What Can I do if the Tenant Claims Rent is Above Fair Market?

Posted by  wasserman 

What Can I do if the Tenant Claims Rent is Above Fair Market?

Understanding that I am not obligated to offer a rent reduction, can tenants successfully argue that their current rent is now above market value through the Rent Board or another forum? 

There is a common misperception about what the Rent Board can and cannot do with regard to rents.  In general, the Rent Board’s jurisdiction extends only to ascertain what rent adjustments are permitted and which ones are not.  The Rent Board may not offer opinions and cast judgments on what constitutes fair or appropriate market rents as to new or current tenants. 

This means that if a current tenant is paying what may be considered above fair market rent, any dispute about what ought to be paid moving forward in a depressed marketplace must be settled privately between the property owner and the tenant.  The property owner may certainly refuse to lower the rent, and the tenant is free to vacate the apartment once any fixed lease term has expired.  As written about previously, any rent reduction granted because of market conditions becomes permanent, even once market conditions improve.

The only real instance where the Rent Board may opine on fair market rent is when a property owner is seeking to adjust rent because of “extraordinary circumstances,” meaning initial base rent was set very low because of fraud, mental incompetency, or some recognized relationship between the owner and tenant that caused this initial pricing to be well under market value.  For example, if you set rent especially lower for a close friend or relative, or if the price point was adjusted because the tenant is also your employee, then perhaps rent might be able to be increased in the future to the fair market level that existed when the tenant first moved into your housing.  In this situation, the Rent Board Administrative Law Judge will consider evidence of initial fair market rent by viewing what comparable apartments rented for during that time period.  Yet absent such a special circumstances dispute, the Rent Board stays out of the fray when it comes to determining what is and what is not market rent.

There is a law on the books which may make an owner liable in civil court for imposing a rent increase that is arguably in excess of market rent and designed to force the tenant out of the apartment.  This component of tenant harassment makes it unlawful to increase rent “with an intent to defraud, intimidate, or coerce the tenant into vacating the unit” in bad faith.  Evidence of bad faith may include, but is not limited, to the following:  (i) the rent increase was substantially in excess of market rates for comparable units; (ii) the rent increase was within six months after an attempt to recover possession of the unit; and (iii) such other facts as a court or the Rent Board may deem relevant.

Here the issue centers more on existing tenants who are paying rents now considered in excess of the market given the unprecedented drop in rental prices during this past year.  As stated above, neither the Rent Board nor any other forum can compel you to adjust pricing to reflect market conditions.  The choice is yours to make, and please remember to keep in mind that any such rent decrease based upon the market becomes instantly permanent regardless of what happens in the future.

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