pursuant to section 2520.11 of this Title on the base date, the legal regulated rent shall be the
rent agreed to by the owner and the first rent stabilized tenant taking occupancy after such
vacancy or temporary exemption, and reserved in a lease or rental agreement; or, in the event a
lesser amount is shown in the first registration for a year commencing after such tenant takes
occupancy, the amount shown in such registration, as adjusted pursuant to this Code."
(RSC § 2526.1 [a][3][iii]).
Petitioner argues that this provision of the RSC allows it to negotiate a first rent after a
temporary exemption however it and the initial tenant deem appropriate. This interpretation, as
applied by petitioner, is misguided for numerous reasons. First off, the statute is clear that the
first rent must be "regulated." Here, the 2001 lease issued immediately after the temporary
exemption [*4]stated that the legal rent was $2000 and that the
new tenant had a preferential rent of $950.[FN4] Petitioner argues that the $2000 rent rendered
the premises unregulated.[FN5] However, such a lease would run directly
contrary to the RSC which requires the first post-temporary exemption lease be regulated. Thus,
if the court were to follow petitioner's interpretation of how it may set the first post-temporary
exemption rent, the "temporary" characterization of RSC § 2520.11 (m) exemptions is
rendered meaningless as the exemption becomes permanent at the whim of the landlord. As
discussed in more detail below, petitioner's interpretation of the RSC would create a loophole
that undermines the goals of rent regulation. Under such a scenario, a landlord could place an
employee in an apartment for a short period of time for the sole purposes of skirting its rent