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  • Shawn F.

Key Points: New NYC Rental Regulations


There is an affordable housing crisis in America, especially in large cities like ours. A wide range of entities—federal agencies, state governments, municipalities, not-for-profits—has proposed and enacted plans to deal with it. On the development side, public-private partnerships and various tax programs are geared towards increasing inventory. On the legislative side, the focus has been on controlling costs for tenants. Oregon just passed a state-wide rent control law that effects all rental properties in the state, California’s house has sent a similar bill to the state senate for approval, and related legislation is pending in Colorado, Illinois, and Washington. Last summer, New York state passed a less expansive but still significant bill with new rules for rent-controlled and rent-stabilized units, and a number of more general regulations that apply to all rentals. (Click here to see more on the Housing Stability and Tenant Protection Act of 2019.). Rent-controlled apartments make up a vanishingly small percentage of the New York real estate market, but almost 50% of the rentals her are rent-stabilized. That’s huge. And the rest of the rules apply to any rental transaction. We’ll give you a quick summary of the regulations impacting landlords, some resources for more detail, and a more complete picture of the new guidelines that apply to any rental transaction.

The law eliminates a number of routes that landlords once had to deregulate apartments or to increase rents dramatically. For example, deregulation was possible if the rent crossed a certain threshold or the lessee earned more than $200,000 for two consecutive years. In these cases, the unit would become a market rate apartment. Also gone is the “vacancy bonus,” which allowed a rent bump of up to 20% once a tenant left a unit. The law also makes significant changes to rent increases owing to "capital improvements" to the unit or building. Absent these exceptions, the New York Rent Guidelines Board sets maximum rent increases (currently 1.5% on a one-year lease renewal, or 2.5% on a two-year lease renewal). Click here (https://www.law.com/newyorklawjournal/2019/07/09/impact-of-the-new-nyc-rent-law-on-landlords-and-tenants/) for a detailed summary of the new regulations.

Before getting into the general provisions that apply to all rentals, we’d like to venture an opinion. These new restrictions on landlords, taken as a whole, are an overreach. But they’re an understandable reaction to pervasive, long-standing bad behavior by a small number of landlords. It seems like the actions of a few bad apples having an outsize effect on the market as a whole. It’s unclear what the long-term effects will be, but it’s almost certain to correct some unethical, greedy behavior while also making life harder for some honest landlords.

On to the portions of the law that have the most impact on the clients we deal with most (on both the landlord and the tenant side). First, security deposits are capped at one month’s rent. In our experience, this is really the norm. We’ve worked with some renters that have proactively offered additional security to compensate for a less-than-ideal credit score, for example, and that practice wouldn’t be limited by this law. This seems reasonable to us.

Next, application fees are capped at $20, inclusive of background/credit check. That’s a very low number, and is definitely an overcorrection. We’ve seen many listings that charge $150 or more for an application, which is unreasonable, but the credit check itself can cost $50. And there is fair amount of time involved reviewing an application. It seems fair for the applicant to share some of the cost of the application process—we’ve always had them pay the cost of the credit check directly, without additional fees—an $20 is a very small amount. I’d imagine this might be contested. Note that a recent ruling has clarified that this regulation doesn’t apply to application fees for condo or co-op sublets.

The law also changes the amount of notice a landlord of a market-rate apartment must give if they intend to raise the rent by more than 5%: 30 days for a lease or length of residency less than one year, 60 days for one to two years, and 90 days for 2+ years. Tenants also have 30 days to remedy certain lease violations, rather than the 10 days previous allotted. These strike us as reasonable and uncontroversial.

Finally, there are new provisions around evictions and using housing court records to screen applicants. Without much experience or background in those areas, we don’t have much of a perspective on those components of the law.

Taken as whole, this suite of new regulations does a lot to protect tenants and to reign in bad actors of the landlord and management side. It’s yet to be seen what effect it will have on the real estate market generally, and on affordable housing specifically. The complexity of the law, and the speed with which it was enacted, is a good reminder that having an experienced professional helping guide you through whatever process you’re engaged in, whether looking for a home or marketing your property to prospective tenants, is a good idea.


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