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Rent control end is near, but not all is lost.

While the Emergency Tenant Protection Act of 1974 and its runs recent extender bill may sunset on June 15th, it doesn't mean the end of rent control, or of rules and regulations governing the maintenance of a residential property.

Aside from that, Marolyn Davenport, vice president of government affairs for the Real Estate Board of New York (REBNY), says they fully expect a compromise plan to be adopted that will protect the vast majority of tenants in place.

"Even vacancy decontrol would be a substantial change," she noted.

If the luxury decontrol thresholds are lowered, it also means the formal process to screen the tenant's income and methodology for obtaining a higher rent will likely echo what is already in place now for those earning $250,000 for two years running who are renting apartments for $2,000 a month or more.

And even if the law sunsets on June 16th, whenever a compromise is worked out, the politicians will ensure that it is retroactive.

"We expect our members to act responsibly, to wait and see, and not to take any action," said Davenport.

Attorneys and owners' groups say owners and tenants alike should also realize that not all stabilized rent regulations will be kaput on June 16th, and that even the legal experts disagree on what can legally occur.

"I have clients calling all day,' said attorney Sherwin Belkin. "A lot of this is brave new world stuff that's not been interpreted at all."

Robert Goldstein, a partner with Borah Goldstein Altschuler & Schwartz, warned "Rent control doesn't end on June 16th, that's a local option, and city stabilization from '69 doesn't expire, and the leases don't expire."

Not to mention that Housing Court is still in session.

Belkin says all tenants protected by formal rent control would continue to be protected. Aside from the apartments where tenants have succeeded the former occupant through hook or crook, most of these 71,000 apartments are inhabited by the elderly and are covered by a city law that is not dependent on the state legislation.

Additionally, those tenants that have leases in effect are still governed by the leases and still have a landlord/tenant relationship, said Belkin, an attorney with Belkin Burden Wenig & Goldman.

"There are also building codes, multiple dwelling laws, and housing and maintenance codes," he said. "Tenants are still protected as far as being provided with services."

Rents also cannot be increased unless leases have ended and the laws have expired.

"At that point, they are free market and subject to what the market will bear," Belkin said.

Attorney Jeffrey Metz, of Borah Goldstein Altschuler Schwartz, P.C., says owners should not be seeking increases they are not entitled to. "It's silly to do anything otherwise," he warned.

There is also a possibility, as Goldstein says, that the Rent Stabilization Law of 1969 will apply.

"This means that tenants who were in occupancy since June 30, 1971 will still be protected by a city law," Belkin said.

Joseph Strasburg, president of the 25,000 owner members of the Rent Stabilization Association (RSA), believes there are less than 50,000 tenants that fall into that category.

Owners should determine if their tenants are rent controlled, old stabilization law or ETPA now, so if and when there is a change in the ETPA, or the law sunsets and is not renewed in some fashion over the following few weeks, they will know what is legally acceptable for each tenant.

Owners can make this determination by looking at old leases in their possession, or with the help of the Division of Housing and community Renewal (DHCR), which maintains records on apartments and tenants, says Strasburg.

"If owners are asking me, my best advice is to comply with the law as it exists," said Belkin. "If they are entitled to renewal, offer the renewals. It's not good for the real estate industry not to adhere to the law and will only heighten the fear campaign."

Belkin says the vast majority of rent stabilization tenants came into occupancy on or after 1971.

"They are not '69 tenants but really ETPA tenants. If that law lapses, those tenants are no longer rent stabilized," he explained.

Under the current rent laws, renewal leases must still be offered to tenants between 150 and 120 days before the end of their lease expiration. So those tenants whose leases would be expiring in November should be sent renewal leases now.

"Those expiring on June 30th would have had to have been offered a renewal lease during February," said Belkin.

"They still have to send out the renewal lease, but that obligation ceases on June 16th," Strasburg agrees.

Once the tenant signs the lease, the owner has 30 days to return a signed copy to the tenant. The lease is not valid, however, until the owner signs it and sends it back to the tenant.

"The Rent Stabilization Code and the renewal form all say they are not binding until countersigned and delivered by the landlord to the tenants," he said.

