2024 Year in Review
By Eileen O’Toole, Esq., Contributing Editor
Following legislative amendments to state and city rent stabilization laws in late 2023, further significant changes to residential landlord-tenant laws were made in 2024 under Chapter Amendments to the 2023 state law revisions, 2024–2025 State Budget Legislation, and local NYC law enactments. Meanwhile, the U. S. Supreme Court has continued to decline review of constitutional challenges to the HSTPA. A number of recurring issues raised by new and amended laws were addressed by the courts and DHCR in 2024, including: implementation of the Good Cause Eviction Law, fraudulent deregulation of rent-stabilized apartments, dismissal of nonpayment proceedings where no lease is in effect, and clarification of rules applicable to substantial rehabilitation exemption applications. Outside NYC, courts responded to challenges against ETPA enactment in Kingston, Newburgh, and Ossining.
SCOTUS Again Declines to Consider Rent Law Challenges
During 2024, the U.S. Supreme Court declined to hear several separate owner appeals concerning challenges to HSTPA amendments. In February, the Court denied certiorari in 74 Pinehurst LLC v. State of New York and 335-7 LLC v. City of New York (LVT #33088). And in November, the Court declined to hear the appeal of another rent law challenge in G-Max Mgmt. v. State of New York (LVT #33472), after a federal court denied the owners’ challenge to certain provisions of the HSTPA. In that case, owners argued in particular that the HSTPA’s restrictions on owner reclamation and condo/co-op conversions violated the Takings Clause of the Constitution’s Fifth Amendment.
Chapter Amendments to 2023 NY Rent Laws Added on March 1
On Dec. 22, 2023, Governor Hochul signed into law approved legislative amendments to the Rent Stabilization Law, ETPA, and rent control laws passed last year by the NY State Legislature. Among other things, the amended laws addressed newly created apartments, substantial rehabilitation, penalties for failure to register rent-stabilized apartments with the DHCR, and standards for determining whether owners had engaged in a fraudulent scheme to deregulate apartments. The governor’s sign-off included a proviso (LVT #33048) that the Legislature issue “Chapter Amendments” to modify certain provisions. The Legislature introduced these proposed Chapter Amendments on Jan. 4, 2024, and on March 1, 2024, the governor signed State Senate Bill No. S8011 into law (LVT #33132).
The 2024–2025 State Budget Legislation
This year’s state budget legislation covered a number of landlord-tenant law provisions.
Effective April 20, 2024, the state’s Good Cause Eviction (GCE) Law was enacted as part of the 2024–2025 state budget legislation and is fully set forth in new RPL Article 6-A (LVT #33162). The GCE Law limits unreasonable rent increases for units that are not already subject to rent regulation, ensures that existing tenants of unregulated apartments are offered renewal leases, and curbs the eviction of free-market tenants except if the owner has “good cause.”
The GCE Law was made a requirement in NYC and may be adopted by other municipalities in the state. GCE doesn’t apply to rent-regulated units but limits both the grounds for nonrenewal of unregulated tenancies and the amount of rent increases that can be charged upon lease renewal.
Under the new law, a Good Cause Eviction notice provision became effective under circumstances listed in the law on Aug. 18, 2024. There are some carve-outs to application of the law, for example, small owners and co-op and condo units. The law lists specific grounds that constitute “good cause”—that is, reasons upon which refusal to renew can be based. These include nonpayment (unless based on an unreasonable rent increase), breach of a substantial obligation of the lease agreement and failure to cure, nuisance, illegal occupancy, failure to provide access for repairs, owner use and occupancy with exemptions for tenants who are 65 years of age or older and who are disabled, demolition, withdrawal from the rental market, and where a tenant fails to agree to reasonable changes in the lease at renewal.
The budget enactment included replacement of the 421-a tax benefit program with a new affordable housing tax benefit program under RPTL §485-x (LVT #33179). The new program, set to expire in 10 years, contains more stringent “affordability” criteria than required under 421-a, with different requirements for small, medium, and large buildings.
The budget legislation also added new tax exemption incentive programs for development of affordable housing outside NYC on vacant or underutilized land, or to redevelop underutilized buildings (LVT #33203). New RPTL §421-p permits municipalities to grant exemptions for newly constructed or converted partially income-restricted rental multiple dwellings consisting of 10 or more units, if the property is located in an area of the municipality designated by local law. Under RPTL §421-pp for fully affordable buildings, the exemption will be extended to 30 years and capped at 10 percent of shelter rent. These new programs require that any new construction take place on vacant, predominantly vacant, or underutilized land, land with a non-conforming use, or land containing one or more substandard or structurally unsound dwellings, or a dwelling that has been certified as unsanitary by the local health agency.
