NY state lawmakers are patting themselves on the back for a job well done after creating a legislative framework that created one million additional and much-needed apartments in under twelve months. Ok, the bit about newly created apartments is not true, but lawmakers are still patting themselves on the back. Governor Hochul signed into law last year a bill that created heavy new penalties on those landlords who fail to register their rent-stabilized apartments with the Division of Housing and Community Renewal (DHCR) starting with the July 31, 2024 deadline.
The penalty increased from the rarely enforced one-time $10 surcharge to $500 per month per apartment. Now, the failure to register 45 rent stabilized apartments, for example, would result in a whopping penalty of $22,500 per month. What about the rent stabilized tenant who fails to pay rent for nine months? Well, they are provided complimentary legal services from attorneys adept at lawfully delaying their clients’ rental obligations.
“Massive Increase in Rental Registrations…”
And the new measure seems to be “working” as more than 919,000 apartments have been registered in the 2024 cycle which is up by more than 100,000 units from recent annual filings. The problem with DHCR filings, however, runs much deeper than owners failing to register the units in a timely manner. The real issue is that there is no formal acknowledgment by any government agency that the filings are correct. Missed and incorrect filings over several decades across multiple owners makes a correct accounting of the registered rents nearly impossible.
Few cared about this issue prior to June 2019 and rarely focused on it when properties traded hands. Today, the situation is different, and investors are acutely aware of flawed DHCR filings and often back away from deals so afflicted.
Amnesty for Owners?
I’d love to hear proposals from owners, investors and astute observers alike on how to fix the DHCR debacle that has further frozen trades in an already troubled asset class. One idea that comes to mind would be an amnesty for the current owner on all prior DHCR filings before his or her time of ownership. Another may be a formal acknowledgment by DHCR that the filings are correct and if not, how so, and within a reasonable period of time post-filing? If there is no response within six months of the filing, then ownership has the legal presumption that the registered rents are correct.
These agencies are funded by the taxpayer and we should demand more of them.
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