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Apartment was potentially illegally deregulated

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

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Apartment was potentially illegally deregulated

Postby westvillage » Wed Mar 30, 2022 3:34 pm

Hi All,

Just wanted to preface this and say that this is a great community and I've been learning a lot from this and really appreciate this forum!

Context: I moved into my apartment last year and my lease is coming up for renewal soon. I requested my rental history from the Division of Housing and Community Renewal since I had a hunch my unit was previously rent controlled. Turns out it was rent controlled - until 2009. I scanned through the rental history and it was rent controlled from 1984 to 2009 with one tenant. The legal registered rent in 1984 was listed as $69.58 (although I think this means per week because that is ridiculously low per month, even in 1984).

This same tenant stayed in the apartment until 2009 and upon vacancy, the landlord immediately deregulated the apartment and had a listed "actual paid rent" of $1,774.

This is how it's shown:
2008 - *RENT CONTROL - REG NOT REOUIRED*
2009 - Permanently Exempt - 07/31/2009 - HIGH RENT VACANCY -
1744.00 RENT CONC (03/25/2009)
VAC/LEAS (08/15/2010)
2010 - Exempt Apartment - Reg not required

So the landlord used the high rent vacancy deregulation method, however, my question is that is that even possible given that the threshold was $2,000 in 2009 to deregulate an apartment? I've also read on the NYC Building (BIS) site that there was a construction job permit for this apartment in 2008, but it was only listed as $10,000 worth of improvements. I highly doubt the improvements were more than that considering this apartment is tiny and has a kitchenette without a full-sized fridge, no microwave, etc.

Is this a likely case of an illegal deregulation? And if so, is there anything I can do about this?

Any advice is greatly appreciated and feel free to let me know if I can provide some more information or context.
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Re: Apartment was potentially illegally deregulated

Postby TenantNet » Wed Mar 30, 2022 10:09 pm

Thanks for the shout-out.

Make sure that in discussing all this that you understand there's a big difference between rent control and rent stabilized units. When you cite the 1984 rent, that suggests it might have been rent stab (RS), not rent controlled (RC). Were there other rents listed in years beyond 1984? What did the rent history say? (DHCR often gets things wrong though).

Even back in 2009, the threshold for high rent decontrol was $2,000, so this doesn't seem right. Do they list a "legal rent" and a "preferential rent?"

Do you know - or can you figure out - what the actual improvements were?

Illegal deregulation is quite common, and you can go either to the courts, or to DHCR. But you really need to do more research. I would ASAP FOIL from DHCR the rent control cards, any records of Maximum Base Rents, Maximum Collectible Rents, Fuel Surcharges, Fair Market Rent Appeals, the Apartment Detail, and any MCI orders. LLs are supposed to file deregulation with DHCR, but many fail to do so. FOIL that as well.

Get a fuller picture of what has happened to this unit over the years. Also go to the HPD website and grab the i-cards. https://hpdonline.hpdnyc.org/HPDonline/ ... dress.aspx

I would also look at the Dept. of Finance for deeds and mortgages, and Dept. of Buildings for DOB records for the building - and Certificates of Occupancy, if any.

I would do all your research quietly for now, don't let the LL know you're poking around. Just build a case.
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Re: Apartment was potentially illegally deregulated

Postby westvillage » Thu Mar 31, 2022 10:23 am

Thanks for the information - I really appreciate it! I'm going to research this more using those methods.

As for the rent control vs rent stabilized: The rent history says "RC" in 1984 with a legal regulated rent of $69.58 but then for each year from 1985 to 2008 it says *RENT CONTROL - REG NOT REQUIRED*.

For 2009, the year of the deregulation, it shows Permanently Exempt and lists no legal regulated rent or preferential rent. The only rent listed is "Actual Paid Rent', which is $1,744. So there's essentially only two rents listed on the entire rental history, the first one in 1984 that's $69.58 and then in 2009 with $1,744.
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Re: Apartment was potentially illegally deregulated

Postby TenantNet » Thu Mar 31, 2022 11:22 am

These days there are fewer and fewer real RC tenants left as no new one are being created (although some continue through succession). To be RC one has to have lived in the unit for 50 years. Not impossible, but less likely. Plus many just don't know the difference and the press is the biggest culprit in that.

Actually $69.58 doesn't strike me as being that strange. Some LLs never sought rent increases - and then complained that RC was a rent freeze. In fact, since at least 1984, RC rents have gone up at a faster pace than RS rents. That changed in 2019. So is it possible your unit was RC until 2008? Sure, but we have to ask.

