On February 17th of last year, Governor Andrew Cuomo announced the creation of the Tenant Protection Unit (TPU) within the state’s Department of Housing and Community Renewal (DHCR) to strengthen enforcement of tenants’ rights. Additionally, they will proactively enforce landlord obligations to tenants, and impose penalties for failing to comply with state orders and rent laws. The governor said the unit would, “proactively enforce landlord obligations” and investigates owners who “may be involved in fraudulent schemes to deregulate apartments.”
According to the DHCR website, since 2009, thousands of units have been deregulated without notice or explanation. The TPU took a proactive outreach in 2012, notifying owners who have failed to register their units since 2009, and requiring them to either re-register or provide an explanation. As a result, more than 25,000 rent-regulated apartments have been re-registered and returned to Rent Stabilization.
The website goes on to say that last year, the TPU launched the first ever audits of owners who filed Individual Apartment Improvement (IAI) increases significantly raising the rent upon vacancy within the last two years. Additionally, letters were issued to owners who had provided inadequate responses to TPU’s initial audit and request, and—for the first time—owners who failed to respond were served with subpoenas for compliance. The unit now has 22 employees and says it has conducted 1,100 audits. This year, the division has a budget of $5.7 million.
As a result, owner groups have openly acknowledged a heightened level of scrutiny of their business practices, and have urged their members to update their business practices accordingly. Furthermore, audited owners have, for the first time, entered into settlement agreements with the TPU agreeing to return money to tenants for overcharges, revise tenant leases and re-register tenant apartments with HCR under the current rents.
CHIP director, Patrick Siconolfi, believes that the demands on landlords are unprecedented and far over reaching. The paperwork now used to deregulate apartments from the rent-stabilization program was not routinely required before. He also stated that itemized receipts for work are often not available, as many landlords received invoices just for an entire job in an apartment or for a kitchen or bath. His greatest concern is the cost and time that these owners have to take on even when in the clear.
One owner I spoke with said these subpoenas go way too far by asking for every financial record, and their business strategies. Landlords take note! Organizations like CHIP and RSA, work with owners to advise them on how best to navigate these new challenges.
James Nelson is a Partner at Massey Knakal Realty Services. Since 1998, he has been involved in the sale of more than 250 properties and loans with an aggregate value of close to $2 billion in the NY Metro Area. He can be reached at firstname.lastname@example.org or 212-660-7710.
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