When I first rented my apartment, the lease came with a generous concession of several months free, which lowered my monthly rent. Now I’m renewing the lease and my landlord won’t give me the same concession. Does this violate the law against preferential rent?
It depends on the type of lease you signed, but if you are in a rent-stabilized apartment there may be grounds to hold onto your lower rent under recent rent reform legislation, says Sam Himmelstein, a lawyer with the firm Himmelstein, McConnell, Gribben, Donoghue & Joseph who represents residential and commercial tenants and tenant associations.
There are currently class action lawsuits alleging that some landlords used rental concessions, which give tenants a period of free rent, in order to get around rent stabilization laws and hit tenants with unexpected rent hikes at renewal time. These lawsuits involve 421-a buildings—developments that received tax abatements, which requires landlords to make all units rent stabilized until the abatement expires.
“In these 421-a buildings, the landlord sets an initial legal rent which, given current conditions, exceeds the market rent, and the units are stabilized at that initial legal amount,” Himmelstein says. “Now with the pandemic, no one wants to pay rents above market rate, so the landlord offers rental concessions.”
The lawsuits claim that this practice is deceptive to tenants. When landlords offer several months of free rent as a concession, they are effectively lowering the monthly rent if the concession is prorated over the course of the lease. By removing the concession upon lease renewal, they are effectively raising the rent by more than would be ordinarily permitted under the rent stabilization law.
This is also a tactic for getting around new laws on preferential rent. Previously, landlords could legally charge “preferential rent,” or rent that is lower than the maximum legal regulated rent for their units if they were having trouble renting them. But upon renewal, they could raise the rent back up to its original rent.
But the Housing Stability and Tenant Protection Act of 2019 makes preferential rent permanent while stabilized tenants remain in their apartment, and rent increases upon lease renewal must be based on that preferential rent. (When the tenant vacates, landlords can raise the rent back to its original regulated level.)
“I’m not aware of any cases that have decided this issue, but in effect when landlords give these concessions it is another way of giving the tenant a preferential rent,” Himmelstein says.
It’s worth keeping an eye on how these class action lawsuits proceed, as their decisions could set a new legal precedent. And landlords are now offering concessions more than ever amid high vacancies and declining rents, especially in Manhattan and Brooklyn. New renters who are benefiting from concessions may find they’re in for an unpleasant surprise when they renew their leases and landlords hike their rent back up to its original level by refusing to repeat the concessions.
For market-rate tenants, though, there isn’t much to be done, at least legally.
“If you’re in a market apartment, then it’s all negotiable,” Himmelstein says. “If the landlord offers you three months of free rent to induce you to rent the apartment, and that’s clearly specific to the first year of the lease, the concept of that concession extending has no relevance.”
In that situation, you’re likely to be charged a higher rent once you renew your lease. Of course, everything depends on the economic situation at the time of your renewal. For now, with Manhattan’s vacancy rate at 6.14 percent, landlords are increasingly willing to negotiate.
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Sam Himmelstein, Esq. represents NYC tenants and tenant associations in disputes over evictions, rent increases, rental conversions, rent stabilization law, lease buyouts, and many other issues. He is a partner at Himmelstein, McConnell, Gribben, Donoghue & Joseph in Manhattan. To submit a question for this column, click here. To ask about a legal consultation, email Sam or call (212) 349-3000.