The budget legislation also amended provisions of the rent stabilization and rent control laws to increase permissible individual apartment improvement (IAI) rent increases (LVT #33163). These provisions had been substantially cut by the HSTPA in June 2019. Under the new law, IAI rent increases are permanent, with several tiers of permissible rent increase. The basic $15,000/15-year cap on IAI spending that could be approved for rent increases under the HSTPA was increased, with two tiers of potentially available increases. The new cap for IAIs is $30,000 within a 15-year period with no change the HSTPA amortization schedule. In some outlined circumstances, the IAI cap can be $50,000 with a different amortization rate.
The budget legislation also added language to RPAPL §711 (LVT #33202) to clarify that a squatter is not a tenant (LVT #33202). This amendment was sought by some Queens County legislators after an apparent rise in instances of disputes between property owners and unauthorized occupants found at the owners’ premises.
The budget legislation also included provisions for funding the addition of Housing Court staff and at least one Housing Court judge.
NYC Legislation and Agency Actions
The New York City Council added provisions to the Administrative Code that became effective this year to permit tenant complaints about unoccupied apartments with the potential for hazardous or immediately hazardous violations. Local Law 1 of 2024 (LVT #33047) requires HPD to notify owners of such complaints, schedule inspections within 21 days, and issue violations if warranted.
The City Council also enacted The Fair Chance for Housing Act, set to take effect on Jan. 1, 2025, which will restrict criminal background checks against residential rental applications (LVT #33087). Under the new law, owners won’t be permitted to discriminate against individuals whose criminal cases didn’t result in a conviction, who have misdemeanor convictions older than three years, or who have felony convictions older than five years. The law includes some limitations on restrictions. In any event, the law prohibits landlords from running a criminal background check until after they’ve made a binding rental offer, and then the background check must be made in accordance with the new law.
The City Council also approved the Fairness in Apartment Rentals (FARE) Act (LVT #33480) in November 2024, barring landlords or real estate brokers from passing brokers’ fees along to tenants when the broker is exclusively representing the landlord's interests. The FARE Act became law in December after the mayor declined to sign it, and becomes effective in 180 days. The Real Estate Board of New York quickly filed a lawsuit challenging the new law.
New York’s City Council filed a notice of appeal involving the mayor’s veto of the City Council’s expansion of the City Fighting Homelessness and Eviction Prevention Supplement (CityFHEPS) voucher program. In Vincent v. Adams (LVT #33423), the court denied the City Council’s Article 78 petition to compel the Mayor’s Office to implement the CityFHEPS Reform Laws, which expanded the rent voucher program. The court found that the subject of the new law was already under the authority of the DSS, and that the City Council’s new law therefore was preempted.
Pandemic-era court directives, in effect following the 2020 COVID-19 outbreak, were rescinded on April 3, 2024, by the New York Court system’s Chief Administrative Judge under Administrative Order No. 143 of 2024 (LVT #33262). In connection with Housing Court proceedings, the addition of a specific notice, typically on yellow paper, that respondents in eviction cases may have “special defenses and protections,” need no longer be added to a Notice of Petition in a summary proceeding.
HPD’s CONH Pilot Program Building List was the subject in two similar cases where a New York County court reviewed owners’ Article 78 appeals of HPD’s addition of their buildings to the list. The list is based largely on HPD findings of significant distress based on application of a Building Qualification Index. While finding that HPD’s rulings were reasonable and supported by the record, the court admonished HPD to be more transparent in its administration of the program, provide more information and explanations for its decisions, and implement a more user-friendly process. See DS Brooklyn Portfolio Owner LLC v. HPD (LVT #33050), GPG 592 LLC v. HPD (LVT #33051).
Good Cause Eviction Law Quickly Raised Court Disputes
In QN St. Albans Holdings LLC v. Sands (LVT #33414), the court pointed out that since the eviction proceeding was started in March 2024, which was before the GCE Law took effect in April, the new law didn’t apply to the case. As a result, the court denied the tenant’s motion to dismiss based on his claim that the landlord failed to plead that it had good cause to evict the tenant. The landlord was permitted to terminate the unregulated tenancy without good cause.
On the other hand, in Doc Realty Mgt. Inc. v. Morales (LVT #33417), the court found that the GCE Law applied to an eviction proceeding commenced after April 20, 2024, even though the termination notice it was based on was served before the new law’s effective date. Since the landlord had failed to argue in its court petition that any GCE Law exemption applied, the case was dismissed.