But if the owner does not send back the signed copy in a timely manner, the only penalty is that DHCR can direct the owner to send it back. And if the ETPA expires, the owner will not have to offer the lease or send it back.

"There's a provision where the owner is supposed to countersign and return the lease to the tenant within 30 days of the owner's receipt of the renewal lease as signed by tenant. What's important is the remedy," said Belkin. "For holding onto the lease, the DHCR can only direct the owner to give the tenant the renewal lease. Once the law lapses, the DHCR does not have jurisdiction over the owner or the apartment."

And if a tenant had a lease expiring June 30th, and the owner did not offer the lease to the tenant until June 1st, the rules require the lease would not start for 120 days. Belkin says the owner could make an argument that it the law lapses, they are not subject to the renewal.

But Belkin says rent laws or not, the owners could still find themselves in a legal battle, as the tenant will make the argument that their rights all vested before the law expired.

"The owner will say, 'Your entitlement may have occurred at the time you were offered the renewal, but nothing binding occurred before the expiration of the law, and you are no longer subject to the renewal,'" he said. "The penalty would have to be imposed by an agency with no jurisdiction."

DHCR has other housing and financing functions and will continue to exist and administer rent control, and if the 1969 tenants remain protected, Belkin says DHCR will have to administer to those tenants.

Where an apartment is already renting at the market rent or the owner is happy with the current tenant because they make timely rent payments or for another reason, a change in the law may not matter one way or the other.

But where units go vacant, Strasburg says owners can keep apartments off the market until the politicians determine if there is going to be vacancy decontrol.

Obviously, that will not affect any current tenants, but where a unit would not fetch much more than the current rent, owners will have to decide how many months of rent they would be willing to lose if they wait for the Albany legislators to come to an agreement.

"Particularly if you have a unit that has under market rates, if you can afford to hold it off the market, that is the smartest thing to do and that is what I am advising my clients," said Belkin.

Even Davenport of REBNY advises, "If you have a vacancy, you may very well want to see what will happen with the status of that unit, but if you have a tenant in place, you have to send out your renewal leases. The law is the law."

If the law expires and the owner decides to seek another tenant, they must wait until the end of the lease. If the tenant does not leave, Belkin says the owner can't simply change the locks.

"The owner has to file legal proceedings and it would take weeks if not months before the tenant could be evicted," said Belkin. "It's unlikely that the next day the tenant will be placed out of that apartment."

If the tenant fights the eviction, they may end up owing the owner attorney's fees, but this is all speculation, since the laws are likely to be renewed in some form.

Goldstein agrees that those tenants that would be targets for any eviction if the rent laws actually expire for good won't be going too far too fast.

"For that class of tenancy that would end on June 16th, I can't imagine anyone getting evicted by 1998 who would actually show to the court they are having a hardship," he explained.

"Owners are entitled to their fights and tenants are entitled to their rights until June 15th comes and goes," added Belkin, still advising a wait-and-see attitude.

Co-ops and Condos

There is a provision in the General Business Law that conversion plans accepted for filing after June 1982 that provides that if rent regulations become inapplicable, tenants are entitled to be offered market rents which do not represent unconscionable rent increases.

Belkin says there is a question as to what it means it the rent laws become inapplicable. "Is 'expiration' equal to 'inapplicable,'" he wondered? "It seems like semantics, but they can potentially mean two things."

As to the rights of rent stabilized tenants in co-ops and condos, "Do they somehow become entitled to greater rights because they didn't buy their apartment than their neighbor in the next building that is a pure rental building who has no rights at all? There is case law that non-purchasing co-op tenant do not have greater rights," said Belkin, adding "It's very murky."

"You should not presume that on June 15th it's all gone," he warned, adding that the wrangling could go on for another month or longer. "You need to know what has actually occurred in Albany."

Adds Davenport, "If rent stabilization expires on June 15th, it is a temporary lapse and we expect there will be a compromise bill which will retain rent regulations for virtually all tenants in place. Seniors will continue to be protected, and disabled tenants will continue to be protected."
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Copyright 1997, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Weiss, Lois
Publication:Real Estate Weekly
Date:May 28, 1997
Previous Article:Sales of $100M+ adding up.
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