Rent-Stabilized Apartments May Be Subject to Vacancy Deregulation Pre-HSTPA After Temporary Exemption

Tenants filed a class action against landlord, claiming rent overcharge. The building had been temporarily exempt from rent stabilization on the base rent date four years earlier when it was owned by Brooklyn Law School and used mostly for student housing. Landlord argued that any apartment initially rented to new tenants at rents above the deregulation threshold after it purchased the building should be deemed vacancy deregulated.

The court agreed with landlord, finding that, while Rent Stabilization Code (RSC) Section 2520.11(r)(5), as amended, contemplates a unit's return to rent stabilization following temporary exemption, and provides a formula to determine the applicable legal regulated rent chargeable to the first tenant, the amended code provision must be read in conjunction with the applicable version of RSC Section 2520.11(r)(5), which exempted from rent stabilization at the time in question apartments that became or become vacant on or after Jan.  24, 2011, with a legal regulated rent of $2,500 or more. The court found no prohibition against vacancy deregulation if the next legal rent was above the then-applicable deregulation threshold. The court also denied tenants' claim that landlord fraudulently deregulated rents, finding that because reliable legal regulated rents could be established using the formula set forth in RSC Section 2526.1(a)(3)(iii), and there was no allegation that landlord's conduct was geared toward tainting the reliability of the last registered rents, there was no need to apply a default formula to calculate the legal regulated rents for tenants. 

Connors v. Kushner Companies LLC: Index No 522076/17 (Sup. Ct. Kings; 8/6/21; Walker, J)[18-pg. document]