Permanently exempt used to mean owner occupancy, but I've seen it referring to deregulated. And if deregulated, there would no longer be a "legal rent." Preferential rent is a creature of RS as it's tied to legal rents. For unregulated units, there can be rent concessions, legally a different thing. I would ask neighbors if the LL or a family member ever lived there.

But again, $1,744 is not above the threshold. It does appear to be an illegal deregulation. But you need to keep sleuthing to see if you missed anything. Why would the unregulated rent be $1,744 and not $1,750? RS rents are a calculated percentage increase, so an odd number like that happens all the time. But that's not the case once deregulated.
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Re: Apartment was potentially illegally deregulated

Postby BubbaJoe123 » Thu Mar 31, 2022 12:02 pm

westvillage wrote:Thanks for the information - I really appreciate it! I'm going to research this more using those methods.

As for the rent control vs rent stabilized: The rent history says "RC" in 1984 with a legal regulated rent of $69.58 but then for each year from 1985 to 2008 it says *RENT CONTROL - REG NOT REQUIRED*.

For 2009, the year of the deregulation, it shows Permanently Exempt and lists no legal regulated rent or preferential rent. The only rent listed is "Actual Paid Rent', which is $1,744. So there's essentially only two rents listed on the entire rental history, the first one in 1984 that's $69.58 and then in 2009 with $1,744.


If the apartment was actually rent-controlled (not stabilized) prior to 2008, then the initial rent after the rent-controlled tenant would be freely negotiated, and, if over $2k (in 2009), then the apartment would have become deregulated. There's a procedure for challenging that initial rent (see here: https://hcr.ny.gov/system/files/documen ... 8-2020.pdf), but as I read it you'd be 8+ years beyond the deadline to do so. The question I see is that $1774 listed there is below the $2k/month high-rent deregulation floor that was in place in 2009.
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Re: Apartment was potentially illegally deregulated

Postby TenantNet » Thu Mar 31, 2022 1:13 pm

Bubba, AFAIK, the deadline (4 years now) is for overcharges, not for apartment status.

Also, while subsequent rents may be negotiated, the first rent after deregulation has to be on an actual lease and calculated from the expiring lease. There was a recent case that said the first rent can't be month-to-month, i.e., there must be a lease.

I would also be a bit wary of the document to which you linked, the Fair Market Rent Appeal. The FMRA has been around since at least 1984 and probably before.

FMRAs were always a murky subject and equally so under deregulation. I would think there are grey areas and loopholes.

While that document does touch on high rent deregulation, the FMRA as used in practice, was really about the transition from RC to RS tenancies. Indeed, a tenant can file one at any time subject to receiving the 90-day notice that starts the clock ticking. I would think that landlords engaging in bogus deregulations are not bothered to send FMRA notices.

So, it may not be the only way to attack that problem. I would have to do more research to be more definitive, but with many issues, there's more than one way to skin a cat, so to speak.
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Re: Apartment was potentially illegally deregulated

Postby BubbaJoe123 » Thu Mar 31, 2022 1:29 pm

"Bubba, AFAIK, the deadline (4 years now) is for overcharges, not for apartment status."

The deadline for filing a Fair Market Rent Appeal was four years after the apartment left rent control - it's now six years (see the HCR fact sheet I linked above).

"Also, while subsequent rents may be negotiated, the first rent after deregulation has to be on an actual lease and calculated from the expiring lease. There was a recent case that said the first rent can't be month-to-month, i.e., there must be a lease."

Presume that's the case, not sure why it's relevant here. If an apartment was under rent control, then it moves to rent stabilization after the RC tenant vacates. The initial RS rent is set at market rate (e.g. whatever the first post-RC tenant and the landlord agree to). Pre-2019, if that initial rent was above the high-rent floor, then the apartment was fully deregulated. Post-2019, the apt says in RS, with increases from that initial market rate rent. The FMRA was designed to let tenants challenge that initial rent, to prevent LL's from getting a related party to sign a lease at an inflated rent.
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Re: Apartment was potentially illegally deregulated

Postby TenantNet » Thu Mar 31, 2022 1:48 pm

Bubba,

As often is the case, you bring up all sorts of things that really have little to do with the OP's question or the issue at hand, and that can lead to confusion over minor details.

As we all know, DHCR often gets things wrong. The 4 vs. 6 years might be impacted by the Regina case, even if DHCR says it's six years. But again, I don't think that matters here.

Your analysis is a bit of hogwash. See Altman and the Court of Appeals on that. And long before that, see Central Park South Associates v. Haynes, January 10, 1997, NYLJ , page 26, col. 5.

