A Step-by-step guide for NYC Tenants to Challenge Rent Hikes

The rent is too damn high! What else is new in NYC? Landlords in New York City and its boroughs of Brooklyn, Queens, the Bronx and Staten Island have been going on a rent raising spree in what is already the most expensive city in the country. With the increase of venture capital real estate firms buying up properties at record pace, this problem does not seem to have an end in sight.

Often tenants feel as though they are subject to the whims of their landlords when it comes to lease renewals and rent regulations. Either consent to another 20% raise in rent or look for someplace new along with all the expenses and stress that come along with it. Some people are even getting priced out of the city permanently.

This is true to an extent, particularly if you live in an apartment that is not subject to any rent control or stabilization. However, you should check on your apartment’s rent history first because you may have some leverage of your own.

Most apartments in NYC used to be rent stabilized at some point, meaning that rents could only be raised by a very small percentage per year, along with many other protections and benefits for tenants. In order to be removed from rent stabilization certain thresholds needed to be met. Surprisingly, or perhaps unsurprisingly, landlords often disregarded these thresholds and simply deregulated the apartments illegally, thinking nobody would catch on. However, thanks to the recent Housing and Stability Act of 2019 tenants have more power than ever to challenge their landlords in these kinds of matters.

Below I’ve put together a step by step list of actions that a tenant can take to determine if their apartment was illegally deregulated at some point, and what they can do about it if it has been. Also, keep in mind that this only applies to buildings with 6 or more units. Anything less has a different set of rules.

Step 1 – Order your apartments rental history through the Division of Housing and Community Renewal (DHCR) website. It will be mailed to the apartment. The landlord will not be notified that you made a request.

You can request your apartment’s rental history here: https://portal.hcr.ny.gov/app/ask

Step 2 – After you review the rental history you will be able to see if and when your apartment was deregulated. There will also be a reason provided for the deregulation. In this article we are going to be talking specifically about the most common deregulation called “High Rent Vacancy Deregulation”.

The DHCR has a fact sheet describing what this means here: https://www.msnhlaw.com/docs/fact_sheet_36_20140416125149.pdf

You will also want to know what the rent threshold for deregulation was at the time the apartment was deregulated. That information can be found here: https://hcr.ny.gov/system/files/documents/2020/11/fact-sheet-36-02-2020.pdf

Step 3 – Determine how much money worth of improvements needed to be performed by the landlord to raise the value of the rent to qualify for deregulation. To do this you will subtract the last legal regulated rent contained on the rental history you received from the DHCR from the threshold rent listed on the historical deregulation chart. Then you multiply that number by the appropriate multiplier depending upon the date of deregulation and size of the apartment building.

If your apartment was deregulated before 2011 then the multiplier is 40x. This means that to increase rent by $1,100 per month then the landlord needed to perform $41,000 worth of improvements. ($1,100 x 40).

If your apartment was deregulated between 2011 and 2019 then the multiplier is 40x (for buildings with 35 or less units) or 60x (for buildings with more than 35units).

If your apartment was deregulated after June 24, 2019 then the multiplier is 168x (for buildings with l35 or less units) or 180x (for buildings with more than 35 units).

Another way to state it is that a landlord can only increase monthly rent by 1/40 (or 1/60, 1/168, 1/180) the amount of the total cost of improvements.

Links with this information can be found at:

May 2016 Operational Bulletin - https://hcr.ny.gov/system/files/documents/2020/02/operational-bulletin-2016-1_0.pdf

February 2020 Operational Bulletin - https://hcr.ny.gov/system/files/documents/2020/02/operational-bulletin-2016-1_0.pdf 

For example, if an apartment was deregulated in 2014 then the deregulation threshold is $2,500. If the last legal listed rent was $1,400 then the landlord would be seeking a rent increase of $1,100 per month. If the apartment is located within a building with 35 units or less then the landlord would have needed to provide improvements to the apartment costing at least $44,000 ($1,100 times 40X multiplier).

Step 4 – Determine if there is a paper trail of work performed by the landlord.  

