New York State passed new rent laws that will change New York City housing. Before these laws were passed, a landlord could convert their property from a rental to a co-op or condominium as long as they sold 15% of the total units to primary home buyers. Now, landlords need to sell 51% of units. Hence, giving the tenants control of the landlord’s property. The reason for this is to protect tenants from landlord harassment to have them vacate their apartments. Some landlord were aggressive and not following the existing laws prohibiting tenant harassment in rent-regulated buildings. Lawmakers wanted more protections for these tenants by putting them in control of the process. Some people believe that this will have serious negative implications for the future of conversions.
In the past, landlords looked at conversions as a way to turn nonperforming assets into profitable ones. Since operating costs and taxes are rising, there might be economic hardships for the property owners even to the point of deferred maintenance. Deferred maintenance occurs when an owner holds off on repairing old or broken systems due to the high cost of such repairs. This deferred maintenance affects the physical appearance and stability of the property and will create a trickle-down effect to other industries like legal, accounting, construction, brokerage and advertising. If the property owner has a small portfolio, this can mean serious economic hardship in regards to their investments.
In NYC, there are a lot of older buildings that require major capital improvements and upgrades. When a landlord converts a building, he or she will improve the building while reducing its carbon footprint. Without these conversions, most upgrades might stop and it might cause the properties to fall into further disrepair. There can also be environmental concerns as well because these older buildings do not have efficient heating systems, new windows and new roofs. This might have a negative impact on the environment.
However, there may be exceptions to these new rent laws and the state attorney general will need to make guidelines to approve certain rental conversions. Perhaps there can be a financial litmus test regarding economic hardships on the landlords and if there is a financial hardship, then the landlord might be able to convert it. We do not know what this new law will bring. It can bring many beneficial changes because the tenants might be more vested in their buildings knowing that they cannot be easily kicked out. Landlords and tenants should be able to bridge the gap and work together to do what is right for both sides.
With over thirty years of experience, All Area Realty Services is well versed in the laws and regulations that can effect co-op boards and condo associations. With our guidance and advice, our client's can trust that we work with them in safeguarding them at all times.