The Housing Stability and Tenant Protection Act of 2019: What You Need to Know

By Eileen O’Toole, Esq.

On June 14, 2019, the New York State Legislature enacted the Housing Stability and Tenant Protection Act of 2019 (the Act), which significantly altered existing rent control and rent stabilization laws. The Legislature followed up on June 25, 2019, by enacting a “Clean Up Bill” to clarify some provisions of the Act. Most provisions of the Act became effective immediately on June 14, 2019.

Among other things, the Act ended “luxury” deregulation of rent-controlled and rent-stabilized units based on vacancy or high income, although units lawfully deregulated before June 14, 2019 remain deregulated. The Act also increased the pre-complaint look-back period for rent overcharge claims from four years to six years and increased the existing time limits for treble damages. The Act eliminated the statutory vacancy rent increase and longevity bonus for new rent-stabilized leases. The Act now provides that rent increases for individual apartment improvements (IAIs) and major capital improvements (MCIs) are temporary rather than permanent and imposes other substantial restrictions on the amount and collection of those increases.

The Act also amended other laws governing many aspects of eviction proceedings commenced in housing court. Except where noted in this issue, those changes will be more fully addressed in a future issue of Apartment Law Insider.

We’ll summarize the changes to the laws covered in the 2019 Rent Regulation Checklist (RRC), providing chapter references for those who have purchased the book. The full text of the Act may be found at https://legislation.nyseate.gov/pdf/bills/2019/S6458. The Clean Up Bill is found at https://www.nysenate.gov/legislation/bills/2019/S6458.

DHCR POWERS & PROCEDURES (RRC Chapter 3)

Part L of the Act, designated as the Rent Regulation Reporting Act of 2019, imposes on the DHCR new reporting requirements with respect both to the number of rent-regulated apartments and DHCR activities under the rent laws. By Dec. 31, 2019, and each year thereafter, the DHCR must submit to the state a description of programs and activities of the agency’s Office of Rent Administration (ORA) and Tenant Protection Unit (TPU), as well as various statistical data, including the number of rent-controlled and rent-stabilized units in each county; the number of MCI applications filed, approved, and/or rejected; the number of units registered with preferential rents; the number of rent overcharge complaints filed and granted; and the number of TPU investigations conducted.

• Provisions added by the Act: NY Public Housing Law §20(2).

Practical Pointer: The Act will require the DHCR to revise existing rent control and rent stabilization regulations that no longer reflect the Act’s changes to the law. The DHCR also will need to amend its Forms, Fact Sheets, Policy Statements, and Operational Bulletins to reflect the Act’s changes. Therefore, owners should check the DHCR’s recently revamped website at https://hcr.ny.gov before relying on existing versions of these documents.

EVICTION OF RENT-REGULATED TENANTS (RRC Chapter 4)

Part M of the Act, designated as the Statewide Housing Security and Tenant Protection Act of 2019, makes a number of changes to the laws governing residential eviction proceedings, applicable to both regulated and unregulated tenants. These changes will be covered in an upcoming issue of the Insider.

HARASSMENT OF TENANTS (RRC Chapter 6)

Part M, §24, of the Act creates a cause of action and criminal offense under the Real Property Actions and Proceedings Law for unlawful eviction of any lawful occupant by using or threatening force, engaging in a course of conduct that interferes or intends to interfere with the occupant’s quiet enjoyment of the dwelling, or causes the occupant to vacate. Under the new law, an owner must take reasonable and necessary action to restore such occupants to possession, and the owner can be subject to criminal and civil penalties for violating the law.

• Provisions added by the Act: RPAPL §768.

HIGH-RENT/HIGH-INCOME DEREGULATION (RRC Chapter 8)

Part D of the Act, as clarified by the Clean Up Bill, repeals high-rent/high-income deregulation of rent-controlled and rent-stabilized units effective June 14, 2019. Any unit that was lawfully deregulated before June 14, 2019, remains deregulated. Prior law permitted the deregulation of units in response to annual owner applications filed with the DHCR, provided that a tenant’s legal rent and income exceeded the thresholds established in the law.

• Provisions repealed by the Act: ETPA §5(a)(12); ETPA §5-a; RSL §§26-504.1, 26-504.3.

