For the sake of posterity, this post should begin with the following caveat: The decision following accurately represents the law as it applies to preferential rent as of January 2019. It is likely that the law will be changed in the June of this year by the passage of legislation (Assembly bill A6285; Senate bill S6527) that will prohibit an owner from raising a preferential rent by an amount more than the legal adjustment approved by the Rent Guidelines Board unless the apartment has been vacated. In other words, the preferential rent will effectively be the legal rent until the tenant leaves. Only then will landlords be able to raise the rent back to the legal level.
As the law stands now, however, landlords are allowed to offer a preferential rent to a tenant, and to then raise the rent to the legal limit at the time of renewal.
This is precisely what happened in this week’s case. Here are the background facts: The tenant moved into an apartment in Ditmas Park in June 2013. At the time, the owner offered her a preferential rent in the amount of $1,050. Presumably, this was a two-year lease. Also presumably, she then signed a second two-year lease at a preferential rent of $1,100 in 2015.
The landlord offered the tenant a third lease in a timely fashion in the spring of 2017, this time without a preferential rent. Instead, it was the full legal rent of $1,998.26. The tenant did not sign it. Instead, she and the landlord evidently came to an agreement wherein the tenant would pay a rent of $1,700. As of August 1, 2017, the tenant was still paying the landlord $1,700 instead of the full legal rent of $1,998.26. Consequently, the Rent Administrator ordered the landlord to offer the tenant a renewal lease at a rent of $1,700. This order was issued January 31, 2018.
The tenant filed a Petition for Administrative Review asserting that the vacancy lease did not explicitly state that the initial amount she paid in rent, $1,050, was preferential. She also assert that she never received the RA-LR1 worksheet. Neither issue was raised at the initial hearing. Furthermore, the landlord had already submitted a preferential rent rider that had been signed by the tenant in 2013 and the landlord had claimed, without being contradicted by the tenant, that tenant had been provided with the RA-LR1 worksheet at the time she moved in. The tenant's claims were also contradicted by the vacancy lease, which has been submitted by the landlord as evidence, which clearly showed that the tenant had been provided with the following information: That the tenant who had lived in the unit before her had paid $1,596 in rent, that the landlord was entitled to a 20 percent vacancy increase following the previous tenant's departure, and that the $1,050 initially paid by the current tenant was a preferential rent.
Because the landlord clearly differentiated between the legal rent and the preferential rent, the tenant was not entitled to treat the preferential rent like the legal rent. By an order filed on October 11, 2018, the tenant’s petition was denied, and the Rent Administrator’s order was affirmed.
What to take away: Raising the rent on a stabilized unit by 80 percent will soon be illegal.
To read more about this case, see what our friends at Landlord v. Tenant have to say.