DHCR Updates Security Deposit and Demolition Fact Sheets

Fact Sheets describe the major elements of rent control and rent stabilization in New York City. The DHCR recently updated Fact Sheet #9, which covers security deposits and other charges, and Fact Sheet #11, which covers demolition.

The update to Fact Sheet #9 says the security deposit amount for a rent-regulated apartment is generally limited by law to one month’s rent. The DHCR added language stating that it is unlawful for the owner to ask for an additional amount of money from the tenant, guarantor, or third party.

The DHCR also added language that discusses key money requirements and brokers’ fees. According to the update, a building owner or property manager is prohibited by law from requesting or otherwise requiring payment of a deposit or additional charge to reserve an apartment unit. Such room reservation charges or deposits, whether paid for or demanded from the tenant, a guarantor, or other third party, are unlawful. Such demands, charges, and requirements are often referred to as “key money.”

A broker’s fee is a fee charged for the transaction of renting an apartment unit. It may be charged and collected by licensed real estate brokers or salespersons. According to the update, the DHCR may determine, however, that a rent overcharge was collected if it is found that a building owner, property manager, and their agents or employees collected a broker’s fee for the rental of a unit they own or manage. A company and a real estate broker or salesperson are also prohibited from collecting a broker’s fee for the rental of an apartment unit that is owned or managed by a building owner or property manager with whom the company, broker, or salesperson is affiliated.

With regard to the demolition fact sheet, it points out that one of the grounds upon which an owner may end a rent-regulated tenancy (rent controlled or rent stabilized) is where the owner intends to demolish the building. However, in such situations, the owner must first obtain the DHCR’s approval.

The owner is required to file Form RA-54, “Owner’s Application for Order Granting Approval to Refuse Renewal of Lease and/or to Proceed for Eviction” with the DHCR. In New York City, if the building contains rent-controlled tenants, before filing Form RA-54, the owner must also file with the DHCR and serve the rent-controlled tenants with Form RC-50, “Report and Certification to Alter or Demolish Occupied Housing Accommodations.”

The fact sheet update emphasized that the RC-50 form is not required where there are no rent-controlled tenants in the building. However, when it is required, the RC-50 form needs to be filed prior to the submission of plans to the New York City Department of Buildings.

According to the updated fact sheet, if the building contains rent-stabilized tenants, owners are required to send a letter to the DHCR advising of the intention to file construction documents/apply for such permit with the NYC Department of Buildings. This letter should include the address of the property to be demolished or altered, a list of apartments that are affected by the work, and a description in some detail of the scope of the project. Upon receipt of the letter, the DHCR’s Enforcement Unit will assign it a report docket number ending in the suffix HD.

In addition, owners are advised to carefully review NYC Department of Buildings Form PW1: Plan/Work Application, specifically Section 26 (Property Owner’s Statements and Signatures), where the owner is asked to answer questions about whether apartment units will remain occupied during construction, whether the units are subject to rent control and rent stabilization, and whether the DHCR has been notified about the proposed work.