Rent Transparency Act & The Slow Walk to Greater Rent Exposures
Landlords should be aware of a new local law that may invite more liability and exposure to risk. The Rent Transparency Act (Intro 1037), passed by the City Council May 28th, 2025, mandates that building owners with rent-stabilized units post a public notice at the entrance of the building. The final law reads plainly:
"This building contains one or more units that are subject to rent stabilization. To find out if your unit is rent stabilized, contact New York State Homes and Community Renewal[(DHCR)]."
On its face the law seems administrative, but its symbolic meaning runs deeper, reflecting a fundamental shift in how the city approaches tenant rights and landlord obligations. The original version of the legislation required landlords to disclose not just the existence of rent-stabilized units but also to alert tenants that failure to file proper DHCR registrations could expose landlords to penalties. The initial draft also emphasized the obligation of landlords to provide tenants with updated DHCR filings each year, essentially inviting tenants to verify their legal rent and registration status. That language was ultimately removed, leaving behind what might appear to be a softened, almost sterile notice. But even this minimal requirement represents a cultural and political shift toward encouraging tenants to self-audit, and reaffirms the city and state's interest in increasing tenant access to rent information.
For investors, the Rent Transparency Act is more than a notice on a door. It signals a broader trend where landlord accountability is expanding. And it invites a reflection on how we arrived at this point through a winding and at times contradictory legal evolution that began in earnest with the 2019 Housing Stability and Tenant Protection Act (HSTPA).
HSTPA & Ensuing Legislation’s Impact on Landlord Legal Liability
HSTPA represented a seismic shift in the regulatory landscape, dramatically increasing the potential liability for landlords, particularly around rent overcharges. It abolished vacancy and high-income decontrol, capped rent increases, and extended the lookback period for overcharge claims to six years, with no time limit for examining the rent history. Tenants were newly empowered to examine decades of rent records, and if they found a pattern of illegal increases, landlords could be hit with treble damages.
This uncertainty created chaos in the investment market, freezing transactions as owners struggled to understand their potential exposure. But in 2020, the Court of Appeals handed property owners a lifeline. In Regina Metro v. DHCR, the court held that applying the overcharge provisions of HSTPA retroactively violated due process because property owners prior to 2019 operated within the framework of laws of that time. In effect, Regina reinstated the pre-HSTPA rule, which provided a four-year lookback period and a four-year statute of limitations for rent overcharge claims. Under this restored framework, tenants could not challenge rent amounts that were set more than four years before their complaint, unless they could prove a fraudulent scheme to deregulate. Even then, they had to meet the high bar of common law fraud by demonstrating misrepresentation, intent, reliance, and injury. For a moment, the fog cleared and confidence returned to buyers. Investors and lenders re-entered the market. Transactions that had frozen during the HSTPA uncertainty began to move again. There was still complexity, but at least the standard was clear and predictable.
However, this period of relative clarity would prove short-lived with the passing of Senate Bill S2980C in 2023. The bill sought to redefine the fraud exception to the four-year rule, not by clarifying common law standards of fraud but by dramatically lowering them and broadening liability. The original text of Part B of the bill would have allowed tenants to trigger an exception to the lookback period if a landlord breached any duty to disclose correct information, regardless of whether the landlord acted intentionally or whether the tenant relied on that misinformation. Translated into English, that would now mean any improper deregulation grounds for fraud, even if committed by a prior owner decade earlier, and even if done in accordance with DHCR guidance at the time.
"With respect to the calculation of legal rents for the period
either prior to or subsequent to June 14, 2019, an owner shall be deemed
to have committed fraud if the owner shall have committed a material
breach of any duty, arising under statutory, administrative or common
law, to disclose truthfully to any tenant, government agency or judicial
or administrative tribunal, the rent, regulatory status, or lease infor-
mation, for purposes of claiming an unlawful rent or claiming to have
deregulated an apartment, whether or not the owner's conduct would be
considered fraud under the common law, and whether or not a complaining
tenant specifically relied on untruthful or misleading statements in
registrations, leases, or other documents. The following conduct shall
be presumed to have been the product of such fraud: (1) the unlawful
deregulation of any apartment, including such deregulation as results
from claiming an unlawful increase such as would have brought the rent
over the deregulation threshold that existed under prior law, unless the
landlord can prove good faith reliance on a directive or ruling by an
administrative agency or court; or (2) beginning October 1, 2011, fail-
ing to register, as rent stabilized, any apartment in a building receiv-
ing J-51 or 421-a benefits."Source: Senate Bill S2980C (2023)
The implications of this change were staggering. This sent shockwaves through the ownership community, creating a new wave of uncertainty that rivaled the original HSTPA confusion. Property owners scrambled to locate old rent records, and some began reconsidering deals or delaying closings entirely. A veteran investor captured the anxiety of the moment when he said to the Real Deal in 2023, "Who has records, bills, for work they did in 2001?"
