As you may recall, on August 31, 2022, DHCR released proposed amendments to the Rent Stabilization Code which DHCR said are intended to address the changes wrought by the HSTPA. DHCR went much further than that, however, and as part of our continued endeavor to fiercely advocate for our clients’ property rights, Rosenberg & Estis submitted comments to DHCR regarding the proposed RSC amendments. We submitted written comments at DHCR’s November 15, 2022 public hearing, raising many issues.
Just yesterday, DHCR adopted the amendments with no meaningful changes to the proposed version. Click here to read the text of the adopted version. The amendments become effective upon publication in the NYS Register, which DHCR advises will be on November 8, 2023.
There are many important and significant changes in these Code amendments, including but not limited to the following:
- Newly created apartments:
- An owner may no longer take a first rent on a newly created apartment. Instead, the Code sets forth various methodologies on how to calculate rents based upon prior legal rents of the apartments which formerly occupied that space. However, there are many scenarios of newly created apartments which the Code does not address with respect to how to set rents.
- Substantial rehabilitation:
- DHCR is now authorized to issue a new operational bulletin (which has not been updated since 1995) modifying the qualification criteria, including that:
- The longstanding 80% vacancy presumption of substandard condition is eliminated.
- At least 75% of listed applicable building- and apartment-wide systems need to be replaced (until now, DHCR was not authorized to require more than 75% replaced).
- There is no longer an exception to the criteria regarding “good cause shown” for an individual system not being replaced. • Generally, a finding of harassment precludes a finding of substantial rehabilitation for 3 years.
- DHCR is now authorized to issue a new operational bulletin (which has not been updated since 1995) modifying the qualification criteria, including that:
- Demolition:
- Previously, the courts defined “demolition” as being able to “stand in the cellar and see the sky.” The new Code amendments redefine demolition as “removal of the entire building including the foundation.”
- Demolition applications must include proof of financial ability to pay (previously, that could be provided prior to issuance of the order).
- Rent overcharges:
- Distinguishes between pre- and post-HSTPA overcharge filings with respect to lookback.
The above is just a short summary of what we believe are the main important topics, but there are other changes in the amendments. On September 22 of last year, R&E hosted a webinar addressing these issues in detail. Use this link to read our written summary handout from the webinar.
The big question that many of you are asking concerns whether the Code amendments will be applied retroactively, especially with respect to newly created apartments. We can expect there to be a great deal of litigation on that question which the courts will ultimately need to decide. Until then, we recommend you reach out to us to discuss how to best position yourselves to defend against such claims.
If you have any questions, please feel free to contact your trusted Rosenberg & Estis, P.C. attorney or Zachary J. Rothken, Member & Head of the firm’s Administrative Law Department, who authored the above.