HIGH-RENT VACANCY DEREGULATION (RRC Chapter 9)

Part D of the Act, as clarified by the Clean Up Bill, repeals vacancy deregulation of rent-controlled and rent-stabilized units effective June 14, 2019. Any unit that was lawfully deregulated before June 14, 2019, remains deregulated. Prior law most recently permitted vacancy deregulation of units where the last rent prior to vacancy exceeded the deregulation threshold.

The Clean Up Bill provides that a market-rate unit in a building receiving tax benefits under the Affordable New York Housing Program (RPTL §421-a(16)) remains subject to the deregulation provisions provided by the law in effect prior to June 14, 2019.

• Provisions repealed by the Act: EHRCL §2(2)(n); CRARL §26-403(e)(2)(k); ETPA §5(a)(13); RSL §26-504.2.

INDIVIDUAL APARTMENT IMPROVEMENTS (RRC Chapter 11)

Part K of the Act significantly alters the rent increase provisions for IAIs. Rent increases for IAIs, previously permanent and added to an apartment’s base rent, are now temporary and, presumably, cannot be added to the base rent. The temporary IAI increases can be collected for 30 years and are then to be removed. IAI costs that can be recouped are now capped at an “aggregate” of $15,000 over a 15-year period, during which no more than three IAI increases may be collected. A prior provision in the law applying IAI increases to an increase in apartment “services” has been deleted.

Previously, neither the cost nor number of IAIs was limited. The percentage of IAI costs that can be added to the unit’s rent has been reduced substantially and capped. Prior IAI rent increases were permitted at 1/40th of the IAI cost in buildings that had fewer than 35 units, and 1/60th of the IAI cost in buildings with 35 or more units. Now, IAI rent increases are limited to 1/168th of the cost if the building has fewer than 35 units, and 1/180th of the cost if the building has 35 or more units. In other words, for IAIs costing $15,000, instead of collecting $375 (1/40) or $250 (1/60) per month, an owner may now collect only $89.29 (1/168) or $83.33 (1/180) per month. The Clean Up Bill specifies that the aggregate $15,000 cap on IAIs begins with the first IAIs performed after June 14, 2019.

The Act also now requires that IAIs be completed by a licensed contractor. There was no such prior requirement. The Act also prohibits a relationship between an owner/agent and a contractor performing IAI work. Previously, such relationship subjected an owner to heightened scrutiny of the IAI and costs. The Act also requires owners entitled to IAI rent increases to “resolve” any outstanding hazardous or immediately hazardous violations.

For occupied apartments, prior law permitted IAI rent increases only upon written tenant consent. The Act now requires “informed” tenant consent on a form to be created by the DHCR for rent-stabilized units. The DHCR already has had a form in place for this purpose for rent-controlled tenants. The Clean Up Bill repeals a requirement that the DHCR mandate that tenant consent forms be executed in a tenant’s primary language.

The Act requires owners to notify the DHCR of all IAIs, and the DHCR is directed to establish by June 14, 2020, a “centralized electronic retention system” (CERS) for tracking IAIs.

• Provisions amended: §CRARL 26-405(g)(1)(e); ETPA §6(d)(1); RSL §26-511(c)(13).

LEASING REQUIREMENTS (RRC Chapter 12)

Effective June 14, 2019, Part B of the Act eliminated statutory vacancy increases and longevity bonuses for rent-stabilized leases to new tenants. The Act also eliminated vacancy increases for second successor tenants. Part C of the Act prohibits a rent guidelines board (RGB) from adopting a vacancy or rent adjustment without prior authorization from the State Legislature. An RGB also now is prohibited from establishing a rent adjustment based on the current rent of an apartment or on the amount of time that has elapsed since a vacancy increase. Previously, statutory vacancy and longevity increases had been added to the Emergency Tenant Protection Act (ETPA) and Rent Stabilization Law (RSL), essentially replacing an RGB’s authority to adopt vacancy increases for rent-stabilized units.

• Provisions repealed: EHRCL §5(9); LEHRCA §5(6); CRARL §26-403.2; ETPA §§6(g), 10(a-1); RSL §§26-511(c)(5-a), 26-512(f).
• Provisions added: ETPA §4(4); RSL §26-510(j).
• Provisions amended: ETPA §4(b).

