Minimum Rent Increases Under RGBO 40 Revoked by Court

Facts: Rent-stabilized tenants sued New York City Rent Guidelines Board to revoke part of Rent Guidelines Board Order (RGBO) No. 40, which set guideline increases for leases renewed between Oct. 1, 2008, and Sept. 30, 2009. RGBO 40 set maximum renewal rates at the greater of 4.5 percent or $45 for one-year leases, and the greater of 8.5 percent or $85 for two-year leases. The minimum dollar increase alternative affected only those tenants paying less than $1,000 per month and resulted in a higher percentage rent increase for them. For some tenants paying $600 or $700 per month, the rent increase was 11 or 12 percent. Tenants argued that RGBO 40 unfairly penalized long-term rent-stabilized tenants who paid lower rents by effectively doubling the percentage rent increase chargeable under RGBO 40. The New York City Council joined the case as a friend of the court and agreed with tenants that the RGB had overstepped its authority under the Rent Stabilization Law.

Court: Tenants win. The Rent Guidelines Board argued that RGBO 40 was rational because it would help equalize rents between long-term and short-term tenants. The RGB also claimed that annulling the guidelines after their effective date would place additional burdens on the DHCR after the agency relied on the order in making rulings on overcharges and other issues. But the Rent Stabilization Law permits the RGB to set annual rent increases for those classes of housing accommodations subject to the law. This doesn’t mean RGB can decide what the “classes of accommodations” are and make different rules for different tenants based on how much rent they pay. RGB went beyond its authority with RGBO 40. The court’s decision also applied to RGBO 41. A lawsuit on that order had been settled by agreement that the rule of the Casado case would be followed.

Casado v. Markus: Index No. 402267/2008 (1/20/10) (Sup. Ct. N.Y. Co.; Goodman, J)