Answer provided by Neil B. GarfinkelREBNY Broker CounselPartner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
It is my understanding that the Housing Stability and Tenant Protection Act (“HSTPA”) generally prohibits deregulation of rent stabilized apartments (meaning that a rent stabilized apartment will never become a free-market rate apartment). Does that include units that became rent stabilized through a 421-a tax abatement?
No, apartments that became rent stabilized under a 421-a tax abatement will become deregulated if the landlord follows certain procedures. A 421-a tax abatement is a New York City tax exemption program offered to developers that lowers the property taxes on certain residential apartments for a fixed period of time, usually lasting between 10 and 25 years.
After the expiration date of the 421-a tax exemption program, apartments subject to rent stabilization under the program are deregulated and become free-market rate apartments. If an apartment became subject to rent stabilization after July 3, 1984, under a 421-a tax abatement program, the landlord would have to include proper notice in the lease in order for the apartment to become deregulated upon the 421-a expiration date.
The notice should be prominent and include the approximate date of expiration of the 421-a tax abatement benefit (this date is typically displayed on the DHCR Rider, which is a required rider to any rent stabilized lease). The rent stabilization protection will remain in effect until the expiration date of the last lease signed under the 421-a abatement period. The next time there is a vacancy or the current tenant renews the lease, the apartment will be rented at market rate and the tenant will sign a non-rent stabilized lease.
If a building became rent stabilized before July 3, 1984, then the apartment will remain rent stabilized until the next vacancy occurs. In other words, the apartment will remain rent stabilized until the tenant vacates the apartment. This is true regardless of how long the tenant remains in place after the 421-a abatement expired. The unit will not be deregulated if the vacating tenant was forced out of the apartment through harassment by the landlord or its agents.
Important Tip: The deregulation of a rent stabilized apartment that became such under a 421-a tax abatement program is only one of the few remaining paths a rent stabilized apartment may be deregulated and become a free-market rate apartment under the HSTPA. Rent regulation laws are complex and it is strongly recommended that a landlord or tenant consult an attorney who is an expert in rent regulation to determine proper procedure when renting, purchasing or selling a rent stabilized apartment.