High Rent Vacancy: Not Actually Automatic Deregulation

Contributors’ Corner Post from
New York
Apartment Law Insider:
High Rent Vacancy:
Not Actually Automatic Deregulation
Vendome Real Estate Media | 2014 | All Rights Reserved
www.apartmentlawinsider.com

High Rent Vacancy:
Vendome Real Estate Media | 2014 | All Rights Reserved
Guest Contributor:
Adam Leitman Bailey, Esq.
Attorney at Law
Email: alb@alblawfirm.com
Website: www.alblawfirm.com

High Rent Vacancy:
Throughout the residential housing industry, there
is dangerous ignorance of the amendments
promulgated this year, amending the Rent
Stabilization Code. All owners should be reading as
much as possible about these amendments.
Business is simply not the same as it was.
Vendome Real Estate Media | 2014 |
All Rights Reserved | www.apartmentlawinsider.com

One of the massive changes is in the notice that an
owner must give to a new tenant immediately
after deregulating the premises for rent that has
gone above the $2,500 threshold. Prior to 2014, it
was enough for the landlord to furnish the new
tenant with a copy of the annual rent registration
immediately following the deregulation. Under the
old rules, the owner delivered it to the new tenant
the later of 30 days after the registration or 30
days after signing a lease with the new tenant.
That requirement is preserved.
High Rent Vacancy:

However, the new regulation adds an additional
requirement. Now, in addition to sending that
copy of the registration notice, the landlord must
also send a new notice promulgated by the DHCR
as part of the new regulations. The DHCR has
published this form at
http://www.nyshcr.org/Rent/RentCodeAmendments/HRVD-N-SJ.pdf.
High Rent Vacancy:

The owner must provide the form to the tenant
within the earlier of 30 days after the
commencement of the tenancy or 30 days after
signing the lease. Prudent landlords have been
giving these forms to tenants right at the lease
signing. If the owner acted wisely, the owner was
already preparing the form while the apartment
was still vacant.
High Rent Vacancy:

While generally speaking, the regulations are
contrary to ownership interests, the advantage to
the landlord side of the industry that this form
provides is that landlords can download this form
from the DHCR prior to renovating an empty
apartment in order to get a clearer idea of the
kinds of things that will and will not qualify for
Individual Apartment Improvements (IAI) of a kind
that will legally help raise the rent above the
$2,500 threshold..
High Rent Vacancy:

The calculations on the form not only list the
specific charges that the DHCR recognizes as
qualified for IAI treatment, but they set forth all of
the other allowances that a landlord would be able
to claim under normal circumstances, such as
those allowances for vacancy, long-term tenancy
by the departing tenant, and minimum increases..
High Rent Vacancy:

The form does not, however, as to any of these
increases, offer legal advice as to what
circumstances would allow or disallow any of
these increases, including those for specific
improvements. Only a solid knowledge of the
DHCR and judicial precedents can provide that..
High Rent Vacancy:

While the form has room for “other,” that can be
something of a trap. If the landlord includes in “other”
things like painting, refinishing the floors, and
repairing anything, those amounts will not be allowed.
While under previous law those kinds of things would
have passed under the radar, now there is reasonable
assurance that anyone with solid knowledge of the
area reviewing the form will disallow such items. This
is problematic as the form calls for bulk costs of parts
and labor broken out only as to the bathroom, kitchen,
and the apartment as a whole.
High Rent Vacancy:

It does not call for itemization of the actual costs
per item. However, owners must indeed possess
such itemizations and in far greater detail than
that called for by the form. Not only must the
owner be able to break down the expenditures in
exquisite detail, but the owner must also keep the
bills, invoices, and canceled checks for the same.
This detailed form does not change that and does
not relieve it. Rather, it underscores it.
High Rent Vacancy:

Like for the predecessor procedures, no one
automatically reviews these forms. The highly
feared “Tenant Protection Unit” (“TPU”) had
already been in existence for some years prior to
the development of these forms. However, the
TPU does not automatically review them; nobody
does. How, when, and against whom the TPU acts
is a closely guarded secret inside the DHCR. It
therefore relies heavily on fear of its waiting to
pounce as an inducement to landlords to play by
the rules
High Rent Vacancy:

The extent of the success this campaign of fear is
undocumented, at least publicly. However, it is clear
that the development of the new regulations and the
design of this new form were both intended to make
the TPU’s job easier. Therefore, every time an owner
prepares one of these forms, the owner should
assume that this very form is to be the one that will be
subject to a random audit. According to the DHCR’s
own documentation, it strongly suspects that much
high rent deregulation is fraudulent. It has warned the
industry that it plans to look more deeply into these
matters in the future.
High Rent Vacancy:

If the TPU, the regular parts of the DHCR (upon
complaint from a tenant), or the courts in virtually
any kind of proceeding find that the
documentation the owner has preserved does not
justify the figures set forth on the form, not only
will the apartment remain under regulation for
this tenant, but the landlord may face crippling
awards for overcharges. The form itself contains
contact information for the DHCR, at least
theoretically encouraging tenants to contact the
DHCR to ask for an audit.
High Rent Vacancy:

Actual practice has shown that when an
apartment looks like it has been heavily renovated,
tenants are unlikely to effect such contact, but
conversely if the apartment looks shabby, tenants
are indeed likely to contact the DHCR, particularly
if they have had conversations with other tenants
in the building who have successfully challenged
the owner before the DHCR.
High Rent Vacancy:

Most analysts see these new forms as an
administrative burden, and indeed that is, in large
measure, true. But it is not the whole story. They
also provide a central place an owner can gather
its legitimate data and take those precautions
necessary to survive an audit unscathed. They may
not be exactly an opportunity, but they are at least
a focus for self-protection.
High Rent Vacancy:

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High Rent Vacancy: Not Actually Automatic Deregulation

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