Higher Legal Regulated Rent Not Preserved in Renewal Lease

Rent-stabilized tenant complained of rent overcharge. The DRA ruled for tenant, finding that landlord had failed to provide for a preferential rent in a renewal lease commencing May 1, 2011. Therefore, the rent charged and paid by tenant under that lease became the legal regulated rent upon which future increases were to be taken. The DRA ordered landlord to refund $2,980, including interest.

Landlord appealed and lost. Landlord argued that the Rent Stabilization Law makes no mention of preserving a preferential rent and in May 2011, the Rent Stabilization Code didn’t require that where a preferential rent was charged, the amount of the legal regulated rent need be set forth in any subsequent renewal lease. But on Jan. 8, 2014, Rent Stabilization Code (RSC) Section 2521.2(c) was amended to eliminate the prior code provision that the legal regulated rent need not be set forth in a renewal lease. So the DHCR now requires that the preferential rent and the legal regulated rent be set forth in each lease executed with tenant who is supposedly paying a preferential rent. Providing for dual rents in annual rent registrations isn’t a substitute, and doesn’t preserve the collection of a higher, legal regulated rent on renewal or vacancy. And although the lease in question was executed in 2011, prior to the 2014 RSC amendment, tenant’s complaint was filed after the code was amended and was properly processed in accordance with the 2014 code amendment. Under RSC Section 2520.9, a code amendment takes effect on filing.

RSD 920, LLC: DHCR Adm. Rev. Docket No. EO410033RO (8/26/16) [3-pg. doc.]