Curbed University delivers insider tips and non-boring advice on how to buy, sell, or rent a home or apartment. Additional questions welcomed to tips@curbed.com. Up now, what's the deal with preferential rent?
With all the recent kvetching about rent regulation, it may surprise some of you to learn that the landlord of a rent-regulated building can occasionally agree to charge a preferential rent—a rent that is even lower than the legal regulated rent registered with the State Division of Housing and Community Renewal. A preferential rent could be offered, for example, while a building is undergoing conversion. The real question, however, is when a landlord offering tenants preferential rent can raise the rent back to the legal regulated rent.
Before 2001, once a tenant was given preferential rent, it continued throughout the tenancy. However, there have been a number of court decisions over the last decade, and the policy as it stands now is that an owner can charge the higher legal regulated rent once the lease expires or the tenant vacates the apartment. However, in order to stop charging preferential rent the owner must cite the legal regulated rent that they aren’t charging in the original lease. Make sense? How about a quiz:
1) You sign a one-year lease that cites a legal regulated rent of $1,000. However, the legal regulated rent is actually $1,500. At the end of the lease, your rent can be raised to:
a) $1,500
b) $1,250
c) It cannot be raised
d) $3,000! I’m no freeloader
2) You sign a one-year lease that cites a legal regulated rent of $1,500 and a preferential rent of $1,000. The lease contains the clause: “the preferential rent shall be offered only for the term of this lease.” At the end of the lease, your rent can be raised to:
a) $1,500
b) $1,250
c) It cannot be raised
d) I don’t know, but I’m pretty sure this is what’s wrong with our country
3) You sign a one-year lease that cites a legal regulated rent of $1,500 and a preferential rent of $1,000. The lease does not contain a clause about whether the preferential rent would extend past the term of the lease. At the end of the lease, your rent can be raised to:
a) $1,500
b) $1,250
c) It cannot be raised
d) Squatter’s rights
Answers: C, A, A
There are also two types of rent concessions that factor in. One is a concession for a specific month or months—for example, if it's written into your lease that the last month is free. This type of concession is not considered preferential rent. The other type is a prorated concession, where the dollar value of the rent free month(s) is prorated over the course of the entire lease and not tied to a specific month. This type of concession is treated as preferential rent. Basically, if a landlord ever offers you free months or prorated rent, make sure you get everything in really clear writing.
· Curbed University [Curbed]
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