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Does sublet allowance apply to preferential rent?

NYC Rent Regulation: Rent Control/Rent Stabilized, DHCR Practice/Procedures

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Does sublet allowance apply to preferential rent?

Postby wiivile » Tue Jun 26, 2018 1:09 am

If my rent stabilized apt has a legal rent of $5,000, but a preferential rent of $1,000, and I am seeking to sublet it for a year, does the 10% sublet allowance apply to the preferential rent of $1,000? If so, is it 10% of the legal rent ($5,000) on top of the $1,000 (=$1,500) or 10% of the preferential rent ($1,000) on top of the $1,000 (=$1,100) that is applied and can be passed onto the subtenant?
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Re: Does sublet allowance apply to preferential rent?

Postby TenantNet » Tue Jun 26, 2018 5:08 am

There's no official answer to this that I can see, but the sublet allowance (set by the RGB every year, refers to section 2525.6(e) of the RSC) appears to be on top of the legal regulated rent and payable to the owner.

So that would be 10% of the legal regulated rent. Of course the LL might not realize this and might not charge for it. But be careful, he might wake up a few months into the sublet and try to charge the allowance back to the beginning of the sublet. Either way make sure the sublet is aware of this possibility.

BTW, if your legal rent is really $5,000, you should really do some research as how it go to that point.
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Re: Does sublet allowance apply to preferential rent?

Postby wiivile » Tue Jun 26, 2018 10:57 am

According to the Preferential Rent fact sheet #40 by DHCR, the sublet allowance is based on the legal rent. But I guess what I don't know is if the sublet allowance passes on to the preferential rent in effect during the existing lease.

So if my legal rent is $5,000, and my preferential rent is $1,000, the sublet allowance would allow the legal rent to increase to $5,500... but would it affect the preferential rent? I don't see how it could, since the preferential rent overrides the legal rent for the duration of that lease...

But, if I'm trying to find a subtenant, is it risky for me to advertise the place for $1,000? What if the landlord demands an extra $500/month (10% of the legal rent) from me/the subtenant?
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Re: Does sublet allowance apply to preferential rent?

Postby wiivile » Tue Jun 26, 2018 12:03 pm

Follow-up question: is the landlord even bound by the preferential rent in the case of the sublet (for the remainder of the existing lease, of course)? Or can they require that a subtenant pay the full legal rent? Of course, if the landlord isn't bound by the preferential rent in the case of a sublet, then the answer to my first question is obvious that the landlord could charge up to $5,500 in my example.
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Re: Does sublet allowance apply to preferential rent?

Postby TenantNet » Tue Jun 26, 2018 1:45 pm

Or it could be added to the PR, for a total of $1500. I agree that the PR continues for the duration of the existing lease. But if the LL options out of it at the next renewal, then you (and the sublet) are back up to the $5K.

Have you called DHCR to see what they say? As for the potential sublet, what you should do is be transparent and lit him/her know of what could happen.
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Re: Does sublet allowance apply to preferential rent?

Postby wiivile » Tue Jun 26, 2018 3:35 pm

I called DHCR and they said, after consulting with an opinion letter from one of their attorneys (they had an opinion letter on hand about this very issue? I don't understand), that preferential rent might not apply to subtenants, and the landlord might be able to charge up to the legal rent plus the 10% sublet allowance (in my example $5,000+10%=$5,500) if subletting. That seems like a strangely landlord-friendly response from DHCR (not that I have any experience in dealing with them). I'm not sure I agree with them...
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Re: Does sublet allowance apply to preferential rent?

Postby TenantNet » Tue Jun 26, 2018 3:58 pm

Do you have a copy of this Opinion Letter? Can you send us a PDF by attaching it using Private Mail (the PM button on the left of each post). DHCR should be able to send it to you by email. If you have the Opinion Letter date and number you can FOIL it from DHCR.
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