I told my tenant that I wanted to raise his rent $100 and he agreed. Then I realized that even with banked rent increases I can only raise it about $30. What should I do?
Rescind the unlawful rent increase immediately, and promptly refund any overage to the tenant. The rent law states that any waiver by a tenant of rights under the rent law shall be void as contrary to public policy. This rule clearly applies, without exception, to illegal rent increases.
Under the “Misdemeanors and Other Enforcement Provisions” section of the rent law, landlords are warned that it is unlawful to charge any rent which exceeds the legal limitations of rent control. Furthermore, any person who charges excessive rents shall be guilty of a misdemeanor, meaning the District Attorney could bring criminal charges against you. Indeed, “[a]ny person who violates [this provision] is guilty of a misdemeanor and shall be punished by a mandatory fine of one thousand dollars ($1,000), and in addition to such fine may be punished by imprisonment in the County Jail for a period of not more than six months.”
Even six hours in county jail should dissuade anyone from collecting an unlawful rental amount! More realistically, you could face monetary penalties for this mishap. The illegal rent adjustment permanently poisons the well, meaning all subsequent rent increases will be illegal. This permits the tenant, at anytime during the tenancy, to file an unlawful rent increase petition with the Rent Board. At the hearing, you will lose and the rent will be adjusted to its last lawful level. Furthermore, you shall be liable for three years of overpayment. These numbers become quite large if the unlawful rental charges accrue over many years. For example, because there is no time limit on when the unlawful rent increase petition can be pursued, the tenant may wait for ten or so years. Even if all subsequent increases have been legal and in accordance with the law, the $100 bump that occurred in 2010 will void these later adjustments. As a result, the rent will be lowered to its pre-2010 level, and the tenant will receive a refund for the difference between the last lawful rent amount and what was paid for the three years preceding the filing of the Rent Board petition (plus the time period from when the petition in filed until a decision is rendered).
Here’s another problem. You sell the building and a new owner takes over. The tenant subsequently files the Rent Board petition. The law holds the current owner liable to the tenant, even though the illegal act occurred during a prior landlord’s tenure. When the new owner pays the judgment, you can bet that you will be sued for indemnity.
And here’s yet another problem. The tenant doesn’t pay rent one month. You, or the new owner, begin an eviction action for nonpayment of rent. The tenant’s attorney will undoubtedly discover that the rent being demanded by the three-day notice is excessive. As a result, the eviction action will be summarily tossed out of court.
In sum, unlawful rents should never be charged. Any agreement by the tenant to accept this increase is null and void. Only increase rent as permitted by law. Without a doubt, the penalties for this transgression far outweigh any benefit. DW