Relates to extending certain rent control provisions

improvements; (4) extend the statute of limitations on rent challenges where the tenant is paying a preferential rent; (5) limit the number of exceptions to the applicable statute of limitations; and (6) extend these laws for eight years, until June 15, 2019.

Summary of provisions

Section 1 of the bill would amend RCL § 26-403(e)(2)(j) to raise the rent threshold to $3000 per month for High Income/High Rent deregulation of rent controlled units in New York City effective January 1, 2011, and would provide for annual adjustment of the rent threshold to reflect the guidelines for one-year renewal leases promulgated by the New York City Rent Guidelines Board. In addition, deregulation of housing accommodations pursuant to the provisions of RCL § 26-403(e)(2)(j) would be permitted on or after October 22, 2009 in buildings receiving certain real estate tax benefits, notwithstanding the receipt of such benefits, provided such housing accommodations would have been subject to regulation in the absence of the receipt of such tax benefits.

Section 2 of the bill would amend RCL § 26-403.1 (b), which sets out procedural requirements for High Income/High Rent deregulation of rent controlled units in New York City, to reflect the change in the deregulation rent threshold.

Section 3 of the bill would amend RSL § 26-504.1 to raise the rent threshold for High Income/High Rent deregulation of rent stabilized units in New York City, effective January 1, 2011 to $3000 per month, and provide for annual adjustment of the rent threshold to reflect the guidelines for one-year renewal leases promulgated by the New York City Rent Guidelines Board price index. In addition, deregulation of housing accommodations pursuant to the provisions of this section of the RSL would be permitted on or after October 22, 2009 in buildings receiving certain real estate tax benefits, notwithstanding the receipt of such benefits, provided such housing accommodations would have been subject to regulation in the absence of the receipt of such tax benefits.

Section 4 of the bill would amend RSL § 26-504.3(b), which sets out procedural requirements for High Income/High Rent deregulation of rent stabilized units in New York City, to reflect the change in the deregulation rent threshold.

Section 5 of the bill amends ETPA § 5(a)(12) to raise the rent threshold to $3000 per month for High Income/High Rent deregulation of rent stabilized units outside of New York City effective January 1, 2011, and would provide for annual adjustment of the rent threshold to reflect the guidelines for one-year renewal leases promulgated by the Rent Guidelines Board for the county in which the housing accommodation is located. In addition, deregulation of housing accommodations pursuant to the provisions of this section of ETPA would be permitted on or after October 22, 2009 in buildings

receiving certain real estate tax benefits, notwithstanding the receipt of such benefits, provided such housing accommodations would have been subject to regulation in the absence of the receipt of such tax benefits.

Section 6 of the bill would amend ETPA § 5-a(b), which sets out procedural requirements for High Income/High Rent deregulation of rent stabilized units outside of New York City, to reflect the change in the deregulation rent threshold.

Section 7 of the bill would amend EHRCL § 2(2)(m) to raise the rent threshold to $3000 per month for High Income/High Rent deregulation of rent controlled units outside of New York City, effective January 1, 2011, and would provide for annual adjustment of the rent threshold to reflect the guidelines for one-year renewal leases promulgated by the Rent Guidelines Board for the county in which the housing accommodation is located.

Section 8 of the bill would amend EHRCL § 2-a(b), which sets out procedural requirements for High Income/High Rent deregulation of rent controlled units outside of New York City, to reflect the change in the deregulation rent threshold.

Section 9 of the bill would amend RSL § 26-504.2 to raise the rent threshold for High Rent Vacancy deregulation of rent stabilized units in New York City, effective October 1,2010, to $3000 per month, and would provide for annual adjustment of the rent threshold to reflect the guidelines for one-year renewal leases promulgated by the New York City Rent Guidelines Board. In addition, deregulation of housing accommodations pursuant to the provisions of this section of the RSL would be permitted on or after October 22, 2009 in buildings receiving certain real estate tax benefits, notwithstanding the receipt of such benefits, provided such housing accommodations would have been subject to regulation in the absence of the receipt of such tax benefits.

