S T A T E O F N E W Y O R K
________________________________________________________________________
2943--A
2023-2024 Regular Sessions
I N S E N A T E
January 26, 2023
___________
Introduced by Sens. KAVANAGH, GIANARIS, KRUEGER -- read twice and
ordered printed, and when printed to be committed to the Committee on
Cities 1 -- committee discharged and said bill committed to the
Committee on Housing, Construction and Community Development --
committee discharged, bill amended, ordered reprinted as amended and
recommitted to said committee
AN ACT to apply the Housing Stability and Tenant Protection Act of 2019
to rent calculations and rent records maintenance and destruction
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Legislative findings. The legislature hereby finds and
declares that:
(a) the pool of rent regulated apartments in New York state contains
an unacceptably high number of apartments in which the current rents are
based on prior rents that exceeded the legal regulated rent at the time
they were charged, but for which remedies were limited under the law in
effect before the effective date of the Housing Stability and Tenant
Protection Act of 2019 (HSTPA);
(b) it is public policy prospectively to reduce, insofar as possible,
those rents to a level in line with what they would have been in the
absence of the unlawful rent setting and deregulations that were permit-
ted under prior law to go unremedied, and therefore to impose the rent
calculation standards of the HSTPA prospectively from the date of its
enactment, including in cases where the pre-HSTPA rent has already been
established by a court or administrative agency;
(c) the purpose of the prospective application of the penalty and
record review provisions of the HSTPA is to prevent the perpetual
collection of unlawful and inflated rents, and to encourage the volun-
tary registration of any rent stabilized apartment for which any prior
annual registration statement has not been filed, and to encourage the
voluntary recalculation of unreliable pre-HSTPA rents;
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD07241-02-3
S. 2943--A 2
(d) in light of court decisions arising under the HSTPA of 2019,
including REGINA METRO V. DHCR, it is public policy that the legislature
define clearly the prospective reach of that law, and limit, to the
extent required by the constitution, the retroactive reach of that law;
(e) despite REGINA, the scope of the fraud exception to the pre-HSTPA
four year rule for calculating rents remains unsettled and the subject
of litigation, and courts have diverged from the controlling authority
of THORNTON V. BARON and GRIMM V. DHCR to impose a common law fraud
standard that is not found in these cases and is inconsistent with the
intent of the legislature to discourage and penalize fraud against the
rent regulatory system itself, as well as against individual tenants,
and it is therefore public policy that the legislature codify, without
expanding or reducing the liability of landlords under pre-HSTPA law,
the standard for applying that exception;
(f) the New York state division of housing and community renewal
(DHCR) misinterpreted the rent stabilization law for a significant peri-
od of time with respect to the regulatory obligations arising from the
receipt of J-51 and 421-a tax benefits resulting in the unlawful deregu-
lation of tens of thousands of rent-stabilized apartments, the setting
of unlawful rents, and the collection of millions of dollars of rent
overcharges, during a housing emergency. Both landlords and tenants
relied upon the DHCR's misinterpretation of the law. In REGINA, the
Court of Appeals settled many of the issues arising from overcharge
claims by tenants who were misled into refraining from filing overcharge
cases during the period when DHCR's erroneous interpretation of the law
was in effect, but left open the issue of whether a landlord's ongoing
collection of overcharges and failure to return apartments to rent-sta-
bilization, after the law was clarified, should be treated as fraud;
(g) the integrity of the registration system for rent regulated hous-
ing has been eroded by the use of base date rents, rather than the
service and filing of reliable registration statements, to set rents
under the law in effect between the enactment of the Rent Regulation
Reform Act of 1997 and the HSTPA. It is therefore public policy to
impose, prospectively from the date of the enactment of the HSTPA, a
rent calculation formula that, insofar as possible, derives the legal
regulated rents for apartments from reliable registration statements
served upon tenants and made available to the public; and
(h) because pre-HSTPA law with respect to the maintenance by landlords
of rent records was complex, and has an ongoing impact upon the calcu-
lation of post-HSTPA rents, it is necessary to codify the pre-HSTPA law
that applied to the destruction of rent records prior to the enactment
of the HSTPA, and to define clearly the impact of such law upon the
prospective calculation of rents under the HSTPA.