In 1719 Gates LLC v. Torres (LVT #s 33424, 33490), the owner sued to evict an unregulated tenant in a holdover proceeding after serving a 90-day termination notice. The tenancy was terminated rather than renewed based on nonpayment of rent, and the issue became complicated. While the GCE Law unquestionably applied to the case, the court initially found that the nonpayment exemption couldn’t apply for the holdover proceeding. The court said that the landlord had to commence a nonpayment proceeding instead. And since the tenant’s lease had expired, the landlord would first have to offer the tenant a renewal lease before proceeding to evict on nonpayment grounds.
But in a second decision after reconsideration of the matter, the court ruled for the landlord and found that RPL §§216(3) and 231-c clearly contemplated a nonrenewal holdover premised on nonpayment of rent, and that the GCE Law had created a new cause of action blending elements of nonpayment and holdover proceedings.
Fraudulent Deregulation Remains Frequent Claim in Overcharge Cases
Claims of fraudulent deregulation of rent-stabilized units, generally raised in connection with rent overcharge complaints, remained frequent litigation issues before the courts and DHCR in 2024, without any apparent simplification through recent amendments to the Rent Stabilization Law.
In a long-pending rent overcharge proceeding involving a claim of fraudulent apartment deregulation, the DHCR rejected the tenant’s claim on appeal that rent stabilization law amendments concerning fraudulent deregulation added in 2023 and 2024 should be applied to the case, noting that these amendments were not applicable retroactively. See Matter of Gomes (LVT #33360).
In Hefti v. DHCR (LVT #33437), the First Department appeals court held that a 2001 rent increase, without more, was insufficient to establish a fraudulent scheme to deregulate. In Nadler v. Carmine Ltd. (LVT #33439), the same appeals court affirmed denial of a tenant’s rent overcharge claim raised 16 years after tenant moved into the apartment and nearly 30 years after the claimed improper deregulation.
In St. Nicholas 24 LLC v. Chavez-Lujan (LVT #33283), the Appellate Term, First Department upheld a trial court’s award to the tenant of $195,000 in rent overcharges based on the owner’s fraudulent scheme to deregulate an apartment. The owner’s claim that the tenant failed to prove all the elements of fraud wasn’t raised before the trial court and therefore wasn’t considered by the appeals court. The appeals court also found that it need not consider whether the December 2023 amendments to the Rent Stabilization Law, which stated that there need not be a finding that all of the elements of common law fraud were satisfied before determining whether there had been a fraudulent scheme to deregulate a unit, applied in this case.
In 309E75 Stone LLC v. Ramos (LVT #33290), a Manhattan Housing Court granted a tenant’s motion for pre-trial discovery where the tenant claimed that the owner had engaged in a fraudulent scheme to deregulate the apartment. Given multiple rent registration inconsistencies, overlapping tenancies, and re-registrations of the apartment, the court found that, under the “totality of the circumstances” standard found in December 2023 amendments to the RSL, the tenant had shown sufficient facts to raise a colorable claim of fraud. The court also cited the amended law’s provision that that, “nothing in this act, or the HSTPA, or prior law, shall be construed as restricting, impeding or diminishing the use of records of any age or type going back to any date that may be relevant, for purposes of determining the status of any apartment under the rent stabilization law.”
Some other Housing Court decisions discussed at length the recent rent fraud amendments to the Rent Stabilization Law and came to opposite conclusions as to whether indications of rent fraud warranted pre-trial discovery. In 41-47 Nick LLC v. Odumosu (LVT #33303), the court found no indicia of fraud that would permit questions concerning the apartment’s rent history back to 1993 that a rent-stabilized tenant first raised in 2022. The tenant had lived in the apartment since 1997 and based his fraud claim on DHCR registration records and other publicly available records. The court noted that, whether it adhered to the heightened “common law” fraud standard for pleading and proving fraud purportedly espoused in the 2020 Court of Appeals Regina decision, or whether it considered the “totality of the circumstances” applied in recent RSL amendments when determining whether tenant had raised a colorable claim of fraud, the court found that in this case, the tenant hadn’t raised a colorable claim of a fraudulent strategy to remove his apartment from RSL protections. And the tenant’s apartment rent had never been close to any deregulation threshold at the time when vacancy deregulation was permitted under the RSL.
In 1532-1609 Ocean Ave LLC v. Herizan (LVT #33304), the Housing Court found that the tenant had properly raised a colorable claim of a fraudulent scheme to deregulate the apartment where she showed that the owner had failed to file registrations consistent with the lease in effect at the time of the registration, failed to accurately reflect when the apartment was deregulated, and, by failing to provide a prior tenant with a lease rider explaining the first rent after deregulation and by charging that tenant a rent that was half the amount of the claimed legal regulated rent, had discouraged any challenge to the unit’s deregulation. The complaining tenant also had submitted a credible, detailed statement that disputed a contractor’s claim as to the scope of IAI work.
