Analyzing the New Tenant Protections

Among the many of its sweeping changes, the Act: 1) repealed high-rent vacancy and high-income deregulation, which had allowed rental units to be deregulated if the maximum legal rent had been reached and/or if the tenants earned more than $200,000 for the previous two years; 2) limits the amount a landlord can increase the rent upon obtaining a vacancy in rent stabilized apartments and removes fuel pass-along charges for rent controlled apartments; 3) limits the "owner use" primary residence provision to the use of a single apartment in a rent regulated building and provides tenants with a cause of action should they be evicted as a result of fraud by a landlord regarding the intended use of the apartment; 4) substantially limits the ability of landlords to charge back to tenants for any Major Capital Improvement (MCI) and Apartment Improvement (IAI) Increases for work in the apartment made by landlords; 5) requires landlords (of all leases) to provide written notice if the landlord intends to not renew a lease or if there is a proposed increase of rent greater than 5% percent for the renewal term; 5) limits the collection of credit search fees and the collection of security (and all payments) to one month's rent, and further prohibits the charging of application fees; 7) limits the amount of late fees that may be charged (lesser of 5% or $50.00); and 8) with respect to cooperative or condominium conversions, eliminates plans which allow a non-purchasing tenant to be evicted and now requires 51% of current tenants to approve the non-eviction plan (up from 15%).

The primary purpose stated for the passage of the Act was to provide additional protections for tenants, which it has. However, some of the protections included in the Act may, in the long term, have a more limited benefit for tenants than had been hoped and, moreover, may in fact have unintended negative outcomes. Given the stringent and possibly debilitating limitations imposed by the Act, the moment the Act was passed, real estate valuations of rental buildings (which are tied to current and potential income) likely decreased. Under the old law, individual and permanent rent IAI Increases were permitted by a landlord who performed certain work within an apartment. Such IAI increases were previously permanent, but now the Act has now made such IAI increases temporary for 30-years (requiring extensive record keeping during that period). The percentage of reimbursement has now been lowered to 1/168 (from 1/40). Additionally, the Act drastically caps the amount of MCI that can be passed along to tenants, thus reducing a landlord's incentive to make certain improvements. Landlords are no longer permitted to deregulate an apartment based on the amount of rent charged or a tenant's annual income (commonly referred to as luxury decontrol). Even following a vacancy of an apartment, landlords, even with market rate apartments (which are not subject to any rent control laws), are now limited to the amount they can increase the rent. Landlords will, instead of making voluntary improvements that would increase building property values and enhance tenants' quality of life, now likely make only the absolute necessary (patchwork) repairs to legally maintain the apartments and buildings. Tenants will have longer term security, but in possibly deteriorating buildings and apartments and owners and investors of real estate may now elect to look outside of the real estate areas for investments, thus decreasing building maintenance improvements and the building of new rental buildings under certain tax exemption programs, thereby further impacting tenants.