Security Deposit and Increase Must Be Based on Preferential Rent

Rent-stabilized tenant complained to the DHCR that landlord offered an improper renewal lease by seeking to increase tenant's security deposit by more than a guidelines increase over the preferential rent paid by tenant. Landlord instead sought additional security deposit to bring the deposit up to the amount of the higher, legal regulated rent that would be in effect under the most recent renewal lease. Landlord pointed out that tenant mistakenly relied on DHCR Fact Sheet #40, as revised in November 2015 since the January 2014 version of that Fact Sheet was the one applicable to tenant's October 2015 renewal lease. The DRA ruled against tenant and dismissed his complaint because tenant failed to submit needed information. Tenant appealed and lost, then filed an Article 78 court appeal claiming that the DHCR's decision was unreasonable. The case was sent back for further review, and the DHCR ruled for tenant. The Fact Sheets in question provide that security deposits should be based on the legal regulated rent. But the DHCR found an exception in cases like this one where the tenant is granted a preferential rent for his entire tenancy. In such case, the security deposit must be based on the preferential rent.

Shahid: DHCR Adm. Rev. Docket No. GT110003RP (11/17/20) [3-pg. doc.]