PRE-1974 buildings

QUESTION: I'm in a pre-1974 building. Can we expect rent increases if the building is taken out of Mitchell-lama and if so, when?

ANSWER: Except for "236" buildings (those built with federal mortgages),* the starting rent for rent stabilization is exactly the same as the last rent paid (including surcharges) under Mitchell-Lama.

NYS Courts have upheld the validity of the state's regulation that just taking a pre-1974 building out of Mitchell-Lama does not justify raising the rents. This regulation closes a loophole in the law that puts these buildings into rent stabilization - a loophole that landlords claimed allowed them to raise the first rent stabilized rent on the building's leaving Mitchell-Lama.

The landlord can still APPLY, but leaving Mitchell-Lama cannot be the primary reason for the rent increase. The landlord must make the request within 60 days of the building entering rent stabilization.

Landlords still have several other ways to increase rent once you leave Mitchell-Lama and enter rent stabilization:

"Major Capital Improvements" -- which the landlord can do at any time. See what constitutes a "major capital improvement.

Rent Guidelines Board increases ordered for each new lease

"Hardship" (the landlord cannot meet his bills based on alternative formulas provided by the Rent Guidelines Board) - although most landlords don't do this since they don't want to open their books for inspection.

No increase is likely to hit all at once. Rent Stabilization laws limit increases to 6% per year (in addition to whatever the Rent Guidelines Board requires for new leases). So if there's a big increase resulting from a Major Capital Improvement (MCI) , from an Individual Apartment Improvement (such as new cabinets) or from "unique and peculiar circumstances," it would be spread out over time.

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*236 buildings: When the owner of a 236 building takes it out of Mitchell-Lama, the landlord loses his federal subsidy, and passes that "loss" to his subsidized tenants as a rent increase. So the subsidized tenants (whenever the building was constructed) must apply for "Section 8 enhanced vouchers" (also called "sticky vouchers") to keep their rents the same.  

Because of a federal and city budget shortfall, the federal housing agency, HUD, issued new subsidy standards" in July 2013 that require tenants with Section 8 enhanced vouchers to move to the smallest possible apartment - and changed the rules about apartment sizes to make things tighter. Consult your tenant association lawyer!