Q: I live in a rent-stabilized apartment in a 16-unit building in Brooklyn. The owners are renovating all of the units – two of which were either rent-controlled or rent-stabilized until the renovation, but were then rented at market conditions. The owner accomplished this by adding a small area to the units, and the change goes far beyond what the law allows for improvements to individual apartments. The new rents correspond to or exceed the other market rents. Can the owner do this?
A: The answer to this question depends on whether the apartments were rent-stabilized or rent-controlled before the renovations. In New York City, there are approximately one million rent-controlled units and fewer than 25,000 rent-controlled units.
When a rent-controlled tenant moves out, the apartment is “detaxed.” If the building was constructed before 1974 and contained six or more units at any time, the unit will be rent stabilized.
“An owner can essentially set the initial legal rent when moving from rent control to rent stabilization,” said Samuel R. Marchese, a partner at Warshaw Burnstein who specializes in rent regulation law.
This is sometimes called a “negotiated first rent,” but in practice the landlord generally sets the rent and a tenant can decide whether or not to apply for the apartment.
The owner must register the home with the Division of Homes and Community Renewal and provide the tenant with a copy of the registration. The tenant has 90 days to dispute the new rent if they believe it is above fair market value for the area. Subsequent rent increases are governed by the Rent Guidelines Board and rent stabilization laws. If the owner never registers the apartment, the tenant can object to the market rent within six years.
Regarding rent-stabilized units, an owner cannot consolidate units or change their footprint and then set a market rent under the Housing Stability Tenant Protection Act of 2019. If two units are combined, the rents of both units would be added together to determine the new rent, but the apartment would still be rent stabilized.
Although a negotiated initial rent can be achieved in new construction and renovations of rent-stabilized units, what you describe doesn’t sound like it at all, said Matthew N. Ross, who practices landlord and tenant law in Manhattan. “Just adding a few square feet doesn’t create a new unit,” he said.
The law allows exceptions for significant renovations, but those renovations must be done on units that were substandard or in a “severely deteriorated condition.” There are also tax relief programs that allow deregulated entities after a certain period of time.
Owners who illegally converted units from rent-stabilized units to market-rate units have faced enforcement action from the state’s attorney general’s office. Tips can be directed to the state’s Tenant Protection Unit.