Finding a decent living place or reliable tenants, can be very challenging. Therefore, landlords and tenants want to do whatever they can to lock down arrangements when they land themselves a workable renting situation.  However, landlords must be aware that certain actions related to rent collection may result in criminal charges.

How is “Rent Gouging” Defined in New York?

While the term colloquially means swindling or overcharging, rent gouging in the general sense refers to a landlord’s agreement to an exchange of value more than the officially agreed-upon rent, in order to start or keep a lease with a tenant.

New York Penal Law § 180.55 – Rent Gouging in the Third Degree

Statute 180.55 defines rent gouging in the third degree as soliciting, accepting, or agreeing to accept something of value – “less than two hundred fifty dollars” – in addition to lawful rent charges, with the understanding that it will increase the possibility of obtaining or renewing the use of one’s property.

New York Penal Law § 180.56 – Rent Gouging in the Second Degree

Statute 180.55 defines rent gouging in the second degree as soliciting, accepting, or agreeing to accept something of value – “of two hundred fifty dollars or more” – in addition to lawful rent charges, with the understanding that it will increase the possibility of obtaining or renewing the use of one’s property.

New York Penal Law § 180.57 – Rent Gouging in the First Degree

Statute 180.55 defines rent gouging in the first degree as – “in a systematic ongoing course of conduct they solicit, accept, or agree to accept from one or more persons in three separate transactions some consideration of value” – in addition to lawful rent charges, with the understanding that it will increase the possibility of obtaining or renewing the use of one’s property.

Sample Cases

We will discuss other related versions later on, but the above-referenced statute affects New York landlords who request or accept additional provisions as part of the rental costs in a quest to attract or keep desirable tenants on their property.

Examples

Some examples in which this can be applied include:

• A landlord agreeing to consider a rental application above others if a $100 fee is paid
• A landlord accepting tickets to a baseball game as a condition for renewing a lease
• A landlord requesting that a potential tenant mow his personal lawn for the duration of the rental year in addition to rent, as a provision for being able to rent the apartment

The burden of blame for this constraint usually falls on the owner of the property, and not on the tenant. Therefore, if you are a landlord in New York, it’s important to be aware of potential legal issues.

Elements of the Crime 

In order to make sure one doesn’t get into this sort of trouble, let’s break down the elements of the crime and determine what makes someone liable.

• The situation in which this crime occurs is when it is “in connection with the leasing, rental or use of a real property.” This means that rent gouging only takes place in regards to the rent of what is considered real property, such as land, buildings, and immovable real estate.
• If someone committed any similar action of soliciting added value for, let’s say, rental of a truck, that person is not liable of rent gouging under this penal law.

Additionally, to be guilty of rent gouging, the person must have committed the act within the scope of a legal rental agreement that is registered and reported. A landlord of an unlawfully rented apartment cannot successfully be convicted of rent gouging (although he could be guilty in the issue of the illegal rental.)

• The criminal act of this statute is “soliciting, accepting or agreeing to accept from a person some consideration of value.” This means that there actually has to be communication about the transfer of value. Simply planning to request this of a tenant, or discussing this possibility with an unrelated third party, is not sufficient to fault someone for this crime.
• For example, let’s say Mr. Baxter rents an apartment out to Larry. If Mr. Baxter asks (solicits) from his tenant a $200 “renewal fee” in order to allow him to continue renting the property, he may be guilty of rent gouging. However, if he discusses this idea with Mrs. Baxter but never actually follows through with Larry, he can’t be held liable.

It’s also important to point out the added language of the statute, that of accepting and agreeing to accept. As we specified above, it is the landlord who needs to be covered in situations that border on this crime.

Therefore, if a tenant is the one who initiates by offering the consideration of value, a landlord can be liable for accepting or agreeing to accept at a later date. However, if the landlord declines, he or she does not fulfill this element of the crime of committing the act of the statute.

• For example, let’s say, Larry, worried about losing his apartment, offers to pay Mr. Baxter an additional $200 to convince him to renew the lease with him. If Mr. Baxter does not accept the money, then Baxter himself is not responsible for committing rent gouging.

Additionally, if Larry manages to give Mr. Baxter a value that cannot be returned, but his landlord never agreed to accept it, then similarly, he did not commit this crime.

• The intention behind accepting the consideration of value must be that it “will increase the possibility that any person may obtain or renew the lease, rental or use of such property, or that a failure to furnish it will decrease the possibility that any person may obtain or renew” it. What does this mean?

This refers to the aim of the landlord when soliciting the consideration of value. The landlord must be requesting it with the intention that it will open the possibility of the rental, or that without it, the rental cannot take place.

• Let’s analyze this with Larry and Mr. Baxter. If Mr. Baxter tells Larry that he has another candidate for next year, but a $200 payment will heavily influence his decision about whom should get the rental, taking the money under these conditions is rent gouging.

This applies whether Mr. Baxter goes through with the other candidate after taking the money, or even if he decides to keep the lease with Larry. It is a problem as long as the money, which was in addition to rent, was given with the clear understanding that it would raise the chances of Larry remaining Mr. Baxter’s tenant.

However, it’s important to clarify that in the case when the landlord is not soliciting, but rather the tenant is initiating, the landlord is only liable if he accepts with the agreement that the possibility of rent will increase because of it.

This means that if Larry gives Mr. Baxter a gift of a box of chocolates as a nice gesture, with no mutual agreement that it will affect his chances of getting his lease renewed, Mr. Baxter can happily accept.

