Court Invalidates Prior Years' Low-Rent Supplements

July 26, 2010

For two subsequent years before this year's Rent Guidelines Board (RGB) order, the RGB authorized a fixed rent increase that affected only tenants who have lived in their apartments for six years or longer and had legal rents of $1,000 or less. Approximately 300,000 apartments had renewal leases executed in 2008 and 2009 that fell under the low-rent supplement criteria in RGB Orders #40 (2008) and #41 (2009).

For two subsequent years before this year's Rent Guidelines Board (RGB) order, the RGB authorized a fixed rent increase that affected only tenants who have lived in their apartments for six years or longer and had legal rents of $1,000 or less. Approximately 300,000 apartments had renewal leases executed in 2008 and 2009 that fell under the low-rent supplement criteria in RGB Orders #40 (2008) and #41 (2009).

However, in a decision dated Jan. 20, 2010, the Supreme Court of New York County issued a decision invalidating the minimum rent increases approved by the RGB in Orders #40 and #41. The RGB tried to argue that the low-rent supplement in RGB Order #40 was rational because it would help equalize rents between long-term and short-term tenants. Unfortunately, the judge disagreed.

According to the judge, the low-rent supplements unfairly penalized long-term rent-stabilized tenants who paid lower rents by effectively doubling the percentage rent increase allowed under RGB Orders #40 and #41, and the RGB had overstepped its authority under the Rent Stabilization Law. For example, for some tenants paying $600 or $700 per month, the rent increase as a result of the low-rent supplement was 11 or 12 percent, greater than the general percentage rent increases allowed in RGB Orders #40 and #41.

The City of New York appealed the decision, and on June 22, 2010, a mid-level appellate court upheld the lower court's decision to invalidate the minimum increases [Casado v. Markus, June 2010].

The RGB has announced that it will now ask the Court of Appeals, the state's highest court, to review the case. Unless the Court of Appeals agrees to review the case and reverses the lower courts, the minimum increases of Orders #40 and #41 are not in effect.

It is important to note that the other provisions of Orders #40 and #41 are not affected by the litigation. Thus, unless the Court of Appeals reinstates the minimum increase provisions, the established percentage guideline increases set forth in Orders #40 and #41 apply to all regulated apartments, regardless of length of tenancy or rent level.

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