Landlord Can't Discontinue Preferential Rent

Rent-stabilized tenant complained to the DHCR that landlord sent her an improper renewal lease offer. Tenant had lived in the apartment since 1968. In 1988, landlord added a preferential rent rider to tenant's renewal lease. It said that, "when the tenant moves out, the owner can compute and charge the new rent based on . . .[t]he legal registered rent." Landlord continued to renew tenant's lease at the preferential rent until 2005. Landlord claimed that, under the 2003 amendment of Rent Stabilization Law Section 26-511, landlord was allowed to discontinue tenant's preferential rent upon lease renewal if it chose to do so. The DRA ruled for landlord and dismissed tenant's complaint in 2006. Tenant then filed a PAR.
The DHCR reversed and ruled for tenant in 2007. Landlord filed an Article 78 court appeal, claiming that the DHCR's decision was based on errors of law and was an abuse of the agency's discretion. The court ruled against landlord. The DHCR reasonably interpreted the 2003 amendments to the law, other provisions of the Rent Stabilization Law and the language of tenant's lease. The lease clearly indicated that the preferential rent would continue until tenant moved out of the apartment. The 2003 amendment to the law didn't bar the DHCR from considering the actual language of the lease. And in fact, other courts had ruled that preferential rent riders that gave more rights than the 2003 amendments to the law were enforceable. Nothing in the law barred landlord and tenant from agreeing to continue the preferential rent for the entire tenancy. So the DHCR had reasonably changed its position on this issue from prior agency rulings. In addition, other parts of the Rent Stabilization Law and court decisions state that a rent-stabilized renewal lease must be renewed on the same terms and conditions as the prior lease.

218 E. 85th St. LLC v. DHCR: NYLJ, 1/28/09, p. 26, col. 1 (Sup. Ct. NY; Shafer, J)