Unintended Result of Rent Law: More Pieds-À-Terre

August 2019Crain's New York Business

It's not hard to guess why it's illegal for a tenant to use a rent-regulated apartment as a secondary residence: Rent regulation is supposed to address a housing emergency, not provide low-cost pieds-à-terre or sublet opportunities. But catching violators has never been easy—and now it's possible that no landlord will even try.

Welcome to one of the many unintended consequences of the rent-law reform passed two months ago in Albany. In an attempt to prevent alleged landlord abuses, tenant abuses have been encouraged.

Under the old law, landlords had a financial incentive to evict tenants who didn't live primarily in their rent-regulated unit: They could raise the rent if the apartment were vacated, most recently by 20%. If the monthly charge went up enough—through standard increases, vacancy allowances and increases based on improvements—the rent might be deregulated entirely.

But most increases and the possibility of deregulation were dispensed with by the state Legislature's reform, passed in June.

As a result, it may no longer matter to most landlords if a rent-regulated apartment is not the tenant's primary residence. Almost no one would care to seek an eviction or welcome a vacancy, except owners in co-operatives and condominiums where some apartments are occupied by rent-regulated tenants or landlords who would like to increase the preferential rent for an apartment to the legal maximum.

Benefits of disuse

Under the new law, landlords might not bother trying to vacate apartments, even for legitimate reasons, so long as the rent is paid. In fact, landlords now have at least four reasons to prefer that a tenant uses a rent-regulated unit as a pied-à-terre, besides avoiding the significant investigation costs and legal fees necessary to prove a nonprimary residence.

Reduced maintenance costs. There is less need to replace appliances and fixtures that are not used frequently. An often-vacant apartment is likely to remain in good condition for a long time.

Lower expenses. If utilities such as gas and water are included in rent, the landlord's cost will be less if less gas and water are used.

Fewer disturbance complaints. Noise and smoking-odor complaints from the tenant of a rarely used apartment are likely to be infrequent, and tenants who aren't often present are less likely to draw complaints from neighbors.

Consistent rent payments. When a unit becomes vacant, the landlord generally loses at least a month's rent. As long as the rent is being paid, a landlord might have little objection to an apartment being vacant, sublet or used by friends and relatives when a tenant moves away or to a nursing home or dies. Why should the landlord care if the tenant of record is 125 years old?

In the past, some attempts by landlords to remove renters who were not using an apartment as their primary residence were unpopular. But no one besides landlords was making a significant effort to enforce the law.

Now affordable housing might become harder to find because nonprimary residency may not be a concern of landlords. Some might even welcome it.

And what is the likelihood that the government will take action against tenants who don't live in their rent-regulated apartment? Given the expense and the possible political fallout of proving wrongdoing, the answer is not much.

Douglas P. Heller is a counsel in the real estate practice of Herrick, Feinstein LLP. He is based in Manhattan.

This article originally appeared in the August 12, 2019 edition of Crain's New York Business.