Landlords have steered clear of good cause evictions, but lawmakers are considering another bill that could “open the floodgates” for rent overcharging cases.
The measure, designed to make it easier for tenants to prove past rent excesses constituted fraud, would lead to huge payouts for years-old breaches — even to previous landlords.
Ellen Davidson of the Legal Aid Society told City Limits that “particularly with some court decisions, it is becoming increasingly difficult to prove that landlords had fraudulent intent to increase rents or deregulate apartments.”
On Friday, the Community Housing Improvement Initiative accused Sen. Brian Kavanagh and Assembly Member Linda Rosenthal of quietly pushing the measure in the final hours of the legislative session. The respective Houses chair the housing committees.
“This bill is about penalizing property owners. Plain and simple,” CHIP executive director Jay Martin said in a statement. “The 2019 rent law changes are about deterring future fraud, not creating a scheme to convict landlords until proven innocent.”
The measure, along with another aimed at giving tenants more insight into their units’ rent history, was debated towards the end of the legislative session. The Senate passed a bill to increase rent history Friday night, and another measure is expected later.
Lawmakers, scheduled to take a yearlong recess on Thursday, stopped in Albany for another day, leaving lobbyists and reporters scrambling to figure out what they were doing.
CHIP claims the bill seeks to unravel landmark 2020 state appeals court decisions, and Subsequent ruling. this 2020 case Finds that the Rent Act 2019 cannot be applied retroactively to cases of overcharging rent.
It also determined that rent owed to tenants in overcharging cases prior to the 2019 law had to be calculated based on a four-year lookback unless the landlord planned to illegally deregulate the unit.
In these cases, if the tenant has evidence of fraud, they can look up rental history beyond the four years prior to the complaint. If fraud is determined, the overcharge will be calculated using a “default formula” that relies on the lowest stable rent recorded for comparable apartments, rather than determining the base rent for a four-year lookback.
The measure defines fraud as “a material breach of any obligation … to truthfully disclose … rent, regulatory status, or lease information” to deregulate or unlawfully increase rents, regardless of whether the fraud was intentional or not, And regardless of whether the tenant “specifically relied on an untrue or misleading statement in a registration, lease, or other document.”
According to the act, fraud includes wrongly deregulating an apartment “unless the landlord can demonstrate good faith reliance on an order or ruling by an executive agency or court.” Fraud also includes failing to Register apartment In a building that received a J-51 or 421a after October 1, 2011.
The 2011 date appears to reflect a 2009 ruling that owners of Stuyvesant Town and Peter Cooper Village cannot deregulate units while receiving J-51 benefits, despite state guidance on deregulating luxury goods Opinions suggest otherwise.
Rosenberg & Estis attorney Deborah Riegel, who argued the 2020 case on behalf of property owners in the appeals court, said the new measure defines fraud too broadly. She said “any mistake” made by landlords would be considered fraud.
“In every case of overcharging, there are claims that the landlord did something wrong,” she said.
“It’s chaos for the industry. No one will know what the rent should be,” she added. “It could open the floodgates and place a huge liability on property owners.”
Increased liability in overfee cases and other aspects of the bill could also scare off lenders, she said.
The measure also requires landlords of buildings exempt from rent stabilization due to extensive repairs to file with the state housing regulator within six months of the bill’s passage.
That means buildings that have been exempt for decades will need to apply for an exemption from rent regulation. Newly restored buildings need to submit an application within one year of completing the work.
The bill further seeks to establish rent rules for newly consolidated rent-stabilized units, similar to Regulation It was proposed last year by the state housing regulator.
News of the measure comes after lawmakers Announce They are not moving forward with a larger housing program that includes 421a extensions and good cause evictions.
