Highlights of high rent/high income decontrol.

The most ballyhooed aspect of this past summer's Rent Regulation Reform Act was the passage of a form of luxury decontrol. The New York State Division of Housing and Community Renewal (DHCR) has only recently promulgated its operational bulletin, instructions, forms and procedures aimed at implementing this aspect of the Act.

Like its nickname, High Rent/High Income decontrol has two requisite elements: high rent and high income. Absent the presence of both elements, this form of decontrol does not apply.

First, the apartment must have a maximum rent (under rent control) or legal regulated rent (under rent stabilization) of $2,000 or more as of October 1, 1993.

Second, the aggregated income of all persons occupying the apartment as their primary residence (excluding bona fide sub-tenants and employees) must exceed $250,000 for the prior two calendar years.

In general, this will mean that you must having been charging $2,000 or more as monthly rent as of the October 1, 1993 trigger date. Among the exceptions concerns the vacant apartment renting for less than $2,000 prior to October 1, 1993, but improvements are made to the apartment which, when added to the prior rent via the 1/40th-of-cost factor would have driven the rent (had the apartment been rented) to $2,000 or more as of October 1, 1993; that rent will be deemed to meet the $2,000 threshold.

If the rent was less than $2,000 on October 1, 1993, but reaches that threshold at a subsequent date, you are out of luck: High Rent/High Income decontrol requires that the $2,000 threshold be met on the October 1, 1993 trigger date. Reaching a rent of $2,000 on a subsequent date is an irrelevancy as far as High Rent/High Income decontrol is concerned. Perhaps, at a future legislative session, this State's representatives may determine that reaching the $2,000 threshold (or some other sum) at a subsequent date will give rise to decontrol. However, for now, the rent on October 1, 1993 is paramount.

At present, the first step for High Rent/High Income deregulation involves use of DHCR's Income Certification Form. This form must be served on a tenant by May 1 of that calendar year. If it is served later than that date, it will be dismissed by DHCR, causing you to lose the right to refile until the following calendar year.

Inasmuch as owners are not likely to know the aggregate household income of their tenants, there would seem to little downside of serving the Income Certification Form upon every tenant whose rent meets the $2,000 threshold.

The Income Certification Form starts the decontrol process. Part A of the form must be completed by the owner; Part B is completed by the tenant.

Item 3 on Part A of the form requests that the owner list all DHCR docket numbers involving the subject housing accommodation. I believe that the purpose of this item is to assist DHCR in expediting any tenant complaints which might result in a rent. decrease (overcharge, service complaints fair market rent appeals. etc.). By expediting companion cases, DHCR could potentially issue orders granting tenant rent decreases; thus bringing the rent below the $2,000 level.

I suggest that owners make sure to list any applications that they have pending which can result in a rent increase (hardship, MCI, etc.). If DHCR is going to expedite companion cases which could potentially result in a rent decrease, it would seem only equitable that the agency must also expedite cases which may result in a rent increase.

It is crucial that owners follow DHCR's instructions concerning the method of service upon the tenant. In order to be safe, my firm has been serving these forms upon tenants by both certified mail, return receipt requested and by regular mail with certificate of mailing. Thus, if the tenant refuses to accept the certified mailing, by also forwarding the document by regular mail (with proof of mailing), the tenant will have little ability to protest that he or she did not receive the Income Certification Form. Because of the dramatic results that can be obtained from aleregulation, I believe that the small added expense and inconvenience of serving by both certified mail and regular mail is well worth the effort.

Items 5-A and S-B on the Income Certification Form are crucial. In Item 5-B, all tenant names must be listed. In Item-B, any non-tenants also in occupancy as a primary residence must be listed, with the tenant able to check off income that should not be included (pertaining to employees or sub-tenants). If you have reason to believe that the tenant has not listed everyone in occupancy as a primary residence or is falsely claiming persons to be employees or sub-tenants (thus trying to exclude income from the aggregate $250,000 level), you should investigate these facts carefully to verify the identities and status of all persons maintaining the apartment as their primary residence.

In a subsequent article I will be discussing the Petition process which follows the initial Income Certification step. DHCR's Petition process arises if the tenant (a) concedes high income; (b) fails to complete the Income Certification Form; or (c) certifies that the aggregate household income does not meet the $250,000 threshold, but the owner believes that such income certification is false. For now, it is premature to discuss the petition process. At present, owners should marshal their efforts towards meeting the May 1 deadline for proper service of the Income Certification Form.