How to Handle Rent-Stabilized Tenants Who Ignore Renewal Offers

When a nonregulated tenant's lease expires, an owner is under no legal obligation to renew it, unless the lease itself gives the tenant a renewal option. The situation is very different though for rent-stabilized tenants. Generally, as long as the rent is paid, you must offer renewal leases to rent-stabilized tenants.

The Rent Stabilization Code (RSC) provides that a renewal lease offer must be sent to a tenant at least 90 days and not more than 150 days prior to the end of a tenant's lease term, says attorney Peter Schwartz of Graubard Miller. You're required to notify the tenant in writing that the lease will soon expire and that the tenant may choose to renew for a term of one or two years. Your notice must also inform the tenant of the amounts by which the monthly rent and required security deposit will increase, based on the renewal rent increases authorized by the Rent Guidelines Board. The offer must be sent by mail or personal delivery, adds Schwartz.

At this point, after receiving the renewal lease form, the tenant has 60 days to accept your offer by signing the form and returning it to you. You then get 30 days to send a fully executed renewal lease form to the tenant.

However, a tenant may fail or refuse to respond to a lease renewal offer. The tenant may have been planning to leave or may have simply misplaced the offer. The problem for the owner occurs when the tenant doesn't leave by the end of the lease term. Fortunately, the RSC specifically addresses this situation where an owner offers the tenant a renewal lease and the tenant doesn't respond, but remains in possession of the apartment after the lease expires [RSC § 2523.5(c)(5)].

In effect, there are two options available for the owner. The RSC provides that after the expiration of the lease, the owner could bring an eviction proceeding against a tenant who continues to stay or hold over in the apartment. And according to the RSC, the owner may also choose to continue the tenancy by deeming a renewal lease to be in effect.

Deemed Renewal Lease Basics

If the tenant doesn't respond to the renewal offer, but following the lease expiration, the tenant remains in the apartment and pays the rent at the one- or two-year renewal increase amount, then the owner can deem the lease renewed for the term that reflects the one- or two-year increase paid by the tenant. According to attorney Karen Schwartz-Sidrane of Sidrane and Schwartz-Sidrane LLP, in this situation there has been a meeting of the minds or mutual intention to agree between the owner and tenant and, therefore, the lease can be considered renewed. The owner billed the rent increase at the end of the lease term, and the tenant is paying it.

But what if the tenant doesn't pay an increase? Can the owner still deem a renewal lease to be in effect? The owner can deem the lease renewed for the term of the previously expired lease. Thus, if the prior lease was for two years, the owner can deem that lease renewed for a two-year term at the Rent Guideline increment that relates to the two years. In fact, after the owner deems such a renewal to be in effect, and if the tenant doesn't pay the increase, the owner must take affirmative action to obtain the difference in a nonpayment proceeding, says Schwartz-Sidrane.

The deeming of a renewal lease happens automatically. There are no specific procedures and no forms for an owner to employ, says Schwartz. However, it's a good idea to keep proof of a deemed lease handy in case the tenant challenges you in court. Schwartz recommends that the owner retain a copy of the renewal lease offer with proof of service upon the tenant to establish that a proper offer was made. Rent bills showing the new rent should also be sent to the tenant. Additionally, a letter to the tenant explaining that the owner deemed the lease renewed, while not required, may be helpful to show the rent history in the event of a future challenge to the rent.

For example, in one DHCR decision, a tenant complained of a rent overcharge. The owner claimed that the district rent administrator failed to calculate a rent increase for a renewal lease that the landlord had deemed to be in effect for the tenant for the year 2006. The DHCR ruled against the owner. To get credit for a deemed lease, the owner had to prove that a proper and timely lease renewal offer was delivered to the tenant, that the owner charged the tenant the amount claimed to have been due under the deemed lease, that the tenant either paid the deemed lease rent, or that that the owner sued the tenant for nonpayment based on the deemed rent increase. In this particular case, the DHCR noted that the owner failed to submit any proof of any of these requirements. So the rent administrator correctly determined that there was no deemed lease increasing tenant's rent [Orin Management Corp, February 2008].

Pursuing Eviction

Rather than continuing a landlord-tenant relationship with a nonresponsive tenant, an owner may want to end the relationship and pursue a “holdover” eviction proceeding as soon as the lease term expires.

However, owners must be mindful of the notice requirements when pursuing this approach to a nonresponsive tenant. RSC Section 2524.2(c)(1) requires the service of a 15-day notice of termination for failure to execute a renewal lease, and even with this notice of termination, a court may hold that the tenant still has a right to cure by executing a renewal lease.

If the tenant hasn't returned your renewal offer form after 60 days, you shouldn't wait until the lease term ends to prepare and serve the notice of termination to the tenant. This will cause undue delays. Rather, you should speak to your attorney about the timing of service of the notice to ensure that the termination date in the notice is the last day of the renewal term. Under this scenario, the owner can immediately commence a holdover eviction proceeding to recover possession the day following the expiration of the lease term without any delay.

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