But aside from all that, please leave all this junk out.
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Re: Apartment was potentially illegally deregulated

Postby Landlords Boy » Fri Apr 01, 2022 12:43 pm

westvillage wrote:...This same tenant stayed in the apartment until 2009 and upon vacancy, the landlord immediately deregulated the apartment and had a listed "actual paid rent" of $1,774...
...So the landlord used the high rent vacancy deregulation method, however, my question is that is that even possible given that the threshold was $2,000 in 2009 to deregulate an apartment?


"With regard to rent stabilized apartments, where an owner installs new equipment or makes improvements to the individual apartment qualifying for an individual apartment improvement rent increase, while such apartment is vacant, and the legal regulated rent is raised on the basis of such rent increase, or as a result of any rent increase permitted upon vacancy or succession, or by a combination of rent increases, as applicable, to a level of $2,000 or more per month, whether or net the next tenant in occupancy actually is charged or pays $2,000 or more per month, such apartment will qualify for decontrol."

From DHCR Fact Sheet 36, February, 2004.
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Re: Apartment was potentially illegally deregulated

Postby TenantNet » Fri Apr 01, 2022 1:28 pm

LLB, a few things... the unit was RC, not RS. It might not make a difference, but it might - any authority on that? There are any number of things that apply to RC (and not RS), and also to RS (and not RC). 98% of the time we deal with RS units, but every so often we have to look at RS rules.

Second, if the legal rent was above $2,000 as you hypothesize (with the actual charged rent being less than $2,000), that raises a few questions. Seems to me that the legal rent would have to be registered and on the rent history. It's not from what the poster showed us above, although that is also a question as RC units are not required to be registered post-1984. Aside from a LL statement, where is the documentation? For the RC rents, you can find some documentation on MBR and MCR forms, if the LL bothered to file them.

If there is or was a legitimate preferential rent, do they apply to RC units? I have heard that PR only applies to RS units, but probably should be looked at. Where would a Pref Rent be memorialized? Generally they have to be on the rent history.

These may be legitimate questions, but deal with such minutia and unknowns, these could be argued back and forth for years, but don't aid the poster in their central question. On deregulation cases, we normally suggest the poster consult with a tenant attorney who has the expertise to look at these issues. As a long-time user of the forum, you know that in many cases the poster generally reveals only the tip of the iceberg, and we can only respond to what we know. But with a legal consultation, usually ALL the information is revealed and a proper assessment can be made of the strength of the case, and recommendations on how to proceed.

And oh yes, we don't know what improvements were actually done, and if so, what amount was spent to bump the rent from $70 to $1,700. My guess is that would be a lot of money and any improvements would be more than a paint job.

BTW, as I said to Bubba, this is not an invitation to argue the above points as we can easily lose sight of the original question.
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Re: Apartment was potentially illegally deregulated

Postby Landlords Boy » Fri Apr 01, 2022 5:58 pm

TenantNet wrote:LLB, a few things... the unit was RC, not RS. It might not make a difference, but it might - any authority on that?

If I recall correctly, the LL would submit a RR1in form, filling out part 16A for "apartment previously rent-controlled" and then checking the box in 16B for Exempt, High-Rent, Vacancy Deregulation. Note the first tenant after exiting rent control received a copy as well as DHCR.
I'm sure other paperwork was involved but I'm not going to recount these now, even assuming I remember it all correctly.

Second, if the legal rent was above $2,000 as you hypothesize (with the actual charged rent being less than $2,000), that raises a few questions. Seems to me that the legal rent would have to be registered and on the rent history.

That's what the form above does. However, in at least one case of mine a decade or so back the actual "Deregulated" status did NOT appear in the rent history for the unit when a tenant inquired at DHCR. I had to dredge up the paperwork from my records. This was annoying to all involved. All because the rent history the tenant received was the first actual rent after decontrol rather than the decontrolling legal regulated rent. Maybe this was a system-wide issue at the time, I don't know.

If there is or was a legitimate preferential rent, do they apply to RC units?
I think at the time preferential rents only applies to stabilized units, not RC ones. (I might be wrong there, though.)

On deregulation cases, we normally suggest the poster consult with a tenant attorney who has the expertise to look at these issues.
As you've pointed out, a tenant attorney's time is valuable and expensive. If a tenant can get the needed answers by calling up DHCR and asking the right questions first, that saves both tenant and landlord time and money.
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Re: Apartment was potentially illegally deregulated

Postby TenantNet » Fri Apr 01, 2022 7:00 pm

I'll look at all this. Yes an atty can be expensive, but some will provide a free or low-cost consultation. In our experience, DHCR often makes mistakes, I'd rather have a tenant ask someone who actually knows this stuff. Calling the DHCR help line is nothing more than a pot shot. The staffing is bad and the training is bad.

Also, if a complaint is filed down the road, it might go to the courts, not DHCR.
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