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Can I still get a buyout of my rent-stabilized apartment now that the law has changed?
“There are fewer incentives for landlords to pay tenants to surrender the rights of their rent-stabilized apartments under the new rent reforms, but those opportunities do still exist,” says Steve Wagner, an attorney at Wagner Berkow & Brandt who has decades of experience negotiating these kinds of deals on behalf of renters.
The new rent laws give rent-stabilized tenants many more protections. One of these changes is the elimination of provisions that allowed landlords to easily deregulate rent-stabilized apartments through vacancy or high-income or high-rent situations. The reforms prevent landlords from converting rent-stabilized units in rental buildings into higher earning market-rate ones.
Although this option is off the table, there are situations in which landlords may be motivated to buy out your rent stabilized lease, says Wagner.
“Your chances of getting a buyout will be higher if you are paying preferential rent, live in a building that’s already been converted into a co-op or condo, or if your building is in a prime spot for development,” says Wagner, who handles most buyout cases on a contingency-fee basis, receiving payment only if and when a buyout occurs. “Tenants in buildings where the landlord wants to do a substantial rehabilitation of the building might also secure a buyout.”
Having an experienced buyout attorney will be important in identifying whether your apartment presents a buyout opportunity as well as in evaluating and negotiating the deal.
“It depends on the kind of property and whether the landlord will be able to raise the rent and make back his or her money after buying you out. It’s a unique combination of understanding the nuances of the new laws, the remaining opportunities for landlords to deregulate or increase the rent and also familiarity with the laws and economics of zoning, development and the operation of condos, co-ops, and rental buildings,” Wagner explains.
There are at least four scenarios in which a landlord may want to buy out your rent-stabilized lease.
1. You’re paying a low preferential rent
Buyouts will still be a viable option for tenants who are paying a preferential rent that is substantially less than the legal rent the landlord is allowed to charge under your rent-stabilized lease.
That’s because, under the new rent law, landlords can no longer offer renters a low, preferential “teaser” rent to get them into the building and then substantially increase the rent (all the way up to the legal rent) at renewal time. Instead, the preferential rent will now be in place for the entire tenancy subject to relatively small increases allowed by the Rent Guidelines Board.
If you vacate your apartment, however, your landlord will be able to raise the rent to the legal regulated rent for the next tenant.
“If there’s a substantial difference between the rent being paid and the legal regulated rent, that could form the basis of a significant buyout,” Wagner explains.
2. You’re renting from the sponsor of a co-op or condo building
Landlords are looking for other ways to access the money tied up in their real estate now that stabilized apartments cannot be deregulated, says Wagner. They can do that by offering a buyout of a non-purchasing, rent-stabilized tenant renting in a building that’s already been converted to a co-op or condo. In most cases, when the rent-stabilized tenant vacates the apartment, the owner of the apartment can sell it or re-rent it free of the rent-stabilized restrictions. In this situation, a landlord can unlock the equity in the apartment, which is likely to be substantial. “That’s an opportunity for a tenant to negotiate a buyout,” says Wagner.
3. Your landlord wants to demolish your building
If you rent an apartment from the owner of a rental building that’s in a prime position to be part of an assemblage of properties for a brand new building, a developer might try to get the tenants to voluntarily surrender their apartments. That’s an opportunity for a buyout.
“In this situation, a sponsor would pay tenants to leave the building and then make a demolition application,” says Wagner. Often developers make the demolition application while the tenants are in place and if that’s the case, tenants can contest it.
Wagner says “if the landlord wants to knock down the building, there is a big incentive to negotiate with the tenants and make sure they do not contest an application to deregulate the building. These applications can take years to complete if contested. Approval from DHCR is required before the landlord may refuse to renew leases and evict the stabilized tenants.
In this scenario, tenants will vacate their apartments well before the time it may take to get the necessary demolition approval. Time is money to developers. Once a developer commits to redeveloping the property, he or she usually wants to move forward as quickly as possible. That’s a big opportunity for a tenant to negotiate a buyout."
4. Your landlord wants to do a substantial rehabilitation
If your building is in need of major upgrades that are more comprehensive than Major Capital Improvements (MCIs), you may have an opportunity for a buyout. Substantial Rehabilitation of a building that doesn’t fall within an MCI, like a gut renovation where 75 percent of building-wide and individual housing accommodation systems are replaced, allows a landlord to remove an entire building from rent regulation.
”If you are one of the few remaining tenants there, the landlord could offer you a substantial buyout,” says Wagner.
New York City real estate attorney Steven Wagner is a founding partner of Wagner Berkow & Brandt, with more than 30 years of experience representing numerous co-ops, condos, and individual owners and shareholders. To submit a question for this column, click here. To arrange a free 15-minute telephone consultation, send Steve an email or call 646-780-7272.
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