DHCR Adopts new Rules

Michael Littman, Partner

The DHCR has recently certified adoption of regulations that it proposed in August 2022.

These new regulations are effective as of November 8, 2023.

There are many new regulations and below are a few significant changes:

Eliminates a Landlord’s Ability to Charge a “First Rent” When Combining Units:

  • DHCR has drastically changed the rules on “Frankenstein Units”.
  • Where two rent-stabilized apartments are combined into one unit:
    • the legal regulated rent of the newly created unit is the combined rents of the stabilized apartments, plus the IAI allowance for each unit (if applicable).
    • this new apartment would have to be registered with the DHCR under the same apartment designation as one of the prior rent-stabilized apartments.
  • Where one rent-stabilized apartment is combined with one unregulated apartment – OR – when one unregulated apartment is made larger by adding a portion of a Rent Stabilized apartment:
    • the newly created unit is subject to Rent Stabilization, however, a methodology to calculate the new rent is not addressed in the new regulations.
  • Where the outside perimeter of a Rent Stabilized apartment is either increased or decreased:
    • the new legal regulated rent would increase or decrease by a percentage that corresponds with the increase or decrease in square footage size from the original apartment size.

Substantial Rehabilitation

  • Eliminates the presumption that a building is substandard or in seriously deteriorated condition because it is 80% or more vacant.  Owners must show that the building was in substandard or in seriously deteriorated condition, i.e. photographs, vacate orders, violations, professional inspection reports etc.
  • Eliminates owner’s ability to demonstrate that no need existed to avoiding having to replace a building system.
  • Cannot file a substantial rehabilitation application for three (3) years after a finding of harassment.

Rent Overcharge Base Date Calculations

  • Rent Overcharge complaints filed before June 14, 2019 (HSTPA effective date) remain subject to a four (4) year lookback.
  • For overcharges filed after June 14, 2019, the DHCR may look to the “most recent reliable annual registration statement” filed six or more years prior to the filing of a complaint for overcharge/initiation of a proceeding, but in no event shall that date be prior to June 14, 2015.
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