Q&A: Preferential Rent in J51 Housing

Q: In J51 housing, can a preferential rate be adjusted as part of a renewal?

A: In J51 buildings for the past 40 years, if the FIRST tenant gets a “preferential” rent, there’s nothing preferential about it. The owner has given up the right to the higher rent forever.

Under Rent Stabilization Code Section 2521.1(h) the legal rent is the rent that is actually CHARGED to the tenant on the first lease after the J51 order is issued:

(h) The initial legal regulated rent for housing accommodations subject this Code solely as a condition of receiving or continuing to receive benefits pursuant to section 11-243 (formerly J51-2.5) or 11-244 (formerly J51-5.0) of the Administrative Code, as amended, shall be the rent charged the initial rent-stabilized tenant or the lawful rent charged and paid on April 1, 1984, whichever is later, and shall not be subject to a Fair Market Rent Appeal pursuant to section 2522.3 of this Title. However, as to any housing accommodation which previously received tax benefits pursuant to section 11-243 (formerly J51-2.5) or 11-244 (formerly J51-5.0), was not covered by the provisions of the RSL on June 18, 1985, and was made subject to such law by the provisions of chapters 288 and 289 of the Laws of New York for the year 1985 (as amended), the initial legal regulated rent shall be the rent charged and paid on May 30, 1985, or the maximum rent which could have been charged if the housing accommodation had been continuously subject to the RSL for the entire tenancy of the tenant in occupancy on May 30, 1985, whichever is greater.

In other words, for J51, the preferential rent IS the rent, and therefore all rent increases must be calculated from the preferential rent only if the J51 was issued on or after April 1, 1984.