Court Rules Against
Minimum Rent Adjustments
On January 25, 2010, Justice Emily Jane Goodman, a Manhattan Supreme Court judge, ruled that the special minimum increases imposed by the Rent Guidelines Board in two recent orders were illegal. RGB Order No. 40, issued in 2008, provided that tenants paying less than $1,000 a month had to pay an increase of either $45 or 4.5 percent on one-year leases or $85 or 8.5 percent for two-year leases, whichever was higher, for tenants in occupancy for six or more years. Although this decision only applies to Order No. 40, the parties in a separate challenge to Order No. 41, issued in 2009, agreed to be bound by this ruling.
The ruling could lead to millions of dollars in refunds for the 300,000 units that are potentially affected. Plaintiffs, backed by the New York City Council and Speaker Christine Quinn, applauded the decision.
In her opinion, Justice Goodman wrote that the RGB’s formulation “penalizes tenants failing to move in a city that has virtually no affordable housing” and held that the RGB did not have the legal authority to “impose a separate rent increase for a class of accommodation not recognized by the City Council.” Justice Goodman rejected the RGB’s argument that this was a “rational attempt to equalize the rental amounts that long-term and short-term tenants pay…” In response to the concerns raised by the City that the minimum rent adjustment will impact approximately 300,000 renewal leases that have been executed, Justice Goodman stated that no one should have relied on the assumption that the RGB Orders would be upheld if they were ever challenged.
However, no injunction was ever issued preventing the implementation of these orders. Furthermore, this case commenced in September 2008 and has only been decided now, 18 months later.
What’s Next for Owners?
The City’s Law Department, which represents the RGB, indicated that the City does intend to appeal. “We respectfully but strongly disagree with the decision,” said Michael A. Cardozo, the City’s Corporation Counsel, whose office represented the Rent Guidelines Board. “We are especially disappointed that it has taken the court over a year to issue a ruling relating to 2008 rents that will cause confusion for thousands of rent-regulated tenants and owners throughout the city. We intend to appeal, and will seek to ensure that the ruling does not go into effect until the appeal has been decided.”
The City has filed a notice of appeal, and therefore automatically obtained a stay of Justice Goodman’s decision. The RGB orders will remain in full force and effect until the appeals are resolved. The RSA intends to participate in this matter as an amicus in the appellate courts in support of the City’s position that the minimum rent adjustments are legal.
For additional guidance on how owners may want to proceed, you can read the “Ask the Administrator” article on page 10, submitted by Howard Stern, Esq. If you have any questions or concerns about how to proceed with your lease renewals, you can contact the RSA at (212) 214-9200 or your attorney.
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