New York Rent Gouging – A Comprehensive Look

New York City is famous for its sky-high rents. With limited housing stock and high demand, landlords often have the upper hand when it comes to setting rental rates. However, New York has laws in place to protect tenants from illegal practices like rent gouging. Here is a comprehensive look at rent gouging laws in New York, and what tenants can do if they suspect illegal activity.

What is Rent Gouging?

Rent gouging refers to landlords requiring extra payments above the legal rent as a condition of obtaining or renewing a lease. This illegal practice is also known as “key money.”

Some examples of rent gouging include:

• Requiring an extra fee to sign or renew a lease
• Refusing to renew a lease unless the tenant pays a “bonus”
• Demanding extra payments to move up the waiting list for an apartment

Rent gouging laws prohibit landlords from soliciting these extra-legal payments. The rent set by the lease agreement is the maximum a landlord can charge (except for legally allowed increases).

Why is Rent Gouging Illegal?

Rent gouging is illegal because it allows landlords to circumvent rent control laws. In New York City, many apartments fall under rent stabilization rules that limit how much landlords can raise rents each year. Rent gouging enables landlords to get around these limits and charge tenants more.

Rent gouging also takes advantage of tenants who desperately need an apartment. When housing inventory is low, some tenants will agree to extra fees just to secure a lease. The law prohibits landlords from exploiting tenants in this way.

Rent Gouging Penalties in New York

New York State penal code sections 180.55, 180.56, and 180.57[1] make rent gouging a crime punishable by fines and jail time:

• Rent gouging in the third degree (180.55) is a Class B misdemeanor. It covers illegal payments under $250. The maximum penalty is 3 months in jail and a $500 fine.
• Rent gouging in the second degree (180.56) is a Class A misdemeanor. It covers illegal payments of $250 or more. The maximum penalty is 1 year in jail and a $1,000 fine.
• Rent gouging in the first degree (180.57) is a Class E felony. It applies when there is an ongoing scheme to solicit illegal payments for 3 or more apartments on at least 3 separate occasions. The maximum penalty is 4 years in prison and a $5,000 fine.

Landlords convicted of rent gouging may also face civil lawsuits from tenants and have to pay back any illegal fees collected.

Real World Examples of Rent Gouging

Rent gouging cases periodically make headlines in New York City. Here are some notable recent examples:

• In 2018, a Queens landlord was charged with rent gouging[2] for allegedly demanding a $17,000 “key money” payment from a tenant. He faced second-degree charges.
• In 2015, a Brooklyn landlord pleaded guilty to rent gouging after requiring 10 tenants to pay extra “fees” of $1,000 – $5,000 to obtain leases[3].
• In one notorious case, a Manhattan landlord was convicted in 1997 of first-degree rent gouging after collecting more than $1 million in illegal “key money” payments from 34 tenants[4].

These examples illustrate that rent gouging remains an issue that tenants need to watch out for.

Signs of Potential Rent Gouging

How can you tell if a landlord’s actions cross the line into illegal rent gouging? Here are some red flags to watch for:

• The landlord asks for extra fees above the rent to sign or renew a lease
• You’re required to pay additional “move-in fees” besides the standard security deposit
• The landlord won’t rent to you unless you pay a “bonus” upfront
• There are additional fees to “expedite” your application or get priority on a waitlist
• The landlord says extra fees are “standard practice” in the building
• You’re asked to make payments in cash or pay fees to a third party instead of the landlord

While some legal fees like application fees or broker commissions are allowed, anything that seems designed to skirt rent limits is suspicious.

What To Do If You Suspect Rent Gouging

If you believe a landlord is engaging in illegal rent gouging, here are some steps to take:

• Document everything. Keep copies of all lease agreements, receipts, cancelled checks, texts/emails, and any other evidence of payments made.
• File a complaint. You can report rent gouging to the NY State Division of Housing and Community Renewal (DHCR)[5] and NYC Department of Housing Preservation and Development (HPD)[6].
• Consult a lawyer. An experienced tenant lawyer can advise you on your rights and options. They may help you bring civil or criminal action against the landlord.
• Organize with other tenants. Talk to your neighbors and see if the landlord has made similar demands of other tenants. Working together can strengthen your case.
• Refuse illegal demands. You cannot be evicted for challenging illegal rent gouging. But consult a lawyer before withholding any rent payments.

The bottom line is tenants should not tolerate rent gouging. Report suspected cases and don’t be afraid to assert your rights.

Rent Gouging Defenses for Landlords

Landlords accused of rent gouging may argue the extra fees were for legal purposes, not to skirt rent laws. Some possible defenses include:

• Claiming the payment was a broker fee for obtaining the tenant
• Stating the money was for an apartment renovation or repair fund
• Asserting the payment was a non-refundable move-in fee, not extra rent
• Arguing the tenant offered the money voluntarily, it wasn’t solicited

However, these defenses often fail when evidence shows the landlord tied the payment to obtaining or renewing a lease. Prosecutors look for a clear “quid pro quo” linking the payment to the lease.

Changes to Rent Gouging Laws

In 2019, New York State strengthened its rent gouging laws by passing the Housing Stability and Tenant Protection Act (HSTPA). The law:

• Increases civil penalties for rent gouging from $1,000 to $5,000 per violation
• Makes it easier for tenants to sue landlords for rent gouging
• Extends the statute of limitations for civil rent gouging cases from 1 to 2 years
• Allows rent gouging cases to be fast-tracked on the court calendar

These changes give tenants more power to take action against rent gouging. The new penalties also aim to further deter landlords from flouting the law.

Outlook for Rent Gouging Enforcement

Rent gouging remains an ongoing issue, especially in tight housing markets like New York City. But prosecutors have been ramping up enforcement efforts in recent years.

For example, in 2017 Manhattan DA Cyrus Vance Jr. announced a crackdown on illegal practices by landlords. His office has set up a “Tenant Harassment Task Force” and encouraged tenants to report shady behavior.

Meanwhile, New York State’s Tenant Protection Unit brought 230 cases against landlords in 2018 alone. They actively investigate and prosecute rent gouging cases across the state.

Stronger enforcement, coupled with expanded tenant rights under the HSTPA, provide important new safeguards against predatory rent gouging practices.

Conclusion

Rent gouging laws aim to protect tenants from exploitation in New York’s challenging housing market. Tenants who understand the issue and their rights will be empowered to take action against unlawful conduct.

Stopping rent gouging requires vigilance from tenants willing to report violations. It also depends on prosecutors ensuring laws have teeth and landlords face consequences for illegal behavior.

With proper safeguards in place, the hope is that unlawful rent gouging will become a thing of the past in New York. Tenants have the right to fair treatment under the law.