MAJOR CAPITAL IMPROVEMENTS (RRC Chapter 13)

Part K of the Act substantially alters the rent increase provisions for MCIs. MCI rent increases previously were permanent and added to an apartment’s base rent. Going forward, MCI rent increases are now temporary and, presumably, cannot be added to the base rent. Temporary MCI increases can be collected for 30 years and must then be discontinued.

The Act has narrowed the definition of what constitutes an MCI, requiring that the work must be essential for preservation, energy efficiency, functionality, or infrastructure of the entire building. Previously, approved MCI costs were based on “actual costs incurred,” but the Act requires the DHCR to set a schedule of “reasonable costs” with a ceiling on how much can be recovered based on the type of MCI and its rate of depreciation. MCI applications must now include an itemized list of work performed and a description or explanation of the reason or purpose of the work.

The Act also extends the MCI amortization period to 12 years if the building has fewer than 35 housing units, and 12½ years if the building has 35 units or more. Previously, costs were amortized at eight or nine years. The DHCR also must audit and inspect 25 percent of MCI applications to confirm that the work was completed.

The Act now bars owners from applying for MCI rent increases if a building’s rent-regulated tenants occupy 35 percent or fewer of a building’s units.

Previously, collection of MCI rent increases was capped annually at 6 percent for rent-stabilized tenants and 15 percent for rent-controlled tenants. MCI rent increases are now capped annually at 2 percent for all tenants. The Clean Up Bill clarifies that, for any renewal lease commencing on or after June 14, 2019, the collection of any MCI rent increase approved by the DHCR between June 16, 2012, and before June 16, 2019, shall not exceed 2 percent in any year for any tenant in occupancy on the date the MCI was approved.

MCI rent increases for rent-stabilized tenants will no longer be granted retroactively. MCI rent increases for both rent-controlled and rent-stabilized tenants will now become effective 60 days after the DHCR issues an order approving the increases.

Under the Act, no MCI increase will be granted if there are outstanding hazardous violations at the building.

• Provisions repealed: CRARL §26-403.2; EHRCL §5(9); ETPA 6(g); RSL §26-512.
• Provisions added: EHRCL §8-a; CRARL §26-405.1; ETPA §§6(d)(3-a), 10-b; RSL §26-511.1.
• Provisions amended: EHRCL §§4(3-a)(2), 4(7), (8); CRARL §26-405(g)(1)(g); ETPA §6(d)(3); RSL §26-511(c)(6).

OWNER OCCUPANCY (RRC Chapter 15)

Part I of the Act modifies the law to limit recovery of rent-controlled or rent-stabilized housing accommodations for owner occupancy to one unit to be used as the owner’s or family member’s primary residence. Previously, an individual owner was permitted to recover one or more apartments for this purpose.

Under both rent control and rent stabilization, an owner must now prove compelling necessity to recover any apartment for owner use. Within New York City, an owner previously was required to prove only a good faith intent to occupy a rent-stabilized apartment.

The Act applies to any tenant in possession on or after June 14, 2019, regardless of whether an owner’s application for an order, refusal to offer a renewal lease, or refusal to extend or renew a tenancy based on owner occupancy took place before that date.

The Act reduces the length of long-term tenancy protections against owner use applications from 20 years to 15 years.

The Act permits tenants to sue an owner who makes a fraudulent statement with respect to the proposed use of the premises. The Clean Up Bill clarifies that the cause of action for fraud based on an owner’s use claim exists only when the tenant was required to surrender the premises under the owner’s use provision.

• Provisions amended: EHRCL §5(2)(a); CRARL §26-408(b)(1); ETPA §10(a); RSL §26-511(c)(9)(b).

PREFERENTIAL RENTS (RRC Chapter 18)

Part E of the Act provides that a preferential rent granted in a rent-stabilized tenant’s lease rider or provision must become the base rent upon lease renewal for that tenant, subject to applicable RGB renewal increases. Prior law permitted owners to raise the preferential rent to the legal rent upon renewal of a lease term, unless a preferential rent rider or lease provision stated otherwise. Upon vacancy, owners can resume renting rent-stabilized units at the previously established legal regulated rent as long as the vacancy wasn’t caused by the owner’s failure to maintain the unit in compliance with the warranty of habitability.

The Act includes a limited exception to its preferential rent provision for buildings that have a regulatory agreement and receive federal project-based rental assistance.

• Provisions amended: ETPA §10(a-2); RSL §26-511(c)(14).

