The adoption of the HSTPA of 2019 has altered the laws regarding preferential rents. At this time, any rent regulated tenant who has a preferential rent keeps the preferential rent as their base legal rent for the entire time of their tenancy. When they move out permanently, the rent may possibly be increased if “the legal regulated
rent upon which these increases are based must be written in the vacancy or renewal lease in which the preferential rent was first charged and in all subsequent renewal leases.” Registering the rent is not enough, it must also be written down in the lease. This may have a catastrophic impact on the value of a multi-family building and we suggest that all owners examine the tax assessments for their buildings. All residential buildings are valued by their rental income or the estimated value of rental income for similar apartments. Some neighborhoods may have lower comparable rents so co-ops and condos should consider challenging their assessment.
Additional information can be found in DHCR Fact Sheet #40 which is available on DHCR’s website Fact Sheet 40