DHCR Updates Policy Statement on Decontrolling Rent-Controlled Apartments
The DHCR recently updated Policy Statement 2014-1, which details the filing requirements upon the vacancy of rent-controlled apartments. The automatic rent stabilization coverage has not been changed. If your building has six or more units, a decontrolled apartment automatically falls under rent stabilization when the new tenant signs a lease. The DHCR will continue to regulate the apartment’s rent and the services you must provide.
If your building has fewer than six apartments, the decontrolled unit escapes rent stabilization. This means that you are free to rent the apartment on whatever terms you see fit. However, this rule does not apply if you are receiving benefits under the city’s J-51 program or other government program, such as the 421-a new construction program. If you are receiving these benefits, the apartments in your building will remain rent stabilized until the building stops getting benefits. The following are the forms owners should file when re-renting a decontrolled apartment:
Apartment registration forms. With the policy statement update, owners are now required to serve to the tenant the DHCR annual apartment registration form instead of the initial registration form. However, the initial registration form contains an important notice to tenants concerning their right to challenge the fair market rent. Until further clarification, it’s recommended that owners serve both forms.
You have 90 days after the first rent-stabilized tenant moves in to complete the initial apartment registration, mail copies to the tenant by certified mail, and file it with the DHCR. Although there is no outright penalty for missing the 90-day deadline for sending the tenant a copy of forms and filing it with the DHCR, it’s in your best interests to comply with the deadline. Until you take these steps, you will face these major drawbacks:
- You won’t be able to legally collect any rent increases on the apartment. This includes increases for major capital improvements and individual apartment improvements;
- The tenant and all future tenants will be able to file a fair market appeal, challenging the legality of the first rent you charged for the newly rent-stabilized apartment; and
- The tenant and all future tenants can file a rent overcharge complaint and argue that you never filed an initial apartment registration form. This can result in a rent freeze, and a court might go so far as to freeze the rent and the amount for the old rent-controlled unit until you file the RR-1 form.
For the registration forms, acceptable proofs of service are a date-stamped U.S. Post Office receipt for the certified mailing or the tenant’s signed receipt acknowledging hand delivery of the form.
Owner’s Report of Vacancy Decontrol (RA-42V). When a rent-controlled apartment becomes vacant, you must report the vacancy to the DHCR. You do this by filing an “Owner’s Report of Vacancy Decontrol” [RA-42V-NYC] within 30 days following the date of first rental. Remember that this form needs to be filed only if the apartment was subject to rent control—and not rent stabilization—prior to the vacancy. You should keep a copy for your file; you don’t have to give a copy of this form to the new, rent-stabilized tenant.