Similarly, if Larry offers to walk Mr. Baxter’s dog on Sunday because he enjoys animals, and there is no understanding that it will make him a more desirable tenant, Mr. Baxter can agree to accept.

• The subject of the criminal action in this law, rent gouging in the third degree, is “some consideration of value, less than two hundred fifty dollars, in addition to lawful rental and other lawful charges.” This means that the value being transferred has to be in addition to rent, or any other payments due to the landlord.

If the landlord is requesting an added fee for another reason, such as for a deposit or use of the laundry machine, then it is not considered rent gouging. If the landlord requests a reservation fee in advance of the rental period, but the money will be included in the first month’s rent, then it does not fall under this problematic area.

• For example, if Mr. Baxter requests that Larry pay him some money he owed from last month, in order to agree to renew the lease with him, he is clearly not liable of rent gouging.

Similarly, if Larry offers the service of painting Mr. Baxter’s fence in lieu of payment of his parking fee, Mr. Baxter can agree to this provision, because he is owed this money.

(On a side note, even if Larry is only painting the fence as a condition for renewing his lease, Baxter would only be liable of rent gouging in the third degree if the paint job can be valued at under two hundred fifty dollars.)

Now that we broke the statute down to these four elements, we can see how a rent gouging charge may not be so clear-cut. All four of these elements would have to be proven as satisfied in order to convict someone of violating this crime.

Federal Statutes

The majority of landlord-tenant laws are state-specific. The two major federal statutes regarding rent are the Fair Housing Act, which prohibits discrimination, and the Fair Credit Reporting Act, which governs the use of credit checks in the screening process.

Related Offenses 

Charges of rent gouging may be brought in these other forms.

• Rent gouging, in the second degree, is set out in statute 180.56. This crime is identical in all elements to rent gouging in the third degree, with the exception that the consideration of value would have to be two hundred fifty dollars or more.

It is a Class A misdemeanor. In the examples above, Mr. Baxter would be liable of rent gouging in the second degree if he requests a “renewal fee” of $250 or accepts an item or service from Larry that can be valued at this amount or more, expressly to increase the chance of renting to him.

• Rent gouging, in the first degree, is set out in statute 180.57. This crime prohibits the soliciting of added value from the rental of three or more units, in three separate transactions, as part of an ongoing scheme of rent gouging. This is a class E felony.

An example of this would be if Mr. Baxter also owned two other units, and demanded an additional payment from all three of his tenants in order to have their leases renewed.

[Impactful Cases] 

Prosecution 

In New York, the Division of Housing and Community Renewal is a government agency that supervises affordable housing and deals with issues tenants may experience. It is responsible for overseeing rent stabilization, control, and overcharges.

Owners of such buildings must be especially aware of rent gouging issues because asking for more rent than is allowed on protected properties would constitute rent gouging. This is different than the examples we have discussed until now because it means that the landlord may intend for additionally requested money to be part of a rent increase, but still be liable for rent gouging because it is more than the lawful rent allowance.

Statutory Penalties

The statutory penalties for rent gouging differ for each of the three related offenses. Rent gouging in the third degree, a class B misdemeanor, can result in up to three months in prison, one year of probation, community service, restitution to the victim, and/or a fine of up to $500 or twice the amount gained from the crime.

A second-degree violation, a class A misdemeanor, can be punishable by up to a year in prison, three years of probation, community service, restitution, and/or a fine of up to $1,000 or twice the amount gained from the crime. In the most extreme case of rent gouging in the first degree, a class E felony, a sentence of up to four years in prison and a fine of up to $5,000 can be imposed.

What happens if the defendant has a prior criminal history?

In all cases, a sentence could be stricter if the defendant has a prior criminal history or if the court wants to make a point about the severity of the crime. It’s worthwhile to note that in New York, enforcement of remaining rent-controlled properties is a hot issue.

Needless to say, being convicted of any of these crimes, particularly a felony, can create a lot of problems when attempting to continue a successful real estate business, aside from the time and money that can be spent fighting such cases.

Defenses 

When one is accused of a case of this kind, the burden of proof falls on the prosecution to establish beyond a reasonable doubt that the defendant has violated all elements of the crime. Therefore, an experienced criminal defense lawyer can help fight the charges by asserting that there is no proof of violations in all areas.

Examples of possible defenses include:

• The rental is not considered a lawful rental; therefore, the “tenants” were only guests allowed to stay on the property. Thus, the payment in question was not rent.
• The payment was not solicited, agreed to, or formally accepted. The tenant gave a non-refundable donation on his own volition.
• The payment was not made in conjunction with any understanding about expanding the possibility of future rental. The landlord accepted it as a gift and was unaware of any motives.
• The payment was requested to cover a lawful charge that the tenant owed.
• The consideration accepted was valued at less than $250 (for second-degree charges).
• The payment was requested from less than three individuals and was not part of an organized scheme (for first degree charges).

What Someone Who is Charged Can Do

If you have been charged with rent gouging, there are steps you can take to navigate the charge towards the best possible outcome. Above all, retaining an attorney as a first step will help immeasurably with communicating with the investigators and advising you on your statements to the authorities.

Then, your lawyer will work with you to craft a strong defense, negotiate a sentence, and discuss trial strategies. A charge like this can be serious, resulting in prison time and a stain on your record. Don’t let yourself get involved in these complicated legal matters on your own without seeking expert advice to guide you through the process.

If you have questions about your charges and would like to discuss the issue confidentially with an experienced criminal defense attorney, don’t hesitate to contact our firm. We have local offices in your area to help you deal with the Rent Gouging in New York.