The letter to the Editor of Crain’s New York Business, written by Sherwin Belkin, Co-Founding Partner, regarding the potentially devastating effects upon multi-family property owners of two bills recently passed by the NYS legislature (not yet signed into law), was published on June 27, 2023.
The letter, titled “Bills would devastate rent-regulated property owners” highlights two bills that pose a significant threat to multi-family rent-regulated property owners. These bills, if enacted, would impose retroactive penalties and liabilities on an already struggling real estate industry, which is still recovering from the ill-conceived 2019 Housing Stability and Tenant Protection Act.
According to the letter, one of the bill’s sponsors downplays the impact of these changes, referring to them as “modest” adjustments aimed at promoting clarity and fairness. However, the reality is far from modest. These bills redefine the concept of “fraud” for property owners, deviating from the standard definition applied to others. Consequently, even minor errors could be misconstrued as fraudulent acts, resulting in severe consequences and potentially exorbitant rent overcharges.
Furthermore, since 1974, buildings undergoing substantial rehabilitation have been exempt from rent stabilization without requiring an order from the Division of Housing and Community Renewal (DHCR). However, these bills would introduce a mandatory application to DHCR for every building exempted due to sub rehabilitation since 1974. This requirement, affecting buildings that may have changed ownership multiple times over nearly five decades, is a significant departure from the current practice. It could create chaos for property owners, especially considering the potential unavailability of relevant documents and the likelihood of witnesses being unavailable due to the passage of time. This burden would further strain an already overwhelmed DHCR.
Contrary to the sponsors’ claim of achieving clarity, these changes contradict long-standing legal precedents established by appellate courts and administrative bodies. The concept of a “first rent” for newly created apartments resulting from the combination or division of rent-regulated units has been recognized by both DHCR and the courts. Rent stabilization renders rents for no longer existing apartments irrelevant. However, these bills seek to overturn this well-established principle.
Moreover, the changes proposed by these bills undermine fairness by infringing upon due-process rights. The Court of Appeals previously invalidated a portion of the HSTPA in 2019 because it retroactively altered the requirement for rent record retention, thereby denying owners their due-process rights. The new bills essentially revive this denial of due process under a different guise, perpetuating the constitutional infirmity.
In summary, the letter indicates that the proposed changes are neither fair nor balanced but rather draconian and punitive. They are not legally mandated but rather legislative creations aimed at burdening property owners with excessive regulations, penalties, and the re-regulation of lawfully exempt apartments.