November 2023 Insights
By Eileen O’Toole, Esq., Contributing Editor
As announced last month, the DHCR published amendments to the Rent Stabilization Code (RSC) in the NY State Register on Nov. 8, 2023 (LVT #32912), which is the date they became effective. At press time, amendments to the rent stabilization and rent control laws that were approved in June 2023 by the New York State Legislature remain unsigned by Governor Hochul. The deadline for the governor’s approval is Dec. 31, 2023.
While a large portion of the RSC revisions amend the code to conform with Rent Stabilization Law (RSL) changes made by HSTPA in 2019, provisions concerning newly created apartments that result by combining or dividing existing units also have been added to the RSC although not addressed in the HSTPA amendments to the RSL. The new RSC amendments eliminate the ability to set a “first rent” for new apartments that then become subject to rent-stabilized rent increases. Instead, the new regulations significantly restrict how the initial rents for new apartments may be established, even if a former rent-stabilized unit is combined with a lawfully deregulated apartment. These particular RSC amendments appear to have no basis in the existing RSL, although amendments to the law awaiting action by the governor would add similar restrictions to the governing law.
The DHCR’s Tenant Protection Unit (TPU) continues to pursue owners found to be in widespread violation of the Rent Stabilization Law. In an action commenced by TPU claiming RSL violations in an owner’s 38 buildings (LVT #32956), the court ruled against the owner who sought to compel TPU to produce certain records the agency withheld in pre-trial discovery. The court found that since this was a law enforcement proceeding by the DHCR, the agency was entitled to withhold information it properly deemed privileged.
The “confusion and consternation” (see LVT #32962) relating to rent overcharge claims involving alleged fraudulent schemes to deregulate apartments appears to continue despite some recent Appellate Division rulings. Following Thomas v. 500-566 Hudson LLC (LVT #32922), where the First Department appeals court held that J-51 building tenants failed to present sufficient proof that the owner engaged in a fraudulent scheme to deregulate apartments, the First Department addressed the issue again in Aras v. B-U Realty Corp. (LVT #32964), another case involving overcharge claims by tenants in a J-51 building. In Aras, the appeals court ruled that all elements of fraud must be established in order to expand the lookback period and invoke the default formula, and that tenants had failed to meet that burden.
In a subsequent housing court eviction case based on nonpayment of rent, 41-47 Nick LLC v. Odumosu (LVT #32962), a rent-stabilized tenant claiming fraudulent rent overcharge asked the court to permit discovery reaching back to 1993. Citing Thomas and Aras, the court found that the tenant didn’t adequately explain why he hadn’t previously addressed any rent registration discrepancies. The court decision includes discussion of potential instances where the applicability of the Thomas and Aras court rulings could be questionable and noted that State Assembly Bill A06216 of 2023, if signed into law by the governor, would clarify and codify the standard for applying a fraud exception and make any confusion “moot.”
Several recent housing court decisions continued to address issues concerning added pandemic era tenant protections. For example, in Rizq Properties Corp. v. Brooks (LVT #32970), the court vacated a stipulation between the owner and tenant granting possession to the owner, finding that the agreement impermissibly waived COVID-era ERAP rights to an unrepresented tenant. See also First Housing Co. Inc. v. Diaz (LVT #32966), where the court found a stipulation between the parties to lift an ERAP stay invalid where the agreement hadn’t been so-ordered by the court.