Background
This case arose from a disputed attempt to deregulate a Bronx apartment unit before the Housing Stability and Tenant Protection Act (HSTPA) took effect on June 14, 2019. The HSTPA — one of the most significant changes to New York landlord-tenant law in decades — repealed the Rent Stabilization Law’s high-rent vacancy deregulation provisions, which had previously allowed landlords to remove units from rent stabilization once the legal regulated rent exceeded a threshold and the unit became vacant.
Defendant 340 E. 198th St. LLC acquired the building in October 2018. Apartment 3B was vacant but rent-stabilized at that time. The landlord claimed to have made approximately $65,400 in Individual Apartment Improvements (IAIs). On May 31, 2019 — two weeks before the HSTPA’s effective date — the landlord executed a lease with Lydia Brown for a market rent of $2,500. Critically, the lease did not commence until June 14, 2019, the exact day the HSTPA became law. Plaintiffs, who moved into the apartment under a subsequent market-rate lease in September 2020, brought suit seeking a declaratory judgment that the unit remained rent-stabilized and seeking back overcharges.
Supreme Court, Bronx County (Alpert, J.) denied plaintiffs’ motion for summary judgment. The Appellate Division, First Department unanimously reversed.
The Court’s Holding
The panel held that the “effective date” of a lease is the date the tenancy commences, not the date the lease instrument was executed. Because the Brown lease did not commence until June 14, 2019 — the same date the HSTPA became effective — the HSTPA applied to that lease, and with it, the repeal of high-rent vacancy deregulation. The court relied on Matter of 160 E. 84th St. Assoc. LLC v. New York State Div. of Hous. & Community Renewal, 43 NY3d 275 (2024), and general contract principles that the effective date of a legal instrument may differ from its execution date.
The court further held that even if the conditions for pre-HSTPA deregulation had technically been met in May 2019, the IAI-driven rent increases could not become “effective or collectible” until the lease commenced on June 14, 2019 — triggering the HSTPA’s amortization formulas under DHCR Operational Bulletin 2016-1 and Bulletin 2024-2 (which provided that IAIs become effective and collectible on the commencement of the vacancy lease, not its execution). Applying the HSTPA was not retroactive, the court reasoned, because the operative commencement of the lease occurred on the same day the statute took effect.
The court granted plaintiffs’ summary judgment motion declaring the apartment rent-stabilized and remanded for further proceedings on overcharges, treble damages, and legal fees.
Key Takeaways
- A landlord cannot deregulate a rent-stabilized unit by executing a lease before the HSTPA’s June 14, 2019 effective date if the lease term does not begin until that date or later — execution date is irrelevant; commencement date controls.
- IAI-based rent increases under the pre-HSTPA deregulation regime also become “effective and collectible” on lease commencement, not execution — landlords who signed pre-HSTPA leases with post-June 14 start dates cannot rely on those increases to justify deregulation.
- Tenants currently paying market rent in units where the landlord executed a vacancy lease shortly before June 14, 2019 but with a commencement date on or after that date have a strong argument that their unit remains rent-stabilized and may be entitled to overcharges, treble damages, and fees.
Why It Matters
This decision closes a loophole that some landlords had tried to exploit in the weeks before the HSTPA’s enactment. By ruling that a pre-signed but not-yet-commenced lease does not qualify as a pre-HSTPA deregulation, the First Department aligns with the HSTPA’s remedial purpose and the Court of Appeals’ 2024 decision in Matter of 160 E. 84th St. The ruling is particularly significant in the Bronx and other outer-borough markets where a wave of building acquisitions and renovations preceded the HSTPA.
For landlords holding buildings with contested deregulation histories — especially units where the timing of IAI improvements and lease execution straddled June 14, 2019 — this decision substantially increases litigation exposure. Tenants’ counsel now have clear First Department authority for challenging any “deregulated” unit whose vacancy lease commenced on or after the HSTPA’s effective date. Landlords and their lenders should audit their rent rolls for units in this timing window and assess potential overcharge liability before tenant claims surface.