How to Apply the Rent Guidelines When ERAP Is Accepted
If you’re accepting ERAP funds, you must abide by certain terms.
Since Governor Hochul took office in late August, her administration has identified as one of her top priorities the distribution of relief money to New Yorkers struggling from the economic impact of the pandemic as quickly as possible. Her office recently announced progress in providing pandemic relief to New Yorkers through the Emergency Rental Assistance Program (ERAP). The program, which is administered by the state Office of Temporary and Disability Assistance, is providing $2.6 billion in federal funding to pay up to 12 months’ arrears and three months of prospective rent directly to landlords, while providing approved tenants with up to a year of eviction protection, provided they continue to pay rent.
Since Hochul took office, the number of payments issued has grown from 15,548 payments, totaling $203 million to landlords, to 30,781 payments, totaling $399 million to landlords. And as of Sept. 15, middle-income renters previously ineligible for assistance have been allowed to begin applying for $125 million in ERAP funding. These renters earn between 80 percent and 120 percent of the area median income.
It may be the case that as the ERAP funds have been ramping up, you have received or soon will receive payments on behalf of tenants who have submitted an application. But, in accepting the rental arrears payment, you will have agreed to certain terms. We’ll remind you of these conditions and discuss how they may affect upcoming lease renewals for rent-stabilized apartments.
Owner ERAP Requirements
ERAP assists eligible households behind on their rent who have experienced financial hardship due to COVID-19 and are at risk of homelessness or housing instability. During the application process, owners need to provide the following documents:
- Completed tax Form W-9, Request for Taxpayer Identification Number and Certification;
- Executed lease with tenant applicant. When you upload this document to the ERAP application portal, the information on the lease should contain the unit address, named tenants, monthly rental obligation, and a signature page. Nonpayments such as late fees are not included;
- Proof of ownership such as a warranty deed, insurance policy, tax bill, or other similar document;
- Documentation of rent due from tenant (such as a ledger, etc.) or attestation on application, including how many months the tenant is in arrears;
- Banking information to receive direct deposit payment; and
- Affidavit for a property manager (if applicable). This is the owner affidavit of property manager/agent as recipient of funds and management agreement.
The owner or an authorized property management company will be required to sign the application form and associated certifications agreeing that the information provided, including the amount of rental arrears owed, is accurate and doesn’t duplicate a payment received from another program.
Condition of accepting payment. The owner or authorized property management company must also agree to the following terms as a condition of accepting rental arrears payments:
- Acknowledge the ERAP payment satisfies the tenant’s full rental obligations for the time period covered by the payment.
- Waive any late fees due on any rental arrears covered by the ERAP payment.
- Not increase the monthly rental amount above the monthly amount due at the time of application for ERAP assistance for months for which rental assistance is received and for one year from receipt of the ERAP payment.
- Not evict the household on behalf of whom the ERAP payment is made for reason of expired lease or holdover tenancy for one year from the receipt of the ERAP payment. An exception to this requirement will be made if the dwelling unit contains four or fewer units and the property owner or owner’s immediate family members intend to immediately occupy the unit for use as a primary residence.
Limits on One-Year Rent Increases
This year, the new rent guidelines passed by the Rent Guidelines Board (RGB) apply to leases beginning anytime on or after Oct. 1, 2021, through Sept. 30, 2022. The RGB voted to freeze existing rents for six months before increasing rates by 1.5 percent for the remaining half of the year for one-year leases. And it raised rents on two-year renewal leases by 2.5 percent.
If you’re accepting ERAP funds, you may be wondering how to apply the rent guidelines when you’re prohibited from increasing the rent above the monthly amount due at the time of application for ERAP assistance for one year from receipt of the ERAP payment.
Take note of ERAP payment date. Once you’ve received an ERAP payment for a qualified tenant, you aren’t allowed to increase the rent for that tenant for one year following the receipt of that money. In other words, for one year after receipt of ERAP payment, you aren’t allowed to take increases typically allowed for rent-stabilized apartments. These potential rent increases include the allowable increase for rent renewals under Rent Guidelines Board Order (RGBO) #53 and lawful increases for individual apartment improvements or major capital improvements.
Don’t increase rent for overlapping months. There would be no rent increase in months 7 to 12 for the one-year renewal lease if any of those months overlapped with the ERAP period prohibiting rent increases. Suppose your rent-stabilized tenant has opted for a one-year lease renewal that starts on Nov. 1, 2021. According to RGBO #53, the 1.5 percent increase is delayed until the seventh month. In this case, the rent-stabilized tenant’s rent would remain the same through May 1, 2022. Then, the tenant would pay 1.5 percent more for the last six months of the one-year lease.
But suppose the tenant successfully applied for emergency rental assistance and you received funds from the state Office of Temporary and Disability Assistance on Aug. 31, 2021. You wouldn’t be able to collect the rent increase permitted through RGBO #53 until Aug. 31, 2022. Therefore, you would be able to collect a 1.5 percent increase for only the 11th and 12th month of the renewal period or the last two months of the new lease. You wouldn’t be able to increase the rent on months 7 to 10 because these months overlap with the ERAP period limiting rent increases for one year from the receipt of payment.
It’s important to note that how many months a tenant’s rent might be frozen at 0 percent in months 7 to 12 depends on when ERAP funds are received and when a lease renewal commences. It may be the case that the ERAP rent increase limit period will expire before the one-year rent increase period for months 7 to 12 begins. In this case, an owner could collect the rent increase for all six months of a one-year lease renewal.
Don’t refer to delayed increase as preferential rent. A preferential rent is a rent an owner agrees to charge that’s lower than the legal regulated rent the owner could lawfully collect. It’s important to note that not collecting the RGBO increase on overlapping months with the ERAP limited increased rent collection period is not a preferential rent. It’s a rent increase collection delay.
Unless you already have a preferential rent, you should not register or designate anything as preferential with the DHCR or on the lease as a preferential rent. The Housing Stability & Tenant Protection Act (HSTPA) of 2019 established that tenants paying a preferential rent on or after June 14, 2019, will retain it as long as they continue to rent the property. And future Rent Guidelines Board increases and other increases allowed by the Rent Stabilization Law are to be applied to the preferential rent.