Take Four Steps When Allowing Apartment Pass-On to Family Member

Suppose you’ve agreed to the pass-on of a rent-stabilized apartment to a tenant’s family member after the tenant has died or moved out. For example, you may choose not to fight the pass-on in court because the family member has a strong case that he or she is entitled to pass-on rights. Even though you’re not fighting the family member, you should be careful how you handle this kind of pass-on. By taking the right steps now you can avoid problems down the line, such as inadvertently collecting a rent overcharge or losing out on a vacancy increase if another family member later takes over the apartment. Here are four steps you should take.

Step #1: Get Proof That Tenant’s Gone

Before agreeing to a pass-on, you should first be absolutely sure that the tenant has actually moved out or died. You don’t want to give the apartment to the family member only to have the tenant come back and say he wants the apartment for himself.

To avoid this situation, send the family member a letter asking for proof that the tenant has either moved out or died. To help you with the request, we’ve provided a Model Letter: Ask Family Member for Proof that Tenant Has Moved Out or Died. Here’s the proof you’ll need:

If tenant has moved out. If the family member claims that the tenant has moved out, tell him you need a letter, signed by the tenant, stating that he’s vacated the apartment and has given up (in legal terms, “surrendered”) his right to possession of the apartment.

If tenant has died. If the family member claims that the tenant has died, ask for a copy of the tenant’s death certificate.

Step #2: Give Family Member Renewal Lease

If you’re allowing the family member to get pass-on rights to the apartment, you should give the family member a renewal lease. That’s because the family member is stepping into the shoes of the tenant.

When should the renewal lease start? Say the tenant moves out or dies in the middle of his or her current lease. You should wait until the current lease ends instead of starting the renewal lease with the family member right away. At that point, you can give the family member a renewal lease in his own name, and start to collect the applicable increase allowed for renewal leases. Don’t start collecting the renewal increase from the family member until the start date of the renewal lease.

You may encounter a situation in which the tenant or the tenant’s estate may be paying the rent due under the current lease before the renewal lease starts. If the family member then starts paying the current rent, you can accept this rent since you’re willing to accept the family member as the tenant. You don’t have to worry that, by accepting the rent, you’re waiving your right to object to the family member.

Step #3: Add Special Rider to Renewal Lease

Section 2522.8(b) of the Rent Stabilization Code allows you to collect a vacancy rent increase from the second successive family member of a rent-stabilized tenant to take over an apartment when the tenant dies or moves out. If the family member in question is the first family member to take over the apartment, you can’t collect this increase. But it’s a good idea to point out in a special lease rider that this person is the first family member to get pass-on rights. Then, if a second family member takes over the apartment, you can use the rider to help prove that this is indeed the second family member to take over the apartment, so that you’re entitled to collect the vacancy increase.

For example, suppose a tenant’s son takes over an apartment after the tenant moves out. Here’s what a rider should say:

Sample Rider

This Rider is part of the lease dated Oct. 1, 2015, between John Landlord and George Tenant, as Tenant of Apartment #1 at 999 E. 99th St., New York, NY 10000.

The tenant acknowledges that he is the son of the prior tenant of Apartment #1, Jane Smith. Jane Smith no longer resides in the apartment, having vacated on Feb. 1, 2015. The tenant lived with Jane Smith from the inception of her tenancy and is the first successive tenant to take over the apartment.

If the person getting pass-on rights to the apartment is the second successive family member to get pass-on rights, you can collect a vacancy increase and should add a different type of rider to the renewal lease. Here’s what such a rider should say:

  Sample Rider

This Rider is part of the lease dated Oct. 1, 2017, between John Landlord and Michelle Tenant, as Tenant of Apartment #1 at 999 E. 99th St., New York, NY 10000.

The tenant acknowledges that she is the daughter of the prior tenant of Apartment #1, George Smith. George Smith no longer resides in the apartment, having vacated on September 1, 2017. The tenant lived with George Smith from the inception of his tenancy on Oct. 1, 2015.

George Smith was the first successive tenant to get succession rights to the apartment as a family member subsequent to the original tenant, his mother, Jane Smith, who died. George Smith is the named tenant on a renewal lease that took effect Oct. 1, 2015.

The current tenant has provided to the Landlord proof that she is the daughter of George Smith and has resided in the apartment since the inception of his tenancy on Oct. 1, 2015.

The current tenant understands that she is the second successive family member to occupy the subject apartment as a named tenant since June 19, 1997. As such, the owner is entitled to collect the rent increase permitted pursuant to Section 2522.8(b) of the Rent Stabilization Code.

Step #4: Get Family Member’s Consent to Improvements Increase

Pursuant to the Rent Act of 2011, in buildings that contain more than 35 apartments, an owner can collect a permanent rent increase equal to 1/60th of the cost of the Individual Apartment Improvement. In buildings that contain 35 apartments or less, an owner can collect a permanent rent increase equal to 1/40th of the cost of the individual apartment improvement. You may decide to make improvements to the apartment before giving the family member the renewal lease.

If you want to collect an increase for these improvements, the Division of Housing and Community Renewal (DHCR) has ruled that you must get the family member’s written consent to the rent increase.

For example, in one case the DHCR refused to allow an owner to collect a rent increase for improvements made to an apartment. The owner applied to the DHCR for permission to increase the rent for the second pass-on tenant by making individual apartment improvements. The DHCR found that the owner couldn’t increase the pass-on tenant’s rent for 1/40th improvements without the pass-on tenant’s written consent. The pass-on tenant had lived in the apartment. There had been no vacancy. So the owner couldn’t collect a 1/40th rent increase unless the pass-on tenant consented in writing to the rent increase [89th St. Assoc., July 2005].