Uphill Battle to Challenge Illegal Apartment Deregulations

David Sewell thought there was something “very suspicious” about his rent when he and his wife, Peggy Vujovich, moved into their one-bedroom apartment in Greenpoint in 2014. Their lease said it was a market-rate unit with a legal rent of $2,900 a month, above what was then the $2,500 threshold for being taken out of rent stabilization, but the landlord gave them a discounted “preferential rent” of $2,000. 

“I had my doubts about it as soon as I moved in,” Sewell, a 47-year-old actor, says. Earlier this year, after he and two neighbors obtained histories of their apartments’ rent from the state Division of Housing and Community Renewal, he discovered another red flag: All three histories, according to Sewell, showed a “suspicious bump” in 2013, identical $1,000-a-month increases that brought the rents over $2,500, allowing the landlord to declare the apartments as market-rate. “It was just obvious they were trying to get out of rent stabilization,” he adds. 

Sewell filed a challenge to the legality of his rent with DHCR, the branch of the state Housing and Community Renewal agency that administers rent regulations, in February. In June, when his lease was up, his landlord refused to renew it, and began Housing Court proceedings to evict Sewell and Vujovich—a move Sewell calls “obviously retaliatory.” And because their apartment was supposedly no longer rent-stabilized thanks to that 2013 increase, the landlord had the right to deny him a renewal without cause, except for illegal reasons such as racial discrimination or harassment. 

Their apartment is one of an unknown number in the city that have been illegally deregulated since 1994, when a city law allowed landlords to take vacant units out of rent stabilization once the rent had been raised to $2,000. The state enacted a similar measure in 1997. The state Housing Stability and Tenant Protection Act, the rent-law revisions enacted in June, repealed that provision. Early versions of that bill would have reregulated the vast majority of the apartments affected, but “chapter amendments” added after the legislation was passed, ostensibly to clear up technical errors, specified that “any unit that was lawfully deregulated prior to June 14, 2019 shall remain deregulated.” 

No one knows just how many apartments were deregulated, legally or otherwise, under the high-rent vacancy decontrol law. The city Rent Guidelines Board, citing DHCR figures, says there were 160,000 between 1994 and 2018, peaking at more than 12,000 a year between 2008 and 2010. But it cautions that this is a minimum, because it includes only apartments that landlords told DHCR they had deregulated— and reporting was voluntary before 2014. 

“The true number is higher than that, and we don’t know how much higher. I have given up trying,” Community Service Society housing policy analyst Thomas Waters told the Assembly Housing Committee in May. Michael McKee of TenantsPAC, a longtime tenant activist and lobbyist, says the number might be as high as 300,000 to 450,000. 

The most common legal method of raising rents past the deregulation threshold was by doing renovations after a tenant moved out, and applying a fraction of the cost to the new tenant’s monthly rent; when that fraction was set at one-fortieth of the cost, a $40,000 renovation enabled a $1,000 increase. The most common illegal method was by exaggerating the costs of those renovations high enough to get over the threshold. 

Challenging an illegal deregulation, however, “can be very, very difficult,” says Sewell’s lawyer, Ronald Languedoc, a former tenant representative on the RGB. “It’s going to be very hard, in my opinion, to recapture a lot of these apartments.” For Sewell to win his case, says Languedoc, he’ll have to get the landlord to document what work was done and how much it cost—and likely bring in an expert witness to challenge the validity of what the landlord claims. 

Trust Management, the Williamsburg-based property manager of Sewell’s building, declined to comment. “I think we want to keep this confidential between the landlord and the tenant,” an administrator who answered the phone said. The company manages more than 50 properties, mostly smaller buildings in Bushwick, Williamsburg, and Greenpoint. 

The two other tenants in the building who suspected their rents were illegally high have not filed challenges, Sewell says—one because they can’t afford a lawyer, and the other because they wanted to wait until after the new rent laws were enacted. 

The June law made it much easier for tenants to challenge an illegal overcharge or deregulation, tenant lawyers say. It clarified that there is no statute of limitations on challenging fraudulent increases. It also expanded the limit on how far back tenants can get refunds (from four years to six) and treble damages for overcharges (from two years to six). 

“Every tenant should get a copy of their rent history,” says Manhattan lawyer Roger Sachar. Obtaining one from DHCR is normally the first step in the process. If the increases listed in the legal rent seem questionable—such as those that are for suspiciously round numbers, or where separate apartments received identical increases—McKee urges residents to contact a lawyer or tenant organizer. 

Manhattan lawyer Marc Bogatin, who successfully challenged the deregulation of his own Upper West Side apartment and went on to represent 16 other tenants in his building, says that in eight of those cases, his landlord, Stellar Management, hadn’t spent enough to reach the threshold “even based on their own records.” 

