Just in case you missed it, our partner Lucas A. Ferrara was quoted in Sunday's New York Times.

While I don't agree with the analysis, it makes for interesting reading. (And is likely to stir up quite a bit of controversy.)

Here's the piece in its entirety.

Can a Bargain Rent Have Staying Power?

FOR landlords and some tenants in rent-stabilized buildings, few issues are more important than “preferential rent” — rent that is lower than the legal regulated rent registered with the State Division of Housing and Community Renewal. 

Lucas A. Ferrara, a Manhattan lawyer and an adjunct professor at New York Law School , said that before 2001, the courts held that a preferential rent would continue throughout the tenancy, even if the lease provided otherwise.

In 2001, however, an appellate court held that the lease would govern and that if a preferential rent was not “for the duration of the tenancy,” that provision should be honored.

In 2003, however, the State Legislature amended the Rent Stabilization Code to provide that preferential rents would terminate upon vacancy or renewal, allowing landlords to end preferential rents when leases expired.

But despite that change, in a 2003 decision, in a case known as Colonnade Management v. Sturgis Warner, another appellate court ruled that the increase to a higher rent was permissible only if the lease unambiguously allowed it. Based on that decision, Mr. Ferrara said, the Division of Housing and Community Renewal last month updated its fact sheet on preferential rents, which is issued as a tenants’ aid.

First, he said, if the lease makes clear that the reduced rent will apply only for a limited duration, the preferential rent will end at the time specified in the lease.

But, Mr. Ferrara said, if the agreement provides that the preferential rent will apply for the entire tenancy — or if the landlord fails to disclose the legal regulated rent in the lease — the reduction may not be rescinded.

And if the lease is ambiguous or silent about the duration of a preferential rent, the ambiguity is generally resolved in favor of the tenant and the preferential rent continues throughout the tenancy.

Sherwin Belkin, a Manhattan lawyer who represents landlords, said that owners who want to make sure a preferential rent will end must make that clear in the first lease set at the reduced rent.

The duration of preferential rents can be important when a building is being converted.

Errol A. Brett, a real estate lawyer in Floral Park, N.Y., says he is representing several tenants who were given preferential rents during the conversion process but whose landlords — now that the conversion is complete and the tenants are no longer eligible to buy — are trying to increase the rents to the legal regulated amount. He believes that those rents cannot be raised.

Under the law that governs conversions, he said, a tenant in occupancy has only 90 days after the plan is accepted for filing by the attorney general to buy at the “insider price.” By increasing the rent to the legal maximum after that period has expired, the landlord is essentially giving the tenant three options: buy at market price; pay the higher rent; or leave the apartment.

To download a copy of this article, please use this link: NYT: Preferential Rents (5/11/08)