RENT CONTROL COVERAGE (RRC Chapter 20)

Part A of the Act eliminated the “sunset” provisions of the New York State and City rent control laws. Rent control laws previously were subject to periodic expiration and required renewal by the Legislature based on a finding of a continued housing emergency. Rent control laws now simply remain in effect without an expiration date.

Part H of the Act changed the rent increase formula for calculating maximum collectible rents (MCRs) under rent control. Increases to rent-controlled rents now will be based on the lesser of either: (a) the average of the last five one-year renewal lease increases adopted by an RGB for rent-stabilized apartments; or (b) 7.5 percent. Previously, MCR increases were based solely on a 7.5 percent annual increase, provided the owner applied to the DHCR and obtained approval for annual MBR rent increases.

Part H of the Act also eliminated the fuel cost adjustment previously applicable to rent-controlled rents in New York City, now prohibiting the costs of fuel to be passed along to rent-controlled tenants.

• Provisions repealed: CRARL §26-405(g)(1)(l), (n).
• Provisions added: EHRCL §9; CRARL §26-407.1.
• Provisions amended: EHRCL (June 16, 2019, expiration date revoked); EHRCL §1(2); CRARL §26-405(a)(5).

RENT OVERCHARGE (RRC Chapter 22)

Part F of the Act significantly changed the rent stabilization laws concerning rent overcharge by extending the statute of limitations for overcharge from four to six years before an overcharge claim is made, and by imposing treble damages for any willful overcharge determined for all six prior years. Previously, treble damages could be assessed going back only two years before the date an overcharge claim was filed before the DHCR or a court. The Act also eliminated an owner’s “safe harbor,” which allowed owners to avoid the assessment of treble damages by refunding an overcharge and reducing the tenant’s rent within the time limit to respond to an overcharge complaint. And the Act now permits treble damages to be assessed where an overcharge results solely due to an owner’s failure to file proper or timely initial or annual rent registrations. Previously, this omission wasn’t considered grounds for treble damages.

The Act specifies that the amended rent overcharge provisions apply to any claims pending or filed with the DHCR or a court on and after June 14, 2019. The DHCR is already sending notices to owners who have answered pending rent overcharge complaints that request submission of additional rent history records going back six years.

While the Act limits liability for rent overcharge to no earlier than six years before a complaint is filed, it permits tenants to file an overcharge claim “at any time” and permits the consideration of rent history that’s “reasonably necessary” to make an overcharge determination. Under prior law, owner fraud was the only exception to the four-year look-back period for review of rent history to determine rent overcharge, although other grounds for piercing the four-year rule had been added by ETPR and RSC regulations. Under prior law, the rent registered four years prior to the most recent registration wasn’t subject to challenge after four years. Now the DHCR or a court “shall” consider all available rent history that’s reasonably necessary to make overcharge determinations.

The Act specifies that tenants have a choice of forum and can pursue an overcharge claim either before the DHCR or in court. The Act also provides that an owner “shall” be assessed costs, attorney’s fees, and interest in connection with a rent overcharge determination.

• Provisions added: ETPA §12(a)(9); RSL §26-516(h).
• Provisions amended: ETPA §§12(a)(1), 12(a)(8),12(b); RSL §§26-516(a), 26-516(g); CPLR §213-a.

RENT REGISTRATION (RRC Chapter 23)

Part K of the Act increases the annual fee for DHCR rent registration from $10 to $20 per unit.

• Provisions amended: ETPA §8(c), (d); RSL §26-517.1(a).

RENT STABILIZATION COVERAGE (RRC Chapter 24)

Part A of the Act eliminated the “sunset” provisions of the ETPA and NYC Rent Stabilization laws. Rent stabilization laws previously were subject to periodic expiration and required renewal by the Legislature based on a finding of a continued housing emergency. Rent stabilization laws now simply remain in effect without an expiration date.

Part G of the Act extended rent stabilization coverage to all counties within New York State where local legislatures determine that an emergency exists. Prior law permitted rent stabilization only in New York City, Nassau, Rockland, and Westchester Counties where localities determined that coverage was warranted.

• Provisions added: ETPA §§4(a-1), 5(a)(5-a).
• Provisions amended: ETPA (June 16, 2019, expiration date revoked); ETPA §§2, 4(a), 5(a), 14; RSL (June 16, 2019, expiration date revoked).

