High Rent Deregulation under the Rent Act of 2015

1. HIGH RENT DEREGULATION UNDER THE RENT ACT OF 2015 David B. Cabrera, Esq. Borah, Goldstein, Altschuler, Nahins & Goidel, P.C. 377 Broadway New York, New York 10013 Tel: 212 965-2544 Fax: 212 965-2744 dcabrera@borahgoldstein.comwww.borahgoldstein.com

2. TOPICS TO BE DISCUSSED: Rent and Income Thresholds For Luxury Deregulation Methodology to Determine Exempt Status New Preferential Rent Rule To Determine Exemption Discrepancy in Laws Involving Preferential Rents First Rent Deregulation David Cabrera dcabrera@borahgoldstein.com; (212) 965-2544

3. Luxury Deregulation High Rent, High Income Deregulation • The income threshold of $200,000 remains unchanged. High Rent Vacancy Deregulation • Effective June 15, 2015, the rent threshold for high rent vacancy deregulation is increased from $2,500 to $2,700. • The $2,700 threshold is subject to adjustment each January based upon the one-year lease renewal rate adopted by RGB. Examples: 1. Rent Stabilized tenant who was paying $2,600 vacated on June 30, 2015. 2. Rent stabilized tenant vacated August 30, 2015 with a legal rent of $2,850. David Cabrera dcabrera@borahgoldstein.com; (212) 965-2544

4. Methodology To Determine Regulatory Status Prior rule (RRRA of 97 through June 23, 2011). • High-rent vacancy deregulation was determined by whether the legal rent exceeded applicable threshold AFTER vacancy. • Individual Apartment Improvements and vacancy allowances could be added to legal rent of prior tenant to reach threshold. New rule under the Rent Act of 2015: • Deregulation occurs only if the legal rent BEFORE vacancy exceeds $2,700. • Individual Apartment Improvements and vacancy allowancesare not used to increase the legal rent AFTERthe vacancy. • New rule adopts the Altman v. 285 Fourth, LLC holding. • Exception to the new rule: In units with a preferential rent lawful increases and adjustment may be added while apartment is vacant. David Cabrera dcabrera@borahgoldstein.com; (212) 965-2544

5. The Preferential Exception Two different rules for units with a preferential rent: • Units with a preferential rent that becomes vacant after June 15, 2015 can add individual apartment improvements and vacancy allowances to the legal rent while the apartment is vacant. Example • Retroactive Change – Units with a preferential rent that became vacant between June 15, 2011 and June 15, 2015 may not be deregulated unless the legal rent BEFORE vacancy exceeded $2,500. Example Practical Point: Do not re-regulate apartments that are impacted by the retroactive law change at this time. David Cabrera dcabrera@borahgoldstein.com; (212) 965-2544

6. The Preferential Rent Exception Discrepancy Retroactive exception only appears in Rent Stabilization Law not in the Emergency Tenant Protection Act. The RSL states: “Such housing accommodation shall be excluded…when….subsequent to vacancy: (I) such legal regulated rent PRIOR TO VACANCY is two thousand five hundred dollars per month…” The ETPA states: “Such housing accommodation shall be excluded…when…subsequent to vacancy: (I) such legal regulated rent IStwo thousand dollars per month…”. Compare with RSL 26-504.2 which states: “Housing accommodations shall not include:…accommodation that becomes vacant…wheresuch legal regulated rent WAStwo thousand seven hundred dollars…”. David Cabrera dcabrera@borahgoldstein.com; (212) 965-2544

7. How Do You Determine If An Apartment Is Subject To RSL or ETPA? The RSL applies to: Class A multiple dwelling not owned as a cooperative or condominium…containing six (6) or more dwelling units which were completed after February 1, 1947 but before March 10, 1969. The ETPA applies to: Class A multiple dwelling not owned as a cooperative or condominium…containing six (6) or more dwelling units which were completed after March 10, 1947 but before January 1, 1974. Why is this distinction important to you? David Cabrera dcabrera@borahgoldstein.com; (212) 965-2544

8. First Rent Deregulation New unit/combined apartment Example First rents after rent controlled tenant vacates Example David Cabrera dcabrera@borahgoldstein.com; (212) 965-2544

9. David Cabreradcabrera@borahgoldstein.com(212) 965-2544 David B. Cabrera is a partner at Borah, Goldstein, Altschuler, Nahins & Goidel, P.C., in the Administrative Division.  He has experience in all types of proceedings before the State Division of Housing & Community Renewal (DHCR), as well as matters before the Department of Housing, Preservation & Development (HPD), the Environmental Control Board, the Department of Buildings (DOB), and the Loft Board. Mr. Cabrera has over twenty years of real estate law experience, including eleven years with DHCR in various senior positions. Most recently, he was DHCR’s Deputy Commissioner for Housing Operations where he oversaw the State’s Section 8, Mitchell-Lama and Public Housing programs. He also served DHCR as General Counsel in the Office of Legal Affairs and Deputy Counsel and Assistant Commissioner in the Office of Rent Administration and specialized in rent stabilization and rent control matters. Prior to joining the DHCR, Mr. Cabrera was in private practice specializing in real estate litigation and transactions.