Section 10 of the bill would amend RCL § 26-403(e)(2)(k) to raise the rent threshold to $3000 per month for High Rent Vacancy deregulation of rent controlled units in New York City effective October 1, 2010, and would provide for annual adjustment of the rent threshold to reflect the guidelines for one-year renewal leases promulgated by the New York City Rent Guidelines Board. In addition, deregulation of housing accommodations pursuant to the provisions of this section of the RCL would be permitted on or after October 22, 2009 in buildings receiving certain real estate tax benefits, notwithstanding the receipt of such benefits, provided such housing accommodations would have been subject to regulation in the absence of the receipt of such tax benefits.

Section 11 of the bill would amend ETPA §5a( 13) to raise the rent threshold for High Rent Vacancy deregulation of rent stabilized units outside of New York City, effective October 1, 2010 to $3000 per

month, and would provide for annual adjustment of the rent threshold to reflect the guidelines for one-year renewal leases promulgated by the Rent Guidelines Board for the county in which the housing accommodation is located. In addition, deregulation of housing accommodations pursuant to the provisions of this section of the RSL would be permitted on or after October 22, 2009 in buildings receiving certain real estate tax benefits notwithstanding the receipt of such benefits, provided such housing accommodations would have been subject to regulation in the absence of the receipt of such tax benefits.

Section 12 of the bill would amend EHRCL § 2(2)(n) to raise the rent threshold to $3000 per month for High Rent Vacancy deregulation of rent controlled units outside of New York City effective October 1, 2010, and would provide for annual adjustment of the rent threshold to reflect the guidelines promulgated for one-year renewal leases promulgated by the Rent Guidelines Board for the county in which the housing accommodation is located.

Section 13 of the bill would add a new section 26-504.4 to the RSI, to codify procedures and requirements for implementing the recent decision of the New York State Court of Appeals in Roberts v. Tishman Speyer Properties, L.P., 13 NY 3d 270 (2009). The new provision would establish a formula for the calculation of the legal rents and refunds due, if any, to the affected tenants as well as a time frame for the payment of such refund. It also would mandate that owners provide affected current tenants with a notice that informs such tenants of the court ruling and provides a calculation of the legal rent and refund amount, if any, due to the tenant. The new section would also create a mechanism by which, after the owner has provided the tenant with the aforesaid notice, the parties may enter into a final and binding written agreement regarding the legal rent and refund amount due the tenant.

Section 14 of the bill would add a new section 5-b to ETPA to codify procedures and requirements for implementing the recent decision of the New York State Court of Appeals in Roberts v. Tishman Speyer Properties, L.P.The new section provision would establish a formula for the calculation of the legal rents and refunds due, if any, to the affected tenants as well a.s a time frame for the payment of such refund. It also mandates that owners provide affected current tenants with a notice that informs such tenants of the court ruling and provides a calculation of the legal rent and refund amount, if any, due to the tenant. The new section would also create a mechanism by which, after the owner has provided the tenant with the aforesaid notice, the parties may enter into a final and binding written agreement regarding the legal rent and refund amount due the tenant.

Section 15 of the bill would authorize DHCR to promulgate explanatory Operational Bulletins with regard to any of the changes made by this bill, without the further action required for the promulgation of regulations by the State Administrative Procedures Act or RSL.

Section 16 of this bill would amend RSL § 26-511(c)(13), which allows an owner to obtain increases in apartment rents based on individual apartment improvements (IAIs). As a condition of obtaining such increase, the owner would be required to give the tenant written notice of the calculation of such increase on a form prescribed by the DHCR and to file such form with the DHCR. This amendment would conform and make similar the provisions of the RSL with those of the RCI" which already requires a filing of a written notice with the DHCR disclosing the IAls performed.

Section 17 of this bill would amend ETPA § 6(d)(1), which allows an owner to obtain increases in apartment rents based on individual apartment improvements (IAIs). As a condition of obtaining such increase, the owner would be required to give the tenant written notice of the calculation of such increase on a form prescribed by the DHCR and to file such form with the DHCR. This amendment would conform and make similar the provisions of ETPA with those of the RCL, which already requires a filing of a written notice with the DHCR disclosing the IAIs performed.

Section 18 of this bill would amend RSL § 26-516 (g) to require an owner to retain rent records for an additional period, beyond the currently mandated four years, where the owner is charging a tenant a preferential rent. This amendment would be necessary to properly implement the extension of the rental history review period provided for in section 18 of this bill.