You can look up if permits for any construction at the apartment were applied for by the landlord through the DOB Building Information Search - https://a810-bisweb.nyc.gov/bisweb/bispi00.jsp. Often the permits will list an estimate of the cost of work to be performed. If there are no permits then it may be more difficult for the landlord to prove that work was done. Almost all work that would qualify for rent deregulation would require the landlord to obtain a permit. If there is no permit, then the landlord likely did something wrong.

Step 5 – If you do find permits for renovation to your apartment occurring around the time the unit was deregulated the next thing you want to do is obtain the plans for those permits through the DOB. This will require you to first make a request for the plans from the DOB website and then go to the DOB in person to retrieve the plans. A guide for how to schedule a plan examination can be found here: https://www1.nyc.gov/assets/buildings/pdf/appointment_guide.pdf

Step 6 – Develop your strategy.

What we are trying to do here is determine if we can craft an argument that the apartment was deregulated illegally. So, sticking with the example above we know that the landlord needed to provide $44,000 in improvements to the apartment to legally deregulate. At all times the burden is on the owner to prove that the work was performed and for the cost needed to deregulate. The types of documents a landlord would have to provide to prove this include: Cancelled checks contemporaneous with the completion of work, Invoice/Receipt marking the work as paid in full, signed contract agreement, contractor’s affidavit, and potentially additional information.

Additionally, there are certain types of work a landlord can perform that will not count toward an improvement. This is when a landlord performs work this is considered normal maintenance and ordinary repairs, and tries to pass it off as improvements to the unit. These things include, but are not limited to, scraping, plastering, sanding, priming and painting walls, scraping, sanding and polishing floors, removing rotten beams, partial rewiring, etc.

Before you confront your landlord, you want to make sure you have a clear understanding of the position you want to take. You may also wish to consult with an attorney. Here is a link to our contact form HERE.

There are many other factors to consider before determining what the next step should be. These factors include the thoroughness of your research, the severity of the discrepancies between improvements provided and rent added, your risk tolerance, your financial situation, and many others, making it impossible to provide a one size fits all solution.

The best thing you can do is reach out to an attorney after you’ve completed as much information gathering on your own as possible. They will be able to help assist you in evaluation your claims. Generally, our office offers free initial consultations which will include a review and analysis of all documents collected by a tenant. In addition, should we determine that filing a lawsuit is the appropriate course of action we make sure that every tenant gets the legal help they deserve, regardless of their financial situation.

What happens if the apartment was illegally deregulated?

This is the answer, I presume, you’ve been looking for. In the event that a tenant is able to prove, in court, that an apartment was deregulated illegally then there are a great deal of benefits granted.

First, the apartment will be returned to its status as a rent stabilized apartment, and the landlord will be required to offer you a rent stabilized lease. The biggest benefit of a rent stabilized lease is that it limits the amount a landlord can increase your rent each year (usually 1-4% per year) plus a lot of other great protections.

Second, the rent will be reduced to the level that it was prior to being illegally deregulated plus additional legal rent raises that the landlord would have otherwise been entitled to. Let’s take the example we’ve already been talking about. The landlord needed to provide $44,000 in improvements to deregulate the apartment. The tenant brings the landlord to court and the landlord can only prove that he spent $22,000 on improving the apartment. That means that the landlord can only claim $550 in rent increases (22,000/40). This brings the legal regulated rent to $1,950. In this case the tenant will receive a rent stabilized lease with a base rent of $1,950.

Third, the tenant will be awarded damages equal to three times the rent overcharged by the tenant. Let’s keep working with our example. Let’s now assume that the tenant had been paying a rent of $2,600 for the past 12 months. In this case, the amount of monthly rent overcharge would be $650 per month ($2,600 - $1,950) with a total 12-month overcharge of $7,800. Therefore, the tenant would be awarded damages in the amount of $23,400.

Fourth, the landlord will be required to pay the tenant’s legal fees, or reimburse the tenant if the tenant already paid the fees.

A landlord stands to lose a lot should a tenant successfully show that an apartment was illegally deregulated. Often times this proves as a great negotiation chip to get a landlord to agree to a fair lease.  I would recommend every tenant in New York obtain their DHCR rental history to ensure they are being treated legally and fairly by their landlords.