DHCR Adopts Significant Amendments to Rent Regulatory Provisions

The Division of Housing and Community Renewal has announced that it recently filed the necessary “Notices of Adoption” required by law to enact rent regulatory amendments to the Rent Stabilization Code, the Tenant Protection Regulations, and the State and New York City Rent Control Regulations.?

The amendments, which were originally proposed by DHCR in August 2022, are set to be published in the NY State Register on November 8, 2023.? They are expected to become effective immediately on that date.? Once effective, these provisions will immediately impact ownership and management of rent-regulated housing accommodations.

Although DHCR’s stated purpose in originally offering the amendments was to implement changes required by the 2019 Housing Stability and Tenant Protection Act, many of the new and amended provisions go far beyond the scope of the HSTPA into areas which were not at all addressed by the statute. Many of these provisions intentionally upend decades of settled DHCR policy. Some of the more notable provisions are as follows:

Substantial Rehabilitation

The ability to exempt a building from rent regulation through “substantial rehabilitation” has become a more onerous process. Among other provisions, DHCR has removed the presumption that a building which is at least 80-percent vacant is in significantly deteriorated condition and removed exceptions to the otherwise required replacement of building-wide systems where those systems were recently installed or structurally sound.

Demolition

The amendments severely limit an owner’s ability to demolish their own buildings by including, for the first time in history, a definition of the word “demolition” which requires a complete razing of the building to the ground and removal of the building’s foundation.??

Elimination of “First Rent” Rule upon Combination/Creation

DHCR has further upended its policy established since the 1980s, which authorized an owner to charge a negotiated “first rent” for a new apartment formed by combining two previous units or by other significant changes to the perimeter and dimensions of an existing apartment.? In its place, DHCR has enacted regulations, which provide that:

• when two rent-stabilized apartments are combined, the new legal rent is the combined legal rents of the two apartments, plus applicable increases;
• when a rent-stabilized apartment is combined with a non-regulated apartment, the combined unit is now rent-regulated;
• where the space of a non-regulated apartment is increased by adding space from a regulated apartment, both apartments are rent-regulated;
• when the space of a regulated vacant apartment is increased, the rent for the new space shall be the prior legal rent, plus an increase equal to the percentage increase of the space, as well as other applicable increases; and
• when the space of a regulated vacant apartment is decreased, the rent for the new space shall be the prior legal rent, plus a decrease equal to the percentage decrease of the space, as well as other applicable increases.

We note that these rules leave open a significant number of scenarios surrounding newly created units for which DHCR has not addressed how rents should be set.

Succession

DHCR has inserted itself into a split that exists in the courts as to when to measure the time period of co-residency necessary for a family member to qualify for succession to a rent regulated apartment. Under the amendments, such period is measured from the date the tenant permanently ceased residing in the apartment regardless of whether that tenant or the successors fraudulently concealed that fact by continuing to sign renewal leases or paying rent in the name of the vacated tenant.

These are merely a summary of a selected group of noteworthy amendments. The entirety of the amendment can be found by accessing the links made available through DHCR’s?website.

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