By Eileen O’Toole, Esq., Contributing Editor
At this writing, two so-called “Regina repealer bills,” passed by the New York State Legislature in June 2023, await submission to Governor Hochul for review and approval. While unclear when exactly such submission of these amendments to the rent stabilization laws will happen, the deadline for doing so is in December of this year. Rent-regulated building owners also continue to wait for the DHCR’s issuance of amended Rent Stabilization Code and related rent control rules so that these regulations conform to changes to the laws made in 2019 by the HSTPA.
Meanwhile, a Manhattan court recently addressed the DHCR’s disputed reliance on new HSTPA provisions to MCI applications pending on June 14, 2019, when that law took effect. In 101 E. 16th St. Realty LLC v. DHCR [LVT #32651], an Article 78 proceeding, the court ruled that the DHCR’s implementation of new and substantial restrictions to MCI rent increases applied to work and applications completed prior to enactment of the HSTPA constituted an inappropriate retroactive application of the law. The court sent the cases involved back to the DHCR for application of pre-HSTPA MCI rules. The DHCR has filed a notice of appeal to challenge the court’s decision.
The DHCR itself has recently issued rulings in several cases involving owner applications for exemption from rent stabilization based on substantial rehabilitation of buildings after Jan. 1, 1974. While it is generally understood that such applications are not currently required since the sub rehab exemption applies by operation of law, the issue periodically comes up before the DHCR or the courts where landlords and tenants dispute the building’s regulatory status, or where a party simply seeks an agency ruling on the question. The pending amendments to the rent stabilization law awaiting the governor’s review, as well as the proposed RSC amendments, include new requirements that owners who claim a substantial rehabilitation exemption applies to their buildings file for a DHCR ruling on that claim by a deadline specified to be in the near future.
Some recent DHCR sub rehab rulings raise questions about the agency’s apparent amplification of certain applicable guidelines described in DHCR’s Operational Bulletin 95-2. See, e.g., Matter of 245 Sullivan Ave LLC [LVT #32630], where the DHCR ruled that a building that was 25 percent occupied when work began did not qualify as substantially rehabilitated. See also Matter of 219 Troutman LLC [LVT #32637], where the DHCR scrutinized the question of whether the building was in a deteriorated state when the work began and found that, since four of the building’s six tenants moved out pursuant to buyout agreements, the building was “habitable” rather than deteriorated when the sub rehab commenced.
Many owners remark on the difficulty of keeping track of all required residential lease riders, and now must add a new rider. Effective June 21, 2023, residential leases throughout New York State must include a flood history and risk lease rider notice, outlining whether any part of the building is located in specified FEMA districts and the importance of flood insurance [LVT #32652].
A recent DHCR decision also addresses a separate lease rider question that comes up from time to time. In Matter of Siguencia [LVT #32640], the DHCR points out that an owner’s failure to attach a DHCR Rent Stabilization Rider with each lease provided to a tenant did not invalidate any properly renewed lease or freeze the tenant’s rent.
Finally, in 511 E. 80th St. LLC v. Margalit [LVT #32654], a court discusses whether a lease guaranty signed with an initial residential lease extends through all lease renewals or amendments. In this case, the court pointed out that the original guaranty may not survive the original lease where there was some lapse before lease renewal and no further mention of the guaranty. The result underscores the importance of expressly stating a guarantor’s obligations in a vacancy lease provision and reviewing the guaranty upon renewal or amendment of the lease.
