10 REASONS FOR RENT DESTABILIZATION
There are many reasons why a rent stabilized unit would be de-regulated, that is, it would be removed from rent regulation laws, rent increases would no longer be regulated, and tenants would lose many other benefits as well. While there are several and some exceptions, here are three of the most common.
(1) Expiration of J-51 or 421-a Tax Abatements
(2) Conversion to a co-op
(3) High rent vacancy deregulation
(1) Expiration of J-51 or 421-a Tax Abatements. In exchange for applying rent regulation benefits to their building or some of its units, the city offers tax abatements to landlords that reduce the amount of property tax they have to pay on the property that they own. There are two types of tax abatements that landlords can receive if they apply for them, J-51 or 421-a. One of these abatements applies to either fully rehabilitated or converted units, while the other applied to only newly constructed units.
J-51. Is only for units that have either been fully rehabilitated or converted from another use, like if a unit was used as an office space and now it’s someone’s apartment. Knowing the rent regulation status before the J-51 tax abatement was used by the landlord is important, because not all expirations of J-51 tax abatements impact rent regulation status. For example, if the unit was regulated before the J-51 tax benefits were applied, then the unit will remain rent regulated even when the tax benefits expire for the landlord.
However, if the unit became rent regulated because the landlord took the J-51 tax abatement, then it is likely that the unit would no longer be rent regulated when the J-51 tax abatements ends. However, this depends on whether or not the landlord gave you proper notice. Proper notice means that the landlord included a notice in 12-point font in the original lease and all subsequent renewals that stated (1) that the unit could be deregulated when the tax abatement benefits expired and (2) included the approximate date when rent regulation coverage would expire. If the original lease and the subsequent renewals do not have such a notice, the tenant has grounds to keep the unit rent regulated even after the tax benefits expire for the landlord.
421-a. These tax abatements apply only to newly constructed units. If the units were constructed after July 1, 1984, then the rent regulation status expires when the tax abatement expire, as long as the lease and all renewals have proper notices. If your lease extends beyond the date when abatements expire, deregulation takes affect when the last lease that was signed expires.
However, if the units were constructed before July 1, 1984, the units remain rent stabilized even after the 421-a tax abatement expires until the current tenant leaves. Once they leave, the rent regulated status of the unit expires. So, for example, if you are living in a unit that was constructed before July 1, 1984 and the 421-a tax abatement expires, your unit remains regulated only until you leave the unit.
You can call the Department of Housing, Preservation, and Development (HPD) at 212-863-5517 (J-51) or 212-863-5421 (421-a) to find out if your building is a part of either of these programs. Additionally, for more information about the Tax Incentive Program, visit the Housing Preservation and Development webpage..
(2) Conversion to a co-op or a condominium.
When a rent regulated unit is converted to a co-op or condominium, there are often two possible scenarios: either (1) tenants have the option to purchase the unit themselves and either stay there or rent it out to someone else, or (2) someone else buys the unit. If someone else buys the unit, the buyer or landlord can either (1) let the current tenant stay in their rent regulated unit or (2) they can evict them.
Under an eviction plan, tenants cannot be evicted by the purchaser of a co-op or a condominium unit for a minimum of three years after the eviction plan goes into effect. If their lease expires before the three years is up, they are offered another lease that will end when the minimum three years are up. The new lease must be under the same terms as their original lease as rent regulated tenant. Under a non-eviction plan, tenants cannot be evicted and are will remain in their units as rent regulated tenants. For more information, see the Coop/Condo Conversion Handbook.
(3) High-Rent-Vacancy and High-Rent High-Income Deregulation.
There are two types of high-rent deregulations: vacancy and high income.
High-Rent Vacancy deregulation occurs when a unit exceeds its legal monthly rent threshold (as of 2015 it is now $2,700). When exactly the deregulation applies is subject to some debate. Previously, if the high rent threshold is reached during vacancy, it would be deregulated before a new lease was extended to a new tenant. However, the Altman Ruling has challenged that interpretation. Specifically, it says that the deregulation threshold must be reached when the unit is occupied, and then it becomes when the current resident leaves and a new lease is extended to a new tenant. As of October 2017, the Altman Ruling interpretation is being used by many to argue for improper deregulation of rent regulated apartments; however, it is still unclear how long this ruling can be used in court because there is a pending appeal that could over-rule that interpretation, which is more favorable to tenants, in favor of a ruling that is allows for vacancy deregulation.
This is an important distinction because of two ways that landlords can legally raise rents in rent regulated apartments aside from the allowable rent increases allowed by the Rent Guideline Board. First, is what is called a vacancy increase. This is an increase in rent in between tenants, that is, when one tenant leaves a unit and another moves in, the landlord is allowed to charge a vacancy increase. These vary depending on the length of lease that the new tenant chosen for their lease, but are usually somewhere between an16 and 20 percent increase—which can add up. Second, landlords can pass off costs of improvements that they have made either to the building (Major Capital Improvements) or the apartment (Individual Apartment Improvements). Combining these two increases, landlords often claim” to have reached the deregulation threshold, and therefore deregulate the apartment. Since there is little regulation or verification, many rent regulated apartments in New York City are often illegally deregulated.
High-Rent High-Income refers to when the landlord can establish that the tenants living in the apartment have a total annual federal adjusted gross income that exceeds $200,000 for each of the preceding two calendar years. If this the case, then the unit is eligible for permanent deregulation.
For more information, take a look at Fact Sheet #26.