Section 19 of the bill would add new section 26-516A to the RSL to provide that where on the date four years prior to the filing of an overcharge complaint, there was an agreement in effect between the owner and the tenant then in possession of the apartment pursuant to which such tenant was charged less than the legal rent ("preferential rent"), the rental history review period would be extended beyond the currently limited four-year period back to the last date on which there was no preferential rent agreement in effect. The legal rent for purposes of adjudicating an overcharge complaint would be the rent charged on such date, plus all subsequent lawful increases.

Section 20 of the bill would amend CPLR § 213-a to provide that where on the date four years prior to the commencement of an action on residential rent overcharge, there was an agreement in effect between the owner and the tenant then in possession of the apartment pursuant to which such tenant was charged less than the legal rent ("preferential rent"), the rental history review period would be extended beyond the currently limited four-year period back to the last date on which there was no preferential rent agreement in effect. The legal rent for purposes of adjudicating the overcharge

complaint would be the rent charged on such date, plus all subsequent lawful increases.

Section 21 of this bill would amend ETPA section 12(a)(8) to require an owner to retain rent records for an additional period, beyond the currently mandated four years, where the owner is charging a tenant a preferential rent. This amendment would be necessary to properly implement the extension of the rental history review period provided for in section 20 of this bill.

Section 22 of the bill would add a new section 12-b to the ETPA to provide that where on the date four years prior to the filing of an overcharge complaint, there was an agreement in effect between the owner and the tenant then in possession of the apartment pursuant to which such tenant was charged less than the legal rent ("preferential rent"), the rental history review period would be extended beyond the currently limited four-year period back to the last date on which there was no preferential rent agreement in effect. The legal rent for purposes of adjudicating the overcharge complaint would be the rent charged on such date, plus all subsequent lawful increases.

Section 23 of this bill would add a new subdivision c to RSL 26-504.2 to provide that if an owner fails to comply with the notice requirements of RSL . 26-504.2(b), the apartment would remain subject to rent regulation at the previously regulated rent, notwithstanding any other provision of the RSL or the city rent and rehabilitation law to the contrary, until the owner complies with these requirements.

Section 24 of the bill would amend ETPA § 5(a)(13) to require an owner to give written notice to a tenant of the precise basis, including supporting rent calculations, for the owner's claim that the apartment is not subject to rent regulation by virtue of the "high rent vacancy deregulation" provisions of the rent laws. The owner would also be required to provide notice to DHCR of the claim of deregulation through the mechanism of an "exit" registration. The failure of the owner to comply with both of these notice requirements would result in the apartment's remaining subject to rent regulation at the previously regulated rent until the owner did so comply.

Section 25 of the bill would amend RSL § 26-516 (a)(2) to set forth the only circumstances under which DHCR or a court could review the rental history of an apartment outside of the four-year period prior to the filing of a rent challenge by a tenant.

Section 26 of the bill would amend ETPA § 12(a)(1)(b)(i) to set forth the only circumstances under which DHCR or a court could review the rental history of an apartment outside of the four-year period prior to the filing of a rent challenge by a tenant.

Section 27 of the bill would extend the ETPA for an additional eight years, until June 15, 2019.

Section 28 of the bill would extend the EHRCL for an additional eight years, until June 15, 2019.

Section 29 of the bill would extend the EHRCL with regard to the city of Albany for an additional eight years, until June 15, 2019.

Section 30 of the bill would extend certain provisions of the General Business Law and Administrative Code of the City of New York relating to the conversion of residential property to cooperative or condominium ownership in the city of New York for eight years, until June 15, 2019.

Section 31 of the bill would extend certain provisions of the General Business Law relating to the conversion of residential property to cooperative or condominium ownership Nassau, Westchester and Rockland Counties for eight years, until June 15, 2019.

Section 32 of the bill would provide that, except as specifically provided, all sections of the bill shall take effect immediately.

Existing law

Currently, the deregulation rent threshold for rent controlled and rent stabilized units is $2000 per month.

There is no current statutory requirement for a separate and specific IAI notice to tenants under either the RSL or ETPA. Notice to tenants of IAIs is currently provided only in a rider to the lease and in annual apartment registrations.

