Setting Rent-Stabilized Apartment's Rent After Use as a Landlord's Office
Q How do you set the rent on a rent-stabilized apartment after it has been used by the landlord as an office for approximately 20 years?
A The answer turns on whether there was a rental history for the apartment, says attorney Jillian Bittner of Horing Welikson Rosen & Digrugilliers PC. If there was no rental history and the apartment was always owner occupied or temporarily exempt, then the landlord would set a first rent. In this situation, Bittner suggests considering appropriate comparables such as units with the same number of rooms in the building and area. This data would be supported by lease agreements. Bittner notes that use of a website such as StreetEasy, an online real estate listings platform, is insufficient to use as support if challenged in the context of a fair market rent appeal.
If there is a rental history, then pursuant to the Rent Stabilization Code §2526.1(a)(3)(iii), the landlord should take the last legal regulated rent and apply two-year successive guideline increases. Bittner notes that the landlord is not able to receive the longevity bonus of 0.6 percent a year since the Housing Stability and Tenant Protection Act of 2019 repealed this statutory increase provision.
What Units Are Temporarily Exempt?
An apartment can be temporarily exempt from rent stabilization for many reasons. Here are the most common:
- Owner occupied. Apartments occupied by the building’s owner.
- Employee occupied. Apartments occupied by a building employee (such as a super) who pays no rent.
- Occupied by nonprimary resident. Apartments occupied by tenants who don’t use them as a primary residence, as determined by a court.
- Professional use. Apartments rented solely for professional use without a certificate of occupancy (C of O) for professional use and not occupied by a residential tenant. If a tenant lives in the apartment, it’s not exempt. If the unit has a C of O for professional use and a tenant doesn’t live there, then it’s permanently exempt.
- Commercial use. Units rented solely for nonprofessional business use without a C of O for commercial use and not occupied by a residential tenant. If a tenant lives in the unit, it’s not exempt. If the unit has a C of O for commercial use and no tenant lives there, then it’s permanently exempt.