Real Estate Groups to File Lawsuit If Rent Reform Passes


Industry leaders are planning to file a lawsuit against the state to challenge a sweeping rent regulation package introduced by the legislature this week, Commercial Observer has learned.

“The industry is prepared to file a lawsuit as early as Monday challenging provisions of the legislation, if it were to pass,” an industry representative confirmed.

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The New York State legislature reached a deal on rent reform Tuesday ahead of a June 15th deadline, in which the previous rent regulation laws were set to expire, and Governor Andrew Cuomo committed to signing it Wednesday. He is expected to do so Friday.

The legislation, introduced and approved by a Democratic-controlled legislature, drastically curtails the ways in which landlords can increase rent on regulated apartments, and eliminates ways that units can be deregulated, among other tenant protections.

It contains most of the changes that tenant advocates and progressive politicians had been clamoring for, and the real estate industry dreaded. It represents the second serious blow to the industry since Democrats seized control of both houses in November after Amazon abandoned plans to put a headquarters in Long Island City when encountering pressure from legislators and progressive interest groups.

“The legislation put forward [Tuesday] night will be a disaster for the city’s future,” said John Banks, the president of the Real Estate Board of New York, the industry’s lobbying organisation, in a prepared statement. “The Governor and the Legislature are consigning hundreds of thousands of tenants to buildings that [will] soon fall into disrepair,” he predicted.

Now, industry players are saying they will challenge several components of the legislation, including one which makes the rules permanent, as opposed to the current system where they expire every few years. Rent regulations are premised on the city being in a housing crisis, per the Rent Stabilization Act of 1969, which gave rise to the city’s rent-stabilization system, and therefore cannot be permanent, the spokesperson said.

In addition, the lawsuit would challenge the retroactivity of a provision to decrease the amount landlords can charge for major capital improvements (MCIs). The new regulations allow landlords to increase rent by up to 2 percent to cover the building-wide improvements, down from 6 percent under the current rules. The decreased return would apply to landlords who already had their MCIs approved by the state’s Division of Housing and Community Renewal.

In a press conference Wednesday, Governor Cuomo downplayed the permanence of the rules, saying that they can always be overturned or changed by a new bill.

The suit would be directed at the Governor’s office, as well as both houses of the state legislature, the spokesperson said.

The Governor’s office did not respond to request for comment at the time of publication.