Recognizing the constitutional risks and political consequences of such a broad expansion, Governor Hochul negotiated a chapter amendment to S2980C before signing it into law in late 2023. That amendment became Assembly Bill A8506, passed in 2024. A8506 replaced the sweeping redefinition of fraud with a more modest approach. Now, DHCR or a court must determine whether the owner "knowingly" engaged in a fraudulent scheme to deregulate a unit, after considering the "totality of the circumstances."
While this represented a softening from the most extreme version of the original bill, it created new problems for market participants. This was a partial return to the pre-HSTPA logic, but it still departed significantly from Regina. On the one hand, the amendment eliminated the requirement to prove all the traditional elements of common law fraud. On the other, the new law gave judges and DHCR discretion to find fraud based on circumstantial patterns, without showing reliance or intent to deceive. But, as Rosenberg & Estis note in their piece, this attempt to "clearly define" the fraud exception has merely substituted one ambiguity for another. The result is a legal framework that promises clarity but delivers continued uncertainty.
The Real-World Impact on Investment Decisions
The legal ambiguity these bills create matters significantly because it can substantially transform rent rolls. Buying a building with a 7% capitalization rate might sound great, but not if the yield sinks to just 5% in year three later after overcharge cases are adjudicated. The difference between being protected by the four-year rule and being liable for treble damages can mean millions of dollars. Sellers must now provide buyers with full DHCR histories, and buyers must weigh whether any past deregulation, even if conducted before their ownership, could become the basis for future litigation.
The complexity becomes even more pronounced when examining specific types of. Current definitions of the law provide some protection for owners that deregulated units that were receiving J-51 tax abatements. During the 2000s and 2010s, DHCR allowed buildings receiving J-51 tax benefits to deregulate units if certain conditions were met. But after the 2009 Roberts decision and the 2011 Gersten ruling, that position was deemed incorrect, and the case law from these decisions established that deregulations under J-51 had been illegal all along.
It wasn't until 2016 that DHCR issued formal guidance striking down its prior interpretation of deregulations during J-51 tax benefit periods and explaining that deregulating had become unlawful. Due to DHCR's own reversal on when and how owners could deregulate units, there is a strong defense against claims of fraudulent behavior. Landlords can point to DHCR's own guidance to highlight the state of regulatory ambiguity that existed at the time.
However, buildings that have undergone substantial rehabilitations may face greater challenges in protecting themselves from liability, especially if proper documentation is missing or in-building signage requirements are not met. Buildings that underwent sub rehabs before 2022 but failed to obtain binding determination letters are vulnerable under the current regulatory framework. If tenants realize their units were never formally exempted from rent stabilization, landlords could face a wave of claims, especially under the looser fraud definition established in A8506. The new transparency requirements only amplify this risk by encouraging tenants to self-audit.
This regulatory evolution puts a spotlight on today's investing landscape and how sophisticated market participants are adapting. Fair market apartment buildings don't face these regulatory risks, but in multifamily buildings priced over $15 million, a rent-stabilized component is almost inevitable. The smartest sellers are responding to this reality by either fixing issues proactively, selling at steep discounts to account for liability exposures, or refinancing to buy more time (meanwhile, lenders are becoming more sophisticated in their approach to these risks. While not yet universally aggressive in their due diligence, they are asking more detailed questions about DHCR compliance and historical rent registrations).
The New Reality for Investors
This is no longer a market that investors can enter casually without deep expertise and expect a 2-3x equity multiple in three years (cough, cough 2013-2015). Between City of Yes zoning reforms, shifting DHCR enforcement standards, and open-ended legal definitions, navigating stabilized multifamily in NYC requires a specialized team with experience in these complex regulatory waters.
At Sinclair Realty Group, we work at the intersection of law, policy, and investment to help clients navigate these challenges. We don't litigate, but we know which legal risks can derail a deal. We also recognize that when the market misunderstands these risks, it presents an opportunity for sophisticated investors who understand how to price and manage regulatory complexity.
This is a market defined by nuance, and that nuance is only growing as regulatory oversight intensifies. Whether you're acquiring, selling, or repositioning rent-stabilized properties, having the right legal, architectural, and transactional advisors can be a big value add.
I am bullish on NYC Multifamily
Best Regards,
Romain Sinclair
Sources Used:
Rosenberg, G. M., & Cohen, E. R. (2024, February 7). Retroactively Redefining 'Fraud': The Chapter Amendments. Rosenberg & Estis, P.C.
The Real Deal. (2023, August 18). Preparing for the worst: Landlords brace for rent law expansion.
The Real Deal. (2024, January 5). Hochul amends rent bill, sparing landlords from “disaster.”
Assembly Bill A8506 (2024). New York State Assembly.