RSL § 26-516, ETPA § 12, and CPLR § 213-a currently provide for a four-year review period in proceedings challenging a legal registered rent. In addition, RSL § 26-516 and ETPA § 12 require an owner to maintain rent records for only four years.

RSL § 26-504b currently requires an owner to give notice to both the tenant and DHCR of any claim of "high rent vacancy deregulation." However, the RSL does not contain any sanction for the failure of the owner to comply with this requirement. The ETPA currently does not contain any notice requirements for "high rent vacancy deregulation."

RSL § 26-516 and ETPA § 12 now preclude examination of the rental history of an apartment prior to the four-year period preceding the filing of an overcharge complaint.

The ETPA, EHRCL, and certain provisions in the General Business Law and the Administrative Code of the City of New York relating to the conversion of residential real property to cooperative or condominium ownership will sunset as of June 15, 2011.

Legislative history

While several of the matters covered by this bill have been previously addressed in bills introduced by members of the Legislature, this is a new bill.

Statement in support

The High Rent Vacancy and High Income/High Rent deregulation provisions of New York State's four rent regulatory schemes are intended to eliminate the protections of rent regulation in specific narrow circumstances. The so-called "luxury decontrol" thresholds, first introduced in 1993 and amended in 1997, currently allow for the deregulation of vacant apartments when the regulated rent reaches $2000 per month. Occupied units may be deregulated when the regulated rent reaches $2000 per month and the tenants have an income of $175,000 or more per year. These provisions sought to provide the protections of rent regulation for ordinary tenants, while allowing for deregulation of high-rent "luxury" apartments occupied by the wealthiest New Yorkers.

In the seventeen years since this "luxury decontrol" system was put in place, the basic rents for rent stabilized apartments have increased each year by the annual adjustment factor approved by the appropriate Rent Guidelines Board. However, while rents have steadily increased, the decontrol threshold has not changed. As a result, more and more units are being decontrolled - leaving more and more ordinary New Yorkers without the vital protections that the rent regulation provides.

This legislation would increase the High Rent Vacancy and High Rent/ High Income decontrol threshold from $2000 per month to $3000 per month. This increase would begin to restore the delicate balance between tenant protections and appropriate deregulation that was struck when the current decontrol laws were adopted. This new decontrol threshold would be updated annually based on the one-year renewal lease guideline promulgated by the Rent Guidelines Board for the jurisdiction in which the apartment is located and so would continue to be a fair and accurate standard for deregulation in the future.

On October 22, 2009, the Court of Appeals issued a decision in Roberts v. Tishman Speyer Props., L.P. (Roberts), which had the effect of returning more than 40,000 apartments located in more than 4,000 buildings in New York City to rent regulation after these apartments bad become deregulated via the High Rent Vacancy or High Rent High Income decontrol provisions for varying periods of time - in some cases as long as 15 years. The court held that because the owners of these buildings had applied for and received certain real property tax benefits, the units in those buildings were subject to rent regulation and were not eligible for decontrol. This decision

overturned an advisory opinion issued by DHCR in late 1995 that permitted the deregulation of thousands of apartments

During the period when DHCR's interpretation of the relevant statutory provision prevailed, tenants were charged rents and buildings were bought and sold based on the assumption that a certain class of apartments was not subject to rent regulation. Now, as a result of the Court's ruling, rents for the affected apartments may have to be reviewed and in many cases, reduced to bring them into compliance with the requirements of rent regulation. In addition, tenants may well be owed significant sums for the amounts they have paid in excess of rent they would have been charged bad their apartments been continuously rent regulated. Lastly, because the rent rolls for the buildings impacted by the Roberts decision may be reduced, the value of these buildings would be commensurately reduced, raising a host of legal and financial problems for the owners.

The dual issues of how the rents for the affected apartments would be adjusted and how the refunds due tenants as a result of such rent adjustments would be calculated were not addressed by the Court of Appeals, but were left to other fora. Therefore, in the months and years ahead, it is likely that a host of law suits will be commenced by individual tenants seeking compensation under the Roberts decision. Unlike most issues involving rent regulation, where DHCR has sole jurisdiction over the dispute, the courts and DHCR have concurrent jurisdiction over rent challenges. A multiplicity of individual law suits creates the potential for different and perhaps. contradictory, approaches and outcomes. Tenants and owners will be faced with years of uncertainty, as will others - such as lenders and the New York City Department of Finance--whose decisions depend on the value of the affected apartment buildings.

