Owners: Beware of Rent Concessions

By Jamie Heiberger Harrison

Since the enactment of the HSTPA, Owners of Rent Regulated units need to think twice before accepting a reduced rent. This is particularly troublesome while the NYC rental market is down some 30 plus percent. Notably, many rent stabilized units may have legal rents well below the market rate rent leaving Owners caught between a rock and a hard place…..

In the Matter of Bandil Farms Inc, the Appellate Division upheld the dismissal of the Owners Article 78 proceeding which sought to overturn a finding of rent overcharge where the Tenants lease stated “a lower rent if paid on-time." The Court found the DHCR decision was rationally based and was not arbitrary and capricious ………. The agency determination held that the higher rent due if not paid on time did not make the lower rent a "preferential rent" instead the higher rent to be paid was really an unconscionable late fee.

While the Bandil decision was pre- HSTPA and factually different, it does stand to reason that the Courts are likely to find Owners “ free time” and/or “concession(s)” during a down market as nothing more than camouflaged “preferential rent(s)”

Simply put, be careful! Trading time for a higher rent might sound like a good option; however, such concessions will likely be deemed a preferential rent upon which all subsequent increases will be based during the life of the tenancy.