Bought a rent-stabilized building? You inherited its rent history
The Rent Stabilization Code generally makes the current owner responsible for overcharges in the building, including rent the prior owner collected before you closed.
The rule
Under the Rent Stabilization Code, a current owner is generally responsible for overcharges, including penalties and interest, whether the rent was collected by the current owner or a prior one. Buyers at a judicial foreclosure sale are treated differently under the Code in some respects, so the way you acquired the building matters.
The 2019 Housing Stability and Tenant Protection Act extended the overcharge look-back period to six years. Overcharges that occurred before June 14, 2019 are generally governed by the prior four-year rules under the Court of Appeals' 2020 decision in Regina Metropolitan Co. v. DHCR.
Where "I didn't set that rent" helps and where it doesn't
The fact that a prior owner set an unlawful rent does not erase the overcharge. It goes to whether the overcharge was willful, which decides whether damages are trebled. A new owner who can show it inherited the rent, investigated, and corrected it is in a much better position on willfulness than one who kept collecting.
The records problem
DHCR will ask the current owner for leases and ledgers covering the look-back period. If the prior owner kept poor records or will not hand them over, the new owner faces a default finding. See records requests and default findings.
First 90 days after closing
- File DHCR Form RA-44 to report the change in ownership.
- Compare the DHCR registration history for every apartment against the rent roll and the leases you received. Look for apartments carried as free market without a documented exit from rent stabilization, rents above the registered legal rent, and missing registration years.
- Collect every lease, renewal, ledger, and renovation file from the seller while the seller is still responsive.
- Correct rents going forward where they are above the legal rent. Continuing to collect an overcharge after you know about it weakens the willfulness defense.
- File any missing registrations after deciding each apartment's status. See late registration.
Have Evan review it
I review the registration history, leases, and rent roll against each other and deliver a written memo on where the building is exposed and what to fix first.
Flat fee, quoted in writing before any work begins. Written memo delivered on a fixed date.