SECURITY DEPOSITS (RRC Chapter 28)

Part M, §25, of the Act amends New York General Obligations Law provisions concerning security deposits. Security deposits are now specifically limited to the amount of one month’s rent; this restriction already applied to rent-stabilized tenants. Also, within 14 days after a tenant moves out, the owner now must provide the tenant with an itemized statement indicating the basis for any amount of the security deposit retained and must return any remaining portion of the deposit to the tenant. If an owner doesn’t provide the tenant with the statement and deposit within 14 days, the owner forfeits any right to retain any portion of the deposit. A court finding of willful violation of the security deposit provisions can result in an order to refund twice the amount of the deposit.

• Provisions added: NYGOL §7-108(1-a).
• Provisions amended: NYGOL §7-108(1).

TAX BENEFIT PROGRAMS (RRC Chapter 32)

The Clean Up Bill provides that a market-rate unit in a building that receives benefits under the Affordable New York Housing Program [RPTL §421-a(16)] is subject to the deregulation provisions of rent stabilization as provided by the law in effect prior to June 14, 2019.

• Provisions amended: ETPA §§5(a)(6), (10), (11).

Editor’s Note: Separate and apart from the Act, New York’s highest court ruled in June 2019 that apartments located in buildings receiving RPTL §421-g tax benefits weren’t subject to the luxury deregulation provisions of the Rent Stabilization Law, and reversed a lower court ‘s ruling [Kuzmich v. 50 Murray Street Acquisition LLC, 2019 NY Slip Op 05057 (Ct. App. 6/25/19)].

TEMPORARY EXEMPTION FROM RENT STABILIZATION (RRC Chapter 33)

Part J of the Act provides for an exception to temporary exemption from rent stabilization based on the operation of housing accommodations for charitable purposes on a non-profit basis. Under the Act, not-for-profit corporations that rent apartments for use by “vulnerable individuals or individuals with disabilities who are or were homeless or at risk of homelessness” become rent stabilized upon lease renewal. And affiliated subtenants who occupy those apartments are deemed rent-stabilized tenants under the Act. The legal rent for these units will be the rent paid for an apartment by the prior tenant, increased by an RGB guideline.

• Provisions amended: ETPA §5(a)(10), (11).

MISCELLANEOUS REQUIREMENTS (RRC Chapter 35)

Cooperative/Condominium Conversions. Part N of the Act repealed the eviction plan option for building owners seeking to convert occupied residential buildings to cooperative or condominium ownership. At the same time, for non-eviction plans, the percentage of apartments for which subscription agreements or purchase agreements must be signed has been increased from 15 percent of anyone (insiders or outsiders) to 51 percent of tenants in occupancy—that is, insiders. This dramatic increase in the threshold of insiders required to convert an occupied building is likely to result in there being no further conversions of occupied residential buildings to cooperative or condominium ownership.

Mobile Homes. Part O of the Act added a new mobile home tenant bill of rights with new tenant protections, including rent-to-own provisions.

COMPLYING WITH THE NEW LAW

The Act raises questions and concerns that may require consultation with an attorney. Readers are advised to consult their attorneys whenever they have questions about complying with the new rules in specific circumstances.

 

About the Author

Eileen O’Toole is a partner at Borah, Goldstein, Altschuler, Nahins & Goidel, P.C. and the author of The 2019 New York Rent Regulation Checklist, a comprehensive guidebook on rent control and rent stabilization in New York State, published by The Habitat Group. She also writes The Habitat Group ‘s New York Landlord v. Tenant monthly case digest and the annual NYC Apartment Management Checklist, Habitat ‘s building and housing maintenance code guidebook.

O ‘Toole joined Borah, Goldstein, Altschuler, Nahins & Goidel, P.C. in 2014 as a partner in the firm ‘s Administrative Law practice area. She has continued her law practice focus on counseling owners, lenders, and prospective purchasers of residential properties on rent regulatory and other landlord-tenant issues. She also appears in court actions and administrative proceedings to litigate disputes over leasing, rent overcharge, vacancy deregulation, harassment, nuisance, and other housing issues.

A graduate of NYU and Boston University School of Law, O ‘Toole is a frequent speaker at legal education seminars. She is a past member of the NYC Civil Court ‘s Advisory Council for the Housing Part.