How to Implement RGBO #53 Rent Increases

On June 23, the Rent Guidelines Board voted to freeze existing rents for six months before increasing rates by 1.5 percent for the remaining half of the year for one-year leases. The RGB also voted to raise rents on two-year leases by 2.5 percent. The new rates take effect for leases commencing between Oct. 1, 2021, and Sept. 30, 2022.

Last year, the RGB voted to freeze rents for one-year leases as the COVID-19 public health emergency fueled an economic crisis that continues to affect New York City tenants and landlords. For two-year leases, a 1 percent increase was allowed during the second year. Last year’s freeze was the third one during Mayor de Blasio’s tenure.

This year, the board’s owner representatives advocated for a 2.75 percent hike on one-year leases to cover the rising costs of maintenance, insurance, and property taxes. And tenant groups wanted to freeze rates across the board, arguing that the city’s economic recovery is still pending and uncertain. Ultimately, the board chair, David Reiss, backed the compromise proposal with the mid-year hike because New York City “saw the light at the end of the tunnel” in its COVID recovery but wanted to give struggling tenants some time to achieve stability.

The new rent guidelines apply to leases beginning anytime on or after Oct. 1, 2021, through Sept. 30, 2022. Below, we’ll tell you how to calculate rents for two-year renewal leases under RGBO #53.

To help you calculate the rent hike you may charge for each of your tenants when you renew a lease, we’ve included a rent increase calculation chart—Apartment Law Insider’s RGBO #53 Rent Computation Form for Renewal Leases, below. Remember that for renewal leases, you calculate all rent hikes based on the rents charged on Sept. 30, 2021.

Rent Increase Permitted

The RGBO applies to renewal leases for rent-stabilized apartments, beginning anytime on or after Oct. 1, 2021, through Sept. 30, 2022. You can take 0 percent on a one-year lease for the first six months; 1.5 percent for the last six months; and 2.5 percent for two-year leases.

It’s important to note that as a result of the Housing Stability and Tenant Protection Act (HSTPA), these rent guidelines apply to both renewal and vacancy leases. Remember that HSTPA eliminated the statutory vacancy rate and doesn’t permit Rent Guidelines Boards to establish a separate vacancy rate. However, if authorized by the Rent Guidelines Board, the owner may add a one- or two-year guideline to all leases. And the owner can’t add more than one guideline adjustment within the same guideline year.

If Rent Cut in Effect

How do you calculate the rent increase for a renewal lease on an apartment where a Division of Housing and Community Renewal (DHCR) order cutting the rent for reduced services was in effect on Sept. 30, 2021? Base the renewal increase under RGBO #53 on what the tenant’s rent was before the DHCR-ordered rent cut. That’s because a rent cut for a reduced service is temporary. When you fix the problem, you can apply to the DHCR to restore the rent. But don’t collect the guidelines increase until after the DHCR restores the rent.

Example: On July 1, 2021, a tenant’s monthly rent is $1,200. In August, the DHCR cuts the monthly rent by $100, to $1,100. The tenant’s lease is up for renewal on Jan. 1, 2022. The tenant decides to sign a two-year lease. To calculate the guideline increase, multiply $1,200 (the rent the tenant was paying before the rent cut order) by 1 percent for the second year. If you use our Rent Computation Form for Renewal Leases, you would enter $1,200—not $1,100—on line 1 (rent charged for apartment on Sept. 30, 2021). But remember: You may collect the guidelines increase only after you get a rent restoration order.

How to fill out DHCR renewal lease offer form. In New York City, owners must give written notice of renewal by mail or personal delivery not more than 150 days and not less than 90 days before the existing lease expires on a DHCR Renewal Lease Form. The DHCR recently released the updated Renewal Lease Form at https://hcr.ny.gov/system/files/documents/2021/07/rtp-8-fillable.pdf.

When a tenant signs the Renewal Lease Form and returns it to the owner, the owner must return the fully signed and dated copy to the tenant within 30 days. A renewal should go into effect on or after the date that it’s signed and returned to the tenant, but no earlier than the expiration date of the current lease. In general, the lease and any rent increase may not begin retroactively.

On the renewal lease offer form, fill out section 2 (which shows your calculation of the rent increase) as if no rent cut is in effect. In section 2, column b, enter the rent that you could have charged on Sept. 30, 2021, if no rent cut had been in effect. Base the rest of your section 2 calculations on the rent you entered in column b. Make sure you check the box at the top of column f, which indicates you’ll be charging the tenant a lower rent than the amount you’ve entered.

Note that this year's renewal lease form explicitly says the one-year lease guideline increase can’t be applied until the final six months of the lease. There is no guideline increase in the first six months. And in Part B, Tenant's Response to Owner, the one-year renewal lease option states there is no rent increase in the first six months.

Then fill out section 5. Enter the lower rent you’ll be charging the tenant until you get a rent restoration order from the DHCR. Also, check the box that indicates that an agreement is attached to the renewal lease offer form. The agreement is the lease rider discussed in the next paragraph.

Once you get a rent restoration order, you may collect the higher rent listed in section 2, column g, of the renewal lease offer form. To head off tenant confusion and complaints, let the tenant know when and why you’ll be collecting the higher rent. You can add a rider to the renewal lease offer form you send to the tenant. Here’s a sample rider that attorney Karen Schwartz-Sidrane has drafted:

             Model Language

A DHCR rent reduction order is currently in effect; therefore, the tenant will be obligated to pay only the reduced rental in effect pursuant to said order until such time as the DHCR issues an order restoring the rent based upon the restoration of services or upon other grounds. Upon the issuance of said order, the tenant will become obligated to pay the increased rental reserved in this lease, effective as of the date specified in the DHCR’s order.

After the renewal offer is made, the tenant has 60 days to choose a lease term, sign the lease, and return it to the owner. If the tenant doesn’t accept the renewal lease offer within this 60-day period, the owner may refuse to renew the lease and may also proceed in court after the expiration of the current lease, to have the tenant evicted.

If Rent Overcharge Order Issued

What if the DHCR has issued an order finding that you’ve collected a rent overcharge, and that order includes a finding that the rent you charged on Sept. 30, 2021, should have been lower? You must base the increase available to you under RGBO #53 on the lower amount that the DHCR found was the legal rent you could charge on Sept. 30, 2021. If you use our Rent Computation Form for Renewal Leases, enter that lower amount on line 1 of the form.

TAKEAWAYS

• For one-year renewal leases, a 1.5 percent increase is allowed after a six-month rent freeze.
• The rent guidelines apply to leases beginning anytime on or after Oct. 1, 2021, through Sept. 30, 2022.
• Give written notice of renewal with a completed Renewal Lease Form (RTP-8) to the tenant not more than 150 days and not less than 90 days prior to the end of the tenant's lease term, along with the New York City Lease Rider for Rent Stabilized Tenants.