Luxury decontrol cycle begins.

The Rent Regulation Reform Act of 1997 (RRRA) has liberalized the high rent/high income deregulation provisions, As of January 1, 1998, apartments which have a legal monthly rent of at least $2,000 may be decontrolled based upon a reduced income threshold. If the total household income exceeds $175,000 (for each of the prior two years), DHCR can issue an order exempting the apartment from Rent Stabilization or Rent Control.

In past years the threshold had been $250,000 per year. It is anticipated that this $75,000 per year reduction in the income threshold may very well sweep a significantly broader group into the luxury decontrol process.

Owner's should consider commencing the decontrol process against any tenant's whose legal rent is $2,000 per month (or reaches that level on or before April 30, 1998). Even if you have previously filed a luxury decontrol petition against a particular tenant and lost, you are entitled to file and should strongly consider filing annually. Even if you filed in a previous year and that proceeding remains pending, you are entitled to and should strongly consider filing during the 1998 decontrol cycle.

For a number of reasons, the 1998 filing may produce results during this cycle that you were unable to achieve in prior years. For example, the tenant's aggregate household income may have increased above the income derived in prior years. Certainly, 1997's robust economy and predominantly bullish stock market have resulted in many tenants garnering increased income. In addition, the significantly reduced income threshold may turn prior losses into wins - for example, a tenant earning $200,000 per annum during the prior two years would not have been subjected to decontrol; your petition would have dismissed by DHCR. That same tenant's income would now exceed the reduced income threshold, such that a Order of Decontrol would issue against this tenant.

A new wrinkle created by this past summer's enactment is that an owner receiving an Order of Decontrol must offer the tenant 10 days to accept a market rent lease or the tenant will be subject to eviction. What is interesting, and perplexing, is what the statute does not say; that is:

* How should the offer of a market rent lease be made?

* When should the offer of a market rent lease be made?

* How long a term must the market rent lease reflect?

* How is the market to be determined?

* If there is a disagreement as to the "market," who rules upon the dispute? What rent is paid during the dispute? What factors will the trier of the dispute use?

I suggest that, in making the offer of a market lease, a prudent owner should anticipate a potential dispute over the meaning of "market," and take all appropriate steps to substantiate that, at the time the offer is made, the monthly rent that is offered is not predicated upon a whim or a Ouija board, but is truly reflective of the regulation free rental market for comparable apartments in the neighborhood. It will certainly be easier, and may likely be found to provide greater proof as to the genesis of your offer, if you obtain this information and document it in your files contemporaneously with the making of the offer, rather than running around after the fact, trying to obtain market information in response to a tenant challenge.