File High-Income Rent Deregulation Form by June 30

This is the first year since the passage of the Rent Act of 2011 that the high-rent deregulation process will incorporate new household income and monthly legal regulated rent thresholds. If you have a tenant who's paying a monthly rent of $2,500 or more for a rent-controlled or rent-stabilized apartment, it might be time to send out the second of two Division of Housing and Community Renewal (DHCR) forms that may eventually lead to deregulation of the apartment. If you miss the deadline, you'll have to wait until next year to apply for deregulation.

The first form, which had to be sent to the tenant by May 1, 2012, is an Income Certification Form (ICF) that the DHCR uses to determine whether the tenant and other occupants of a high-rent apartment have a high income. A high-rent apartment is one with a monthly rent of $2,500 or more. A high income is defined as a combined federal adjusted gross income of more than $200,000 in each of the past two calendar years.

When to Send Second Form

If a tenant returned the ICF to you and it shows income of more than $200,000 for each of the past two years, or if the tenant doesn't return the form on time, you can ask the DHCR to deregulate the apartment. To do this, you must file a second form—a deregulation petition—with the DHCR. The form's title—“Petition by Owner for High-Income Rent Deregulation 2011 Filing Period”—appears at the top of the front page, and “RA-93-OPD (10/11)” appears in the lower left-hand corner.

You must file this form with the DHCR by June 30, 2012. If you're mailing the deregulation petition, make sure it's postmarked no later than June 30. The DHCR will accept only official U.S. Postal Service postmarks as proof of on-time filing, not postmarks generated by an owner's postage machine.

You can get copies of the form, and instructions on how to complete and file it, from your local borough rent office. You can also download the form and instructions from the DHCR's Web site, www.nysdhcr.gov.

Even if the tenant claims an income of $200,000 or less in either 2009 or 2010 on the ICF, you should still file the deregulation petition if you have reason to believe that the tenant was not truthful. The DHCR will then check the tenant's income information against the records of the New York State Department of Taxation and Finance.

Tenant Gets Chance to Respond

After you file your deregulation petition with the DHCR, the DHCR sends it to the tenant and gives the tenant 60 days to respond. If the tenant doesn't respond, the DHCR should issue an order deregulating the apartment. If the tenant responds after the 60-day deadline, the DHCR may still take into account the tenant's response, after considering such factors as the reason for and length of the delay. If the tenant had a good reason for not responding on time or if the delay was a short one, the DHCR will consider the tenant's response in deciding whether to deregulate the apartment.

Corporate Tenant's Income Doesn't Count

A tenant's corporate income doesn't count toward the $200,000 threshold. In one case, an owner applied for high-rent/high-income deregulation of a rent-stabilized tenants' apartment in 2008. The District Rent Administrator (DRA) ruled against the owner after finding that the tenants' annual household income for the previous two years was under the threshold figure.

The owner appealed and lost. The owner claimed that several corporate businesses were operated out of the tenants' apartment and that the incomes of these entities should also have been considered. But the DHCR doesn't have the authority to independently investigate tenants' income. It can only seek to match income information filed by tenants with the New York State Department of Taxation and Finance. The Rent Stabilization Code also limits what can be verified to individual “federal adjusted gross income.” Therefore, the DHCR can't consider corporate income [Briarcliff 57 LLC, January 2010].

Also, if you applied for high-rent/high-income deregulation of a corporate tenant's rent-stabilized apartment, the tenant is required to list individuals as apartment occupants in the answer. In one case, a tenant didn't list any individuals and claimed that the total household income was less than $175,000 in 2006. The DRA notified the tenant four times that its answer was insufficient, asked for personal income tax information from the apartment occupant, and warned the tenant that it would be in default if it didn't answer.

The DRA then ruled for the owner, based on the tenant's failure to supply the required income verification information. The tenant appealed and lost. The tenant claimed that the corporation operated at a loss in 2008. But this was irrelevant, and the tenant still didn't supply the requested information [Albert Fried & Co., April 2010].