In 1532-1609 Ocean Ave LLC v. Hertzan (LVT #33326), a Brooklyn Housing Court decision provides an extensive discussion of changes to the standards applied to examination of fraudulent deregulation claims under pre-HSTPA law, the Court of Appeals 2020 decision in Regina Metro. Co. LLC v. DHCR, and more recent amendments to the Rent Stabilization Law and ETPA at the end of 2023. In Hertzan, the court held that common law fraud should no longer be the standard for determining fraudulent apartment deregulation and that the “totality of the circumstances test” was a more appropriate measure. As application of the recent rent law amendments continues, there likely will be further discussion of the currently applicable fraudulent deregulation standard in future cases involving questions of improper deregulation and rent overcharge.
Rules Governing Substantial Rehab Exemption Clarified
Chapter Amendments to the Rent Stabilization Law enacted on March 1, 2024 (LVT #33132) removed retroactive application of a new requirement that owners who claim exemption from rent stabilization of a building substantially rehabilitated after Dec. 31, 1974, must obtain an order from the DHCR approving such claim. In other words, applications to the DHCR are now required for substantial rehab work initiated only on or after Jan. 1, 2024. However, if there is a dispute as to whether a substantial rehabilitation took place before Jan. 1, 2024, there may still be instances where a court or DHCR order is required to resolve the issue.
The amendment of other provisions of the Rent Stabilization Law and Code in late 2023 concerning substantial rehabilitation raised questions about retroactivity that the DHCR has addressed in some 2024 decisions concerning whether applicability is retroactive.
Prior to Rent Stabilization Code amendments in November 2023, sub rehab applications were subject to guidelines set forth in DHCR Operational Bulletin 95-2. Op Bull 95-2 has since been replaced by DHCR Op Bull 23-3. In several 2024 decisions, the DHCR has ruled that Op Bull 95-2 still applied to pending applications where that Operational Bulletin was “effective at the time of completion of the work at issue.” See Matter of 826 Marcy Avenue LLC (LVT #33223), Matter of ZG Court LLC (LVT #33446), Matter of Creas, Inc. (LVT #33448), Matter of Freehold 1333 LLC (LVT #33479).
Nonpayment Cases Where No Current Lease Consistently Dismissed
In two 2024 cases, the Appellate Term, Second Department upheld the dismissal of nonpayment proceedings against rent-stabilized tenants who had no current leases and who had not been paying rent. As held by the court, a nonpayment proceeding can stand only when there is a landlord-tenant relationship between the parties and there has been a default in the payment of rent under an agreement by which the premises are held. See Reno Capital, LLC v. Alvillar (LVT #33381), 41 Kew Gardens Rd. Assoc. LLC. v. Munarov (LVT #33388).
While underscoring that an owner cannot seek eviction for nonpayment of rent where there is no lease in effect when the proceeding is commenced, some housing court decisions have suggested alternative remedies. In 594 Rogers BH LLC v. Frederick (LVT #33103) and 109th Affordable Housing, LLC v. Beck (LVT #33097), the courts point out that the owner could commence a plenary proceeding for the money owed or a holdover proceeding based on lease nonrenewal if the tenant had refused to sign a renewal lease. In Lichter Real Estate No. One, LLC v. Schrader (LVT #33426) the court suggested commencing an action seeking payment of “use and occupancy” for rent payment periods in question.
Notable Decisions on Expansion of Rent Stabilization Outside NYC
Enactment of rent stabilization coverage, expanded under the HSTPA to upstate municipalities that adopt the ETPA after determining that it is justified by an area’s vacancy rate, has met opposition in both Kingston and Newburgh, with conflicting results.
In Hudson Valley Property Owners Association v. City of Kingston (LVT #33160), the Third Department upheld Kingston’s adoption of the ETPA and reversed part of the lower court’s ruling on how a newly appointed Rent Guidelines Board could set rents. In response to the owners’ request to appeal further, the court found that the case raised a question of law that should be reviewed by New York’s highest court (LVT #33324), and the case is now before the Court of Appeals.
In contrast, an Orange County court ruled in April 2024 that the City of Newburgh’s December 2023 adoption of ETPA coverage was “null and void.” In Chadwick Gardens Associates, LLC v. The City of Newburgh (LVT #33161), the court ruled after a hearing that the city’s Vacancy Study lacked a rational basis and had incorrectly determined that the vacancy rate in Newburgh was under 5 percent. At press time, it is not known if the City of Newburgh will appeal the court’s decision.
ETPA coverage in the Village of Ossining in Westchester County, adopted in September 2018, was challenged by owners in PJB Equities, Inc. v. Village of Ossining (LVT #33201). The court dismissed the case in May 2019, and in 2024 the Second Department denied the owners’ appeal.