In a significant setback for landlords, Governor Kathy Hochul signed a bill on Friday that broadens the definition of fraud in rent overcharge cases. The legislation also establishes regulations to limit rents on combined apartments, colloquially known as “Frankenstein” apartments, which occur when vacant, rent-regulated units are merged.
Gov. Kathy Hochul, Sen. Brian Kavanagh, and Assemblywoman Linda Rosenthal (Source: Getty)
Rent Regulation Legislation
The law’s passage in June triggered concerns among landlords who warned of an impending surge in rent overcharge cases. Critics argue that the bill creates a scenario where any mistake could be construed as fraud, placing an additional burden on property owners. Real estate attorney Zachary Rothken stated that the legislation could have adverse effects on both the rent-stabilized market and tenants, potentially leading to significant financial burdens for landlords, and affecting their ability to maintain buildings. Jay Martin, executive director of the Community Housing Improvement Program, labeled the law a “disaster” and expressed concerns that it could be the “nail in the coffin” for rent-stabilized housing. Landlords fear that the legislation may have far-reaching implications, potentially bringing back previously deregulated units into rent stabilization due to the inability to document renovations.
Tenant advocates and the bill’s sponsors, Senator Brian Kavanagh and Assembly Member Linda Rosenthal argue that the legislation addresses loopholes in the 2019 Housing Stability Tenant Protection Act. They contend that the bill provides much-needed clarity and curtails fraudulent tactics employed by landlords, such as “Frankensteining,” to exploit legal loopholes and raise rents. The bill also introduces changes to how rents are set for combined regulated units, ensuring that the new rent cannot exceed the combined rents of the previous individual apartments. This prevents landlords from arbitrarily setting new rents when merging stabilized apartments with other units. Additionally, the legislation restricts owners’ ability to raise rents through substantial building renovations, giving them a six-month window to apply for deregulated status achieved through rehabilitation retroactively.
Landlords argue that the legislation may retroactively apply to buildings rehabbed and deregulated years ago, potentially returning them to rent-stabilization status. Tenant advocates, however, celebrate the governor’s decision to sign the bill, stating that it corrects injustices perpetuated by fraudulent tactics employed by landlords. Governor Hochul’s decision to delay announcing the bill’s signing until Christmas weekend suggests a desire to minimize attention on her actions. The governor emphasized the legislation’s aim to protect the approximately one million New Yorkers residing in rent-regulation apartments and to provide the state with stronger tools to enforce rent stabilization laws. At the same time, the governor signed one rent regulation-related bill, another awaited action at the time of reporting. This second bill allows tenants to consult rent histories beyond the usual four-year lookback when determining their legal rent after June 14, 2019. Landlord groups contested the bill, arguing that it contradicted a 2020 state Court of Appeals decision. The fate of this bill remains uncertain, pending the governor’s decision. It’s worth noting that the governor made chapter amendments, which will need approval by the legislature in early 2024.
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