This bill would create a special rent-setting procedure for the affected apartments that could be uniformly applied to all of the apartments. It adheres generally to rent-setting procedures applicable in other situations under the rent laws, and would provide needed certainty for tenants, owners and other affected parties. Most importantly, it would establish a mechanism whereby owners and tenants can resolve the Roberts issue between themselves without the need for intervention by DHCR or the courts.

The current provisions of the RSL and the ETPA do not provide adequate notice to a tenant of the nature and scope of any IAIs that may have been performed in the apartment before the tenant moved in, Tenants should be fully apprised as to the scope and cost of the alleged IAIs so that the tenant can make a reasonable inquiry to determine whether to submit a complaint to the DHCR challenging the increases in rent claimed by the owner. This bill would strengthen existing notice provisions.

Current laws provide that a legal rent not challenged within four years is thereafter unchallengeable. Several issues arise related to the four-year rule that would be addressed in this bill.

First, according to DHCR's rent registration records, approximately 19% of the rent regulated units in New York City, are occupied by tenants paying what is claimed by owners to be a preferential rent (i.e., a rent lower than the legal rent). There is a strong disincentive for a tenant who believes he or she is being charged a preferential rent to challenge the legal rent - fear of losing the perceived benefit of the preferential rent. Such a tenant is faced with the untenable choice of risking the loss of the purported preference by questioning the full rent's legality during the four year period of review or losing the right to challenge the legal rent at all after four years, even if that higher rent had never previously been challenged. Therefore, the four year challenge period provided for in existing law is often not meaningful to a tenant paying a preferential rent. As a result, excessive and unlawful increases in the legal rent may go unchallenged, become final, and, in some instances, be the basis of the removal of the apartment from rent regulation, an otherwise avoidable reduction of the stock of affordable housing. This bill would extend the time period for challenging the legal rent beyond four years where a tenant is paying a preferential rent, to ensure that tenants are given a full and fair opportunity to challenge the legal rent. In order to permit this extended rental history review, the proposed legislation also extends the time period for which an owner must maintain rent records.

Second, since the right of a tenant to challenge a rent extends only for four years, a claim of "high rent vacancy deregulation," which is predicated on the lawful rent for an apartment reaching the $2,000 per month level, is designed to similarly become unchallengeable after four years. Without notice of his or her right to challenge a claim of deregulation, and the information necessary to understand the owner's claim, an affected tenant is unable to file a meaningful challenge. This bill would penalize owners who fail to provide the required notice and information by requiring rent regulation to continue unless and until the notice and information are provided.

Third, this bill would also provide needed clarity regarding the current "four-year" limitation on reviewable rental history in overcharge cases. Since the Legislature clarified this look-back provision thirteen years ago, DHCR and the courts have identified certain situations in which the a four..:year look-back period inappropriately limits a tenant's right to file a meaningful rent challenge, and have created exceptions in certain cases. This bill would expressly set forth those circumstances in which DHCR or a court may review the rental history beyond a four-year period: (1) where there is a DHCR rent freeze order still in effect that was issued before the four-year period; (2) to determine the appropriate vacancy rent increase authorized by RSL § 26-511c(5)(a) or ETPA § 10(a-1); (3) to determine

the appropriate rent increase authorized by RSL § 26-511c(13) or ETPA § 6d(1) for an IAI; (4) to determine the appropriate rent increase upon termination of a preferential rent in accordance with RSL § 26-511c(14) or ETPA § 12-b; (5) to determine non-rent based jurisdictional issues; and (6) where the apartment was vacant or temporarily exempt from rent regulation on the four-year base date.

Budget implications

This bill would have no State financial impact.

Effective date

This bill would take effect immediately, provided that the changes to the High Rent/High Income deregulation rent thresholds provided in sections 1, 3, 5, and 7 of the bill would be effective as of January 1, 2011, and the changes to the High Rent Vacancy deregulation rent thresholds provided in sections 9, 10, 11 and 12 would be effective as of October 1, 2010.