§ 2. (a) The legal rent for all rent stabilized apartments for the
period from July 1, 2019 and thereafter shall be determined in accord-
ance with Part F of the HSTPA. Where the legal regulated rent for a rent
stabilized apartment for the period prior to June 14, 2019 has been
determined by any court or administrative agency, that determination
shall not foreclose a recalculation of the post-HSTPA rent, except that
any pre-HSTPA rent that, as of June 14, 2019, is lower than the rent
that would be permitted to be charged under the HSTPA, shall be deemed
to be the lawful rent under the HSTPA on June 15, 2019, and shall be
used as the basis for calculating subsequent rents under the HSTPA;
(b) Subdivision (a) of this section shall apply to all cases, includ-
ing those pending as of June 14, 2019 before any court, appellate tribu-
nal, or administrative agency in which a claim for rent overcharges or
S. 2943--A 3
rent arrears has been asserted with respect to rent stabilized housing,
the legal regulated rent for the period from June 14, 2019 and thereaft-
er shall be determined in accordance with Part F of the HSTPA. The
legal regulated rent for the portion of any overcharge claim involving
rents paid prior to June 14, 2019 shall be determined under pre-HSTPA
law, including the default formula in cases of fraud, as codified here-
in.
(c) Nothing in this act, or the HSTPA, or prior law, shall be
construed as restricting, impeding or diminishing the use of records of
any age or type, going back to any date that may be relevant, for
purposes of determining the status of any apartment under the rent
stabilization law;
(d) The legal regulated rent payable for the period prior to June 14,
2019 shall be calculated in accordance with the law in effect prior to
the HSTPA, including the prior four year limitation on the consideration
of rent records, and including the fraud exception to such limitation
and such other exceptions as existed under prior law and under the regu-
lations of the New York state division of housing and community renewal.
Nothing in this act shall be construed as limiting such exceptions or as
limiting the application of any equitable doctrine that extends statutes
of limitations generally. With respect to the calculation of legal
rents for the period either prior to or subsequent to June 14, 2019, an
owner shall be deemed to have committed fraud if the owner shall have
committed a material breach of any duty, arising under statutory, admin-
istrative or common law, to disclose truthfully to any tenant, govern-
ment agency or judicial or administrative tribunal, the rent, regulatory
status, or lease information, for purposes of claiming an unlawful rent
or claiming to have deregulated an apartment, whether or not the owner's
conduct would be considered fraud under the common law, and whether or
not a complaining tenant specifically relied on untruthful or misleading
statements in registrations, leases, or other documents. The following
conduct shall be presumed to have been the product of such fraud: (1)
the unlawful deregulation of any apartment, including such deregulation
as results from claiming an unlawful increase such as would have brought
the rent over the deregulation threshold that existed under prior law,
unless the landlord can prove good faith reliance on a directive or
ruling by an administrative agency or court; or (2) beginning October 1,
2011, failing to register, as rent stabilized, any apartment in a build-
ing receiving J-51 or 421-a benefits;
(e) In accordance with the practice of the New York state division of
housing and community renewal prior to June 14, 2019, where fraud is not
established, base rents of apartments unlawfully deregulated shall be
calculated as the average of rents for comparable rent stabilized apart-
ments in the building, rather than the default formula applicable to
cases involving fraud;
(f) For the period prior to June 14, 2019, neither the version of
subdivision g of section 26-516 of the administrative code of the city
of New York then in effect, nor the version of section 2523.7 of the
rent stabilization code (9 NYCRR 2523.7) then in effect shall be
construed as permitting the destruction of rent records for units that
have not been properly and timely registered. Where records have been
permitted to be destroyed by virtue of proper registration, and no other
law required the maintenance of such records, and where the owner has
proven that such records were actually destroyed in accordance with
prior law and that such destruction took place prior to June 15, 2019,
the registration served and filed prior to such lawful destruction of
S. 2943--A 4
records shall be presumed to be reliable, for purposes of any post-HSTPA
calculation of the rent, but that presumption shall be rebuttable. The
parties shall be entitled to discovery of any evidence found to be
reasonably necessary to demonstrate the legal rent. Nothing in this
paragraph shall be interpreted as authorizing the destruction of any
record, that under prior law was relevant to establishing (1) the status
of an apartment as regulated or unregulated; (2) the presence or absence
of fraud with respect to renting any housing accommodation; (3) the
presence or absence of willfulness in the collection of overcharges; (4)
the useful life of any item, the replacement of which is claimed by the
owner to qualify an apartment for a rent increase; (5) the duration of
any tenancy, such as would establish whether an owner was entitled under
prior law to a longevity increase; or (6) compliance with any law that,
independently of the rent stabilization law, required or requires the
maintenance of such records. Where the calculation of the rent is
dependent upon records that the owner has improperly destroyed, includ-
ing where the records were destroyed without the apartment having been
registered, the rent shall be calculated in accordance with the default
formula.
§ 3. This act shall take effect immediately.
