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Temporary and Permanent Exemption from RS

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Temporary and Permanent Exemption from RS

Postby TenantNet » Sun Feb 02, 2020 11:57 am

In certain circumstances, apartments may become exempt from rent stabilization coverage temporarily or permanently.

Over the years, we commonly see this as temporary exemption when a building employee occupies the unit. When that employee leaves the unit, or leaves his/her employment, the unit would return to rent stabilization coverage.

The most obvious question is what would be the unit's rent when RS coverage is re-established ... would it be the legal rent as if coverage had been continuous over the years, or would the legal rent be the rent at the level it was when the unit became exempt?

Permanent exemption could occur when a unit was occupied by the owner and his/her immediate family.

To start, see this thread:
viewtopic.php?f=3&t=13978&p=58858#p58857
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Re: Temporary and Permanent Exemption from RS

Postby TenantNet » Sun Feb 02, 2020 11:59 am

According to this article at Landlord v. Tenant:

Landlord asked the DHCR to determine the status of tenant's apartment. After an extended period of temporary exemption while the apartment was owned and operated by a not-for-profit hospital that used the unit for employee occupancy, the building was sold and new landlord set the rent above the vacancy deregulation threshold.

The DRA ruled against landlord, who appealed and lost. The apartment was temporarily exempt between 1982 and 2004 while the building was owned and operated by the hospital and used for employee housing. Until January 2014, the Rent Stabilization Code (RSC) permitted owners to set a "first rent" and thereby deregulate an apartment if, after vacancy or temporary exemption, the agreed-upon rent exceeded the vacancy deregulation threshold. But RSC Section 2526.1(a)(3)(iii) was amended in January 2014 to provide that the new rent following extended vacancy or temporary exemption must be determined by "bridging the gap" between the last prior rent-stabilized rent and the rent set after temporary exemption ended. And although tenant's rent was set in 2004, the current RSC provision must apply to the case being decided after that provision went into effect. So tenant was rent stabilized. Since tenant's overcharge claim had already been raised in a housing court proceeding, the DHCR should leave the determination of how much overcharge there was to the court.

AEJ 534 East 88th LLC/Hayes: DHCR Adm. Rev. Docket Nos. FT410046RO, FT410019RT (6/27/18)
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Re: Temporary and Permanent Exemption from RS

Postby TenantNet » Sun Feb 02, 2020 12:03 pm

And see this article, "Uncertainty Remains in Setting First Rent if Apartment Vacant or Temporarily Exempt on Base Date"

Or our local download in PDF format:
MR Management Mann Management November 2012.pdf


The cases it references can be found here:

https://scholar.google.com/scholar_case ... 8225361220
https://scholar.google.com/scholar_case ... 7129939016

Seems the Appellate Division upheld the lower NYS Supreme Court decision. But that was 8 years ago, so you should look at any more recent decisions.

Without more research I can't say if the 2019 rent law changes has any impact on exempt status, but I don't think it does.

So do more research. If you can I would seek out the prior tenants and they might be able to give you more history. You should also consult with a tenant attorney who has actual (and recent) experience with this issue.
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Re: Temporary and Permanent Exemption from RS

Postby TenantNet » Sun Feb 02, 2020 12:09 pm

Permanent v Temporary Exemption

DHCR has a list of what is a permanent exemption. According to DHCR, permanent does not mean eternal. If the conditions that allowed a unit to go PE cease to exist, then the unit must return to active RS.

See East West Renovating Co.

http://law.justia.com/cases/new-york/ot ... 897-u.html

http://law.justia.com/cases/new-york/ot ... 143-u.html

East West Renovating Co. v. New York State Division of Housing & Community Renewal, 16 AD3d 166 (1st Dept. 2005)


Two additional disputes concerning the four-year rule emerged in 2005. In East West Renovating Co. v. New York State Division of Housing and Community Renewal, 16 AD3d 166, 791 N.Y.S.2d 88 (1st Dept. 2005), the First Department ruled that DHCR can review rent records beyond the four-year period to determine whether an apartment is stabilized. In Ador Realty v. New York State Division of Housing and Community Renewal, 25 AD3d 128, 802 N.Y.S.2d 190 (2d Dep't 2005), the Second Department held that in order to determine whether an owner was entitled to collect a vacancy bonus under RSL §26-511(c)(5-a), DHCR or a court may look at the rental history beyond the four year look-back period.

http://courts.state.ny.us/Reporter/3dse ... _01661.htm

East W. Renovating Co. v New York State Div. of Hous. & Community Renewal
2005 NY Slip Op 01661 [16 AD3d 166]
March 8, 2005

Appellate Division, First Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
As corrected through Wednesday, May 18, 2005

East West Renovating Co., Appellant,
v.
New York State Division of Housing and Community Renewal, Respondent, and Joseph Vitale et al., Intervenors-Respondents.

Judgment, Supreme Court, New York County (Ronald A. Zweibel, J.), entered on or about February 5, 2004, which denied petitioner landlord's application to annul respondent New York State Division of Housing and Community Renewal's (DHCR) finding of a rent overcharge and imposition of treble damages and dismissed the petition, unanimously affirmed, without costs.

It appears that on the October 1, 1992 commencement date of petitioner's initial one-year lease with the tenants, the apartment in question was rent stabilized by reason of the fact that petitioner was receiving J51 benefits that were not due to expire until June 30, 1993. These circumstances required that the lease include a notice that the apartment was to become deregulated on or about June 30, 1993 (Rent Stabilization Code [9 NYCRR] § 2520.11 [o]). With ample record support, DHCR found that the lease contained no such notice, and that a purported copy of the notice produced by petitioner and purporting to bear the tenants' signatures was neither signed nor received by them. DHCR further held that even if the purported copy were authentic, it would not avail petitioner in view of another provision in the lease explicitly stating that the apartment was not subject to any kind of regulation. These findings rationally support the determination that the apartment did not become destabilized after expiration of the J51 benefits, and that petitioner willfully overcharged the tenants a free market rent. In fixing the overcharge, DHCR set a base date of January 20, 1996, four years prior to the filing of the overcharge complaint, and calculated the lawful increases forward from that date based on the free market rent that the tenants were paying immediately prior to the base date. We reject petitioner's argument that by so doing, DHCR improperly considered events surrounding the execution of the 1992 lease more than four years prior to the filing of the rent overcharge complaint in January 2000, in violation of Rent Stabilization Law (Administrative Code of City of NY) § 26-516 (a) (2). DHCR's consideration of events beyond the four-year period is permissible if done not for the purpose of calculating an overcharge but rather to determine whether an apartment is regulated (cf. Matter of Hargrove v Division of Hous. & Community Renewal, 244 AD2d 241 [1997]; Matter of Condo Units v New York State Div. of Hous. & Community Renewal, 4 AD3d 424 [2004]). Concur—Tom, J.P., Saxe, Ellerin, Nardelli and Sweeny, JJ.
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