In one case, an apartment registered at $454 a month in 2008 rented for $2,575 in 2013. That increase would have required more than $120,000 in renovations, but the landlord admitted spending only $38,000. In December 2017, a State Supreme Court judge, ruling that the owner had “systematically overcharged” tenants, reduced the rent on the apartment to $1,090 and awarded the tenant $62,000 in back rent and damages. 

Other cases are more complex. Records are not hard to fudge or forge, says Languedoc. In those cases, he says, it helps to bring in an expert witness who can compare the landlord’s and contractor’s records of renovations to the work actually done. 

“It’s often just so ludicrous you know it didn’t happen,” says Sachar. “You go in and everything [in the apartment] is 25 years old.” 

It doesn’t help that, according to tenant lawyers, DHCR is surprisingly loose about what it accepts as documentation. In one case, says Manhattan lawyer Robert Grimble, DHCR accepted a landlord’s claim that he paid $50,000 in cash for renovation work without receipts or bank documents. 

In another case where Grimble represented the tenants, a Brooklyn landlord claimed it had spent $26,000 on labor, but the only proof it submitted was a sworn statement signed after the fact, and it wasn’t clear in which of three apartments the work had been done. (A DHCR administrator ordered the landlord to refund $101,000, including triple damages.) 

That case was one that resulted from an audit by DHCR’s Tenant Protection Unit, formed in 2012 to enforce the law beyond relying solely on tenant complaints. A DHCR spokesperson said the TPU has “conducted multiple investigations and coordinated enforcement activities resulting in the registration of over 78,000 improperly deregulated apartments and the recovery of approximately $5 million in overcharged rent for unsuspecting tenants.” 

That is “absolute nonsense,” McKee says. While landlords of those apartments reregistered them after receiving warning letters from the agency, he explains, it didn’t tell the tenants that they might have been overcharged—and there’s no guarantee that apartments were reregistered at the correct legal rent. 

Sachar says the TPU is also understaffed, with only a handful of lawyers to handle New York City and Nassau, Westchester, and Rockland counties. (A DHCR spokesperson clarified that the TPU currently has nine staff attorneys, and 29 staff members overall.) 

Sometimes landlords simply declare an apartment deregulated without renovations, Grimble says. That’s what happened to Clare Grady, an Upper East Side woman he represented in 2017. When she moved into her apartment in 1999, her landlord, Mautner-Glick Corp., charged her $1,450 a month, saying that it was no longer rent-stabilized. She filed a complaint with DHCR in April 2017, a week after the owner told her that it wouldn’t renew her lease when it expired the next month. 

The rent history showed that the last legal registered rent had been $1,023, in 1998, and that the landlord had not registered rents since then. Mautner-Glick immediately claimed that it was a mistake, hastily registered 18 years of rent increases retroactively, and offered Grady a two-year lease at $1,767.50, with a $4,600 refund of overcharges. 

In June 2018, State Supreme Court Judge Barbara Jaffe ruled that charging increases over the legal limit while failing to register rents was fraudulent, and awarded Grady $156,000 in overcharges, damages, and legal fees, according to Grimble. Mautner-Glick is appealing the damages. 

Tenants can challenge a deregulation either administratively through DHCR, or in Housing Court. Either way, it’s a lengthy process. Two to four years is pretty common, and “I’ve had more than one case that’s lasted ten years,” Grimble says. 

That means it is likely that the tenant’s lease will have expired before the proceedings are resolved. Fortunately for tenants charging illegal deregulation, it’s fairly routine to get an eviction stayed while the proceedings are pending. Sewell did, and Marc Bogatin worked out an agreement with Stellar Management that it would not try to evict people in his building who had similar cases. 

One legal reason for this, says Grimble, is that it’s a “rebuttable presumption” that evicting a tenant who’s contesting the legality of their rent is illegally retaliatory, and that a landlord bringing a case in Housing Court would have to prove up front that the apartment had been deregulated. Holdover proceedings, evictions for causes other than nonpayment, are supposed to be dismissed if the tenant has a “colorable”—legalese for plausible—claim they are being illegally overcharged, says Sachar. In 2018, a state appeals court held that a landlord could not pursue a holdover eviction against a tenant whose lease had expired when they had “failed to establish that the apartment was exempt from rent regulation.” 

“If they lose, they’re probably going to lose their apartment,” says Languedoc. On the other hand, he says, people often don’t file a challenge unless they’re already facing eviction, so they have nothing to lose. 

A longer version of this article originally appeared on Gothamist.