Preferential Rents

Preferential Rents

What is a preferential rent?

 

Every rent stabilized apartment has a maximum legal rent based on its unique history. Landlords are required to register the “legal regulated rent” of rent-stabilized apartments with a state agency (New York State Homes & Community Renewal) every year, but may offer the apartment for a lower amount called a “preferential rent”.

If your lease is renewal date is after June 14, 2019, your “preferential rent” should only go up by the rent guidelines board and any other legal rent increases. Your landlord can not revoke your preferential

Preferential rents are sometimes offered as a favor to tenants, but other times they are used to hide that a landlord is registering an illegally high rent for that apartment with the state. Tenants with preferential rents are strongly encouraged to get their rent history by calling 718-739-6400 or send a text message to 646-783-0627

Legal Disclaimer:

The information contained on this web page does not constitute legal advice and must not be used as a substitute for the advice of a lawyer qualified to give advice on legal issues pertaining to housing. For more, visit our page on Finding a lawyer.

This information pertains only to tenants living in New York City.

Many of your rights depend on the type of housing you live in or your type of tenancy. You may be subject to different laws and have different sets of rights than even neighbors in your own building. Learn which rights and responsibilities apply to you.

 

 

What is preferential rent? What is a “legal rent”?

 Preferential rent is any rent charged to a rent stabilized tenant that is lower than the legal rent. As of June 14, 2019, your landlord can now only raise your rent by the rent guidelines board and any other legal rent increases.

There is a maximum legal rent for each apartment, based on the unique history of that apartment. It's not based on the apartment's size, nor the going rent of apartments in that area, nor the income of the tenant. Rents can be increased by small amounts every time the lease is renewed, and by larger amounts every time there is a new tenant or the apartment is renovated.

Why did my landlord offer a preferential rent? Should I be grateful, or concerned?

Your landlord may have offered you a preferential rent:

  • because your landlord was unable to find someone willing to pay the apartment’s legal maximum rent
  • so that you could qualify for a program with a rent cap (such as Section 8 or FEPS)
  • as a concession for you doing your landlord a favor (for example, moving to a smaller apartment)

However, your landlord may have offered you a preferential rent to cover up the fact that he has registered a fraudulent “legal” rent for your apartment. The term “legal registered rent” is confusing, because in many cases the amount registered is not legal at all. New York State Homes and Community Renewal (HCR) is the government agency that administers the rent stabilization program. However, landlords are responsible for registering the legal rents for their own apartments with HCR, and the agency does not verify or investigate their claims. The lack of oversight makes it easy for landlords to file false registrations. Only a complaint made by the tenant living in the apartment will trigger an investigation.

Often tenants with preferential rents don’t investigate their situation, because they see it as a favor or our scared. Changes to the law mean that your landlord can no longer revoke your preferential rent.

How do I know if I have a preferential rent?

The first lease you sign when you move in (or the first lease after you are offered a preferential rent) should contain language indicating that the rent is a preferential rent. Sometimes preferential rents are called by a different name. For example, many leases call a preferential rent a "lower rent to be charged" or a "temporary rent concession".

What happens to my preferential rent when I renew the lease?

As of June 14, 2019, your rent should only go up according to legal rent increases such as the rent guideline board, MCIs and/or IAIs. The rent will never jump to the legal rent while you are a tenant. This is true even if you signed your lease before the change in the law, as long as your lease begins after June 14, 2019.

 

How can I investigate and challenge the “legal regulated rent”?

You can challenge your apartment’s “legal regulated rent” even if you are currently paying the lower preferential rent. There reasons why you shouldn’t wait to start the investigation.

Start by obtaining your rent history. You can call HCR at 718-739-6400 and ask them to mail you a copy, or visit an HCR borough rent office (with a copy of your lease and photo ID in hand.) Insist on a rent history that goes back to 1984, the first year when HCR started keeping the records.

The rent history you obtain from HCR is a report of the registrations filed by your landlord each year. HCR does not verify the truthfulness of the registrations. It is up to you as the tenant to investigate and challenge the rent if an overcharge is suspected. Numerous studies have shown fraudulent rent registrations to be widespread, with the biggest abuses coming when there is a change in tenancy. New tenants are often unaware of their rights, and have only four years challenge the legality of a rent increase in most cases.

Once you have your rent history, show it to an experienced tenant attorney or advocate. It’s not simply a matter of checking what the document lists as the “legal registered rent” for your apartment. A lawyer or advocate can scrutinize rent increases and try to determine if they were valid.

The ‘legal rent’ for a rent stabilized apartment is based on the apartment’s unique history. The number of vacancies, the extent and cost of renovations, and other factors, all go into determining the legal rent.

  • In the past when there is a new tenancy, the landlord can collect a vacancy bonus (usually 20% for a two-year lease, or slightly less for a one-year lease) plus an additional percentage increase if the previous tenant lived there for eight or more years. This increase has ended as of June 14, 2019.
  • When a major building system (eg. roof, boiler) is replaced, the landlord can apply to HCR for a Major Capital Improvement (MCI) rent increase and pass on the cost of the renovation as a monthly rent increase using a specific formula. (Read more about Major Capital Improvement (MCI) rent increases.)
  • In an overcharge complaint, tenants can require their landlords to prove that sufficient money was spent on eligible work to justify the IAI rent increase. When new fixtures and appliances are installed, the landlord can add an Individual Apartment Improvement (IAI):
    Work done Before June 2019 the rent increases is based on 1/40th or 1/60th of the total cost (depending on the year the work was done and/or size of the building.)
    Work done After June 2019 the rent increases can not be for work more than $15,000 over a 15 year period.

After examining your lease and your rent history, the next steps will depend on the unique circumstances of your case.

Challenging the legal rent may cause your landlord to refuse to offer the preferential rent when you next renew your lease. If you want to challenge the legal rent, be advised that you may have different outcomes based on whether you file a rent overcharge complaint with HCR, or raise it as a defense in a Housing Court proceeding. An experienced tenant lawyer will consider your unique circumstances before suggesting a course of action.

If at all possible, seek the counsel of a tenant lawyer experienced with rent stabilization rent overcharges and with preferential rents before taking action.

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