in favor of Richard Altman, holding that although the owner was entitled to a 20% rent increase for Altman’s initial lease, that increase did not serve to deregulate the apartment because the rent was not over $2,000.00 at the time the prior tenant vacated the premises. The decision by the Appellate Division caused mass uncertainty by owners and tenants who had been previously deregulated by the 20% increase. Tenants believed they had won and were ready to start filing lawsuits to return their units to rent stabilized and collect damages for over paid rent. While tenants were excited about the court’s ruling the decision left landlords in a very difficult position because they had previously followed the law by including the 20% to deregulate the apartments and were facing potentially thousands of dollars in back-pay to tenants and thousands of apartments being re-stabilized. However, the Altman decision was appealed and heard by the New York Court of Appeals.
Read full article here : https://sewellnylaw.com/landlord-tenant-battle-nyc-rent-stabilization
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