Free Market / Market Rate Apartments

December 21, 2017 | By Charles Botensten

Q: I am a real estate salesperson and I represented a tenant who rented a “free market” apartment in New York City.  The tenant’s lease is set to expire shortly and the landlord offered a renewal lease at a 25% increase in rent.  Is this legal?

A: “Free market apartments” or “market rate apartments” are apartments that are not subject to rent regulations.  Accordingly, the landlord of a free market apartment is not legally bound by any limitations on the rent being offered to the existing tenant upon renewal (nor is the landlord even obligated to offer a renewal lease to the existing tenant).  Similarly, the landlord has no limitation on the rent being offered to potential new tenants.  The opposite is true of rent stabilized apartments where landlords are required to offer renewal leases to existing tenants and the rent at which the apartment is offered and renewed is governed by the rent stabilization laws. 

Generally, and subject to various exceptions, free market or market rate apartments include the following: (i) apartments in buildings with one to five units; (ii) vacant apartments renting for over $2,500.00 per month; (iii) vacant units in co-ops and condominiums rented by the unit owners; and (iv) apartments in buildings rehabilitated or newly constructed after January 1, 1974 where the owner has not taken advantage of special tax abatement programs such as the J-51 and 421-a programs.

The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel

Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP