Preparing Rent Stabilized Renewal Lease
Preparing a Rent Stabilized Renewal Lease
Rent Stabilized apartments are affordable housing units where the government stipulates the rent increases each year through the Rent Guidelines Board (RGB) and where the rent increases are comparatively low. Preparing a Rent Stabilized Renewal Lease and working in affordable housing in general, involves much liability. Hence, it’s important that you are very organized and meticulous. For instance, by law a Renewal Lease must be sent to the tenant between 90-120 days before the tenant’s current lease expires. If you don’t meet the deadline, you stand to lose rental income. So, it is essential that you, as we do, have systems in place, that alert you as to which of our 100s of leases are expiring in 120 days.
Now that you know which leases need to be renewed, you would think that getting a Lease Renewal Form and starting to fill it out would be next. But hold on. I would recommend you do your calculations in a Rent History spreadsheet first. Go through the all physical copies of the tenant’s previous leases and note all Previous Legal Rents and New Legal Rents for each lease. This is a great way to surface any anomalies and you are now ready to make your calculations for the new rent amount also called the New Legal or Regulated Rent.
You obtain the New Legal Rent by taking the Previous Legal Rent and multiplying it times the rates for a 1-year or 2-year lease. These rates come into effect each year in the early fall from the RGB.
Now that you’ve assessed the New Legal Rent to charge the tenant, you should make sure you state what additional Security Deposit is warranted with a higher monthly rent payment. Add the current Security Deposit amount on the Lease Form and calculate the additional security needed. In your cover letter, make sure that you ask the tenant for a separate check since this money is deposited separately from the bank deposits made for the rental income.
Consider any Added Charges such as washing machine or air-conditioner usage, the rates of which are stipulated by the government via the Department of Housing and Community Renewal (HCR).
If the New Legal Rent is too onerous for the tenant, you might consider a Preferential Rent for the tenant. In subsequent years, this rate will also be subject to increases based on the yearly RGB rent increase.
If the tenant is subject to any government programs, such as NYCHA, SCRIE or DRIE, remember that you have to upload the signed lease to that program’s website, when the signed lease is returned by the tenant. This is to make sure that you are in compliance with that government sponsored program. If you want to know more and these government programs, please check our blogs.
You are almost done completing the renewal lease, but remember that this is a legal document so be sure to double check all lease “to” and “from” dates and make sure that all your calculations are correct. Also, highlight all the areas where the tenant needs to sign or check an option. Make it as easy as possible for the tenant to comply in a timely fashion and send back a signed Renewal Lease.
When you send out the lease, make sure to include the Lease Rider for Rent Stabilized tenants, which articulates the tenants’ and landlords’ rights and responsibilities regarding the lease. You also need to add any additional Riders, such as window guards, lead paint, recycling rules, late payment, etc.
It is important to have a cover letter on top of with all the documents you send, that tells the tenant what to do in order to renew or end their lease.
Lastly, make sure to use certified mail as prescribed by HCR, which is admissible in court should the need arise.