State investigation takes issue with faulty lease riders

State housing officials said their investigation into rent-regulation practices prevented unlawful rent increases for thousands, but the landlord said the action amounted to a clerical change.

The New York Division of Homes and Community Renewal touted the results of its probe into Chestnut Holdings, carried out by its Tenant Protection unit, which found that the landlord gave 2,200 tenants unlawful preferential rent lease riders.

“This is an enormous win for tenants, as Chestnut Holdings saw the writing on the wall and agreed to settle rather than face TPU’s aggressive enforcement actions,” said DHCR commissioner RuthAnne Visnauskas.

But a spokesperson for Chestnut Holdings, upon learning of the announcement, said in a statement that there had been no such arrangement.

“The accusation by DHCR that we were in any way trying to circumvent New York State laws is absolutely false,” the spokesperson said. “This was not a settlement. We willingly complied with all requests from TPU, and continue to do so.”

Further, Chestnut, which has a 6,200-unit portfolio and is one of the largest landlords in the Bronx, said it never planned to hike rents and worked to provide the TPU with all of the documents it requested.

“At no point did Chestnut Holdings overcharge any tenant, or intend to overcharge any tenant,” the spokesperson said. “The TPU requested a clerical adjustment to one of our riders.”

Last year’s changes altered the rules for preferential rents, which previously allowed landlords to keep rents at a discounted level and raise them at any point. The new law mandates that the preferential rent stay in place for the duration of the tenancy. Initial ambiguity in the interpretation of the law led some landlords to rush lease renewals before the new law went into effect.

Gov. Andrew Cuomo in 2012 formed the Tenant Protection Unit within DHCR to combat tenant harassment. According to DHCR, the TPU has conducted hundreds of investigations, registered more than 87,000 improperly deregulated apartments and recovered more than $5.3 million in overcharged rent. A 2019 investigation, in coordination with Attorney General Letitia James, resulted in a $3 million settlement with Raphael Toledano for tenant harassment.

A 2014 lawsuit brought by landlord groups said the agency lacked standards, procedures or appeals process for its agents.