As a result of the new, unique one-year rent guideline, many RSA members have raised concerns as to how they can apply the new guideline to a tenant’s lease renewal if they accept rent relief from the State.
In June, the City Rent Guidelines Board (RGB) adopted RGB Order 53, which for one-year vacancy and renewal leases commencing between October 1, 2021 and September 30, 2021 allows a 0% increase for the first six months of the lease and a 1.5% increase for the last six months of the lease.
Although the one-year guideline is certainly unique, how owners can begin to collect the rent increase during months seven through twelve is mostly straightforward. However, building owners must be more vigilant when collecting the rent increase for tenants who have applied for and have been approved for rent relief through the State Emergency Rent Relief Program (ERAP).
By way of background, the State Legislature delayed the implementation of the highly-anticipated rent relief program by waiting to include it in the annual State budget that was not approved until the first week of April. The creation of the so-called “COVID-19 Emergency Rental Assistance Program of 2021” provided specific language as to how the program would be administered through the State Office of Temporary and Disability Assistance (OTDA), eligibility criteria for tenants, and how property owners would receive approved rent relief funds.
As part of the agreement of accepting rent relief for qualified tenants, building owners would not be able to increase the rent of that tenant(s) under any circumstance for one year following the receipt of the money from OTDA. So, for example, if you received rent relief funds for a particular tenant on July 31, 2021, that tenant’s rent cannot be increased for any reason until at least August 1, 2022. This includes any rent guideline increase, major capital improvement increase (MCI), etc.
There has been much confusion from RSA members as to how they can apply the rent increase permitted by the one-year guideline if that tenant has been approved for rent relief through ERAP. First and foremost, it is important to note that if the 12-month period where an owner cannot collect a rent increase due to acceptance of ERAP money overlaps the one-year renewal period where an owner can begin to collect the rent guideline increase for the last six months of the lease, the rent increase restrictions imposed by ERAP supersede those permissible by RGB Order 53.
For instance, let’s say that a tenant has accepted a lease renewal that will commence on October 1, 2021 and expire on September 30, 2022. RGB Order 53 allows that tenant’s rent to remain frozen through April 1, 2022. For the last six months of that lease, the building owner is permitted to increase that tenant’s monthly rent by 1.5%. However, if that tenant applied for and was approved for ERAP and the building owner received the funds for that particular tenant on July 31, 2021, that owner cannot collect the rent increase permitted through RGB Order 53 until the last two months of the new lease. Although RGB Order 53 permits the owner to increase the rent from April 2022 through September 2022, the building owner can only collect the rent increase for August and September if the owner collected rent relief funds through ERAP.
It is important to realize that every situation will be unique for a particular building owner and tenant. Not all property owners will receive rent relief funds at the same time and not all renewal leases will commence at the same time. Depending on when funds are received and when a lease renewal commences, it is possible that an owner may actually be able to collect the rent increase for all six months of a one-year lease renewal.
Please keep in mind that if any stabilized tenant was not approved for, or was not eligible for ERAP, the six-month increase allowed by RGB Order 53 is collectable for months seven through twelve for that particular tenant.
If you have any additional questions with regard to the one-year guideline approved through RGB Order 53 works, or ERAP, please contact RSA at (212) 214-9200. n