Real estate is a large industry impacting virtually everyone. In New York City, where rental units comprise 63% of the housing stock, (compared to an average rental stock of 37% in the United States), the proclamations of the Rent Guideline Board have an outsized public policy impact. Governor Cuomo signed the Housing Stability and Tenant Protection act of 2019 in June of this year. The law was meant to level the playing field against larger landlords by expanding protections to the 967,000 rent stabilized units in New York City. The law will additionally have a profound effect on the other 43% of New York City renters who live in 936,000 non-rent regulated apartments. Unregulated apartments, typically those buildings with fewer than six units, are managed by small landlords. Below, we highlight a few changes.
SECURITY DEPOSIT ADJUSTMENTS
Security deposits are limited to one-month’s rent. Landlords have less insurance when a tenant breaks a lease, damages the property, or has an extended eviction proceeding. Due to increased notice requirements, evictions are expected to take longer.
NOTICE REQUIREMENTS AND NEW EVICTION PROTECTIONS
The new law requires, that all landlords provide tenants with notice if they intend to raise the rent by more than 5 percent or if they do not intend to renew a lease. This sounds reasonable and fair but upon reviewing the details, the requirements become more onerous and create more risk.
- For renters with leases or tenancy of less than one year, the notice period is 30 days
- For renters with leases or tenancy between one to two years, the notice period is 60 days
- For renters with leases or tenancy of more than two years, the notice period is 90 days
The time extension is clearly more favorable for tenants than small landlords. The pain is made worse when tenants choose not to pay rent during the Notice to Quit time period. Furthermore, some homeowners are under the mistaken belief that they cannot accept rent during the Notice to Quit time period. Therefore, implementation of the new law means potentially more time without rent money while an eviction is being pursued.
Finally, the Notice to Quit has expired and you can now move to evict the tenant. During the Court process, you or your attorney requests rent for use and occupancy. The judge may deny the rent request but grants the eviction. The tenant then says they need time to move, claiming a hardship such as :
- Their children are in school
- They can’t find a place in the neighborhood
- They’ve lost their job
The Judge then grants the tenant a one-year stay of the eviction and no use-and-occupancy rent. Yes, that’s correct: the new law allows the Judge to extend the eviction stay to 1 year compared to a maximum of 6 months with the old law.
If you lack the capital to underwrite this, your home just went into foreclosure, Con Ed has sued you and the City of New York just put a lien on your home for unpaid taxes!
RENT CONTROL VERSUS COST AND OPERATING CONTROL
Unregulated apartments are not subject to rent control or preferential rent. Market rates govern rent increases. There is no need to justify major capital improvements (overall building) or individual apartment improvements. Failure to properly file work permits could result in massive fines. Rent stabilized apartments impact overall housing stock development, demolition and renovation in the area. Eviction rules, security deposit stipulations, and notice rules cover essentially all tenants and by extension, all landlords – including owners with fewer than six units not subject to rent regulation. Restrictions and regulations concerning short term rentals are additional risks that all landlords need to be aware of and properly assess. A worrisome trend centers on fines imposed by the City due to any discrepancy between renovations on site versus renovations recorded on a premise’s certificate of occupancy – even when such variance predates current ownership. We will explore the aggressive and unfair fining environment in greater depth beginning in October.
NETWORKING TO MINIMIZE UNFUNDED MANDATES
The Housing Stability and Tenant Protection act of 2019 imposes additional legal requirements and operational mandates upon small property owners and needs to be immediately reformed. Small homeowners face greater risks under this new law. Large landlords employ organizations such as the National Apartment Association lobby to advance their interests. Tenants have groups such as Right to the City Alliance, the Upstate Downstate Housing Alliance, Citizen Action of NY, and the Association of Neighborhood and Housing Development to coalesce their voices. But who speaks for the small landlords?
Landlords owning fewer than six units are small homeowners, small business owners, taxpayers and voters. Thankfully there is an organization that represent your interests and will fight for you. Let the New York City Small Homeowners Association be your advocate. There is strength in numbers. By networking with your fellow constituents your concerns will be added to the ongoing conversation about decisions that impact your neighborhoods, your investments, and your way of life. Join today.