Preferential Rents Now Decrease Vacancy Increases

Under the Rent Law of 2015, the law irrefutably assumes that a preferential rent is not based on some special relationship with the tenant but is a genuine statement of what the market will bear. Since rent stabilization is supposed to prevent tenants from paying above-market rents, the logic of the situation that the Legislature saw was that in some manner, so-called “preferential rents” are to have permanent legal effect.

Under the Rent Law of 2015, if the rent that is charged a vacating tenant was less than the legal rent, the 20 percent vacancy increase now goes down to a 5 percent vacancy increase if the last vacancy was less than two years previous; 10 percent if the last vacancy was less than three years previous; 15 percent if the last vacancy was less than four years previous; and the full 20 percent only if the last vacancy was at least four years previous. Note that this is not gauged against how much of a preference there is.

Theoretically, if the actual rent charged is a single penny below the legal rent, these decreases to the rate of the vacancy increase come into effect. This is extremely important as it is a common practice in the industry to round rents down on issuing a vacancy lease. So, for example, the new legal rent may be $2,201.54 and the landlord decides to issue a lease in the sum of $2,200.00. This could be a disastrous mistake. In fact, where rents are calculated to a fraction of a penny, the landlord now should always round up. Thus, if the $2,201.54 was really $2,201.541, the landlord should charge $2,201.55 and risk treble damages for an overcharge of a penny instead of risking a drastically lower rent increase on a vacancy.

Example 1: The legal regulated rent for an apartment is, as the most recent tenant is turning in the keys, $2,000/month. The landlord was actually charging the tenant $2,000 a month, the full rent. The landlord is therefore entitled to a vacancy increase of 20 percent on a one-year lease.

Example 2: The legal regulated rent for an apartment is, as the most recent tenant is turning in the keys, $2,000/month. The landlord was actually charging the tenant $1,800 a month with all the proper preferential rent riders in place and the apartment registered showing both the legal rent and the preferential rent. The departing tenant has been there for five years. The landlord is entitled to charge the full 20 percent vacancy allowance on a one-year lease renewal, bringing the new rent to $2,400 as follows: 2,000 x 1.2 = $2,400.

Example 3: The legal regulated rent for an apartment is, as the most recent tenant is turning in the keys, $2,000/month. The landlord was actually charging the tenant $1,800 a month with all the proper preferential rent riders in place and the apartment registered showing both the legal rent and the preferential rent. The departing tenant has been there for three years. The landlord is entitled to charge only a 15 percent vacancy allowance on a one-year lease renewal, bringing the new rent to $2,300 as follows: 2,000 x 1.15 = $2,300.

Example 4: The legal regulated rent for an apartment is, as the most recent tenant is turning in the keys, $2,000/month. The landlord was actually charging the tenant $1,800 a month with all the proper preferential rent riders in place and the apartment registered showing both the legal rent and the preferential rent. The departing tenant has been there for two years. The landlord is entitled to charge only a 10 percent vacancy allowance on a one-year lease renewal, bringing the new rent to $2,200 as follows: 2,000 x 1.1 = $2,200.

Example 5: The legal regulated rent for an apartment is, as the most recent tenant is turning in the keys, $2,000/month. The landlord was actually charging the tenant $1,800 a month with all the proper preferential rent riders in place and the apartment registered showing both the legal rent and the preferential rent. The departing tenant has been there for one year. The landlord is entitled to charge only a 5 percent vacancy allowance on a one-year lease renewal, bringing the new rent to $2,100 as follows: 2,000 x 1.05 = $2,100.