City Council Passes Legislation to Limit Fees for Early Vacancies

On Nov. 23, 2021, the City Council passed Int. 2312-A, which amends the landlord’s duty to mitigate damages for an early vacancy of a leased residence. Specifically, it limits the fees owners can collect from tenants who vacate before the end of a lease to prepare the property for the next rental. The bill passed unanimously and will go into effect 180 days after becoming law, applying to leases entered into on or after that date.

A summary of the bill states, “Where a tenant vacates a residential dwelling unit in violation of the terms of a lease, subject to the mitigation provisions already provided in state law, pursuant to section 227-e of the Real Property Law, this bill would limit the resulting fees recoverable by the landlord to the fair market cost necessary to prepare the residential dwelling unit for rental. The landlord would also be required to provide an itemized list to the tenant demonstrating how such fair market cost was calculated.”

When the Housing Stability and Tenant Protection Act (HSTPA) was enacted in 2019, it imposed a duty to mitigate damages on an owner if a tenant vacated a unit prior to the lease end date. This means an owner must take “reasonable and customary steps” to re-rent the unit for the current lease value or market value, whichever is lower.

Prior to HSTPA, a tenant who abandoned her lease would almost certainly still be on the hook for the remainder of the lease payments and the owner wasn’t legally required to make an effort to re-rent the apartment to someone else as soon as possible. As a result of HSTPA, an owner must try to find a new tenant to lease the unit and if successful may not charge the former tenant for those months of rent.

However, the duty to mitigate imposed by HSTPA didn’t limit fees and penalties that an owner could seek to collect in preparing a residence to be rented again. The City Council’s concern was that owners could charge any arbitrary fee to cover the supposed costs to prepare the apartment for the next rental, thereby putting a large financial burden on tenants. As a result, the bill limits the fees that an owner can recover when a tenant vacates early to the fair market costs necessary to prepare the residence for rental and it requires owners to provide an itemized list to the tenant detailing the calculation of these costs.