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I’m a rent-stabilized tenant. I want to move out and negotiate a buyout with my landlord. Should I wait out the virus or make a move now?
Both the impact of COVID-19 and last year’s rent reform legislation have made it harder to get sizable buyouts, says Sam Himmelstein, an attorney with the law firm Himmelstein, McConnell, Gribben, Donoghue & Joseph, who represents residential and commercial tenants and tenant associations.
The rent reform laws passed in 2019 have dramatically reduced the number of buyouts that rent-stabilized tenants are getting from their landlords.
“The incentive for buying out tenants used to be that landlords could deregulate the apartment with a combination of vacancy increases and apartment improvements, and if you got the rent over the stabilization threshold, it would go to market-rate,” Himmelstein says.
With landlords unable to raise rents through these measures, they’re also less inclined to buy out stabilized tenants. There are some exceptions, however. For rent-stabilized tenants in co-op and condo buildings, for instance, there may be better opportunities to negotiate a favorable buyout.
“Co-ops and condos instantly deregulate when a tenant vacates, and then the landlord can sell the apartment or rent it at market rate,” Himmelstein says. “There, we’re still seeing buyouts, usually for some percentage of the market price.”
Buyouts may also be possible in situations in which the landlord intends to divide larger apartments to create smaller new ones, or combine apartments.
“If you’re in a three-bedroom apartment and you move out, the landlord could chop it up and create a two-bedroom and a one-bedroom,” Himmelstein says. “There’s a doctrine in rent stabilization called 'first rent,' which means if you have newly created apartments with no rent history, you can charge tenants for whatever you can get. They’d still be stabilized, but the initial rent on those two apartments will likely be substantially higher than what the prior tenant was paying.”
Of course, there is an additional hurdle now: The coronavirus outbreak has many New Yorkers fleeing the city, sending the vacancy rate up, and landlords are having a harder time finding new tenants. All this is likely to make your landlord less inclined to offer you a buyout, so you may be better off waiting until the crisis subsides.
“From a strategic point of view with buyouts, you never want to be the one who approaches the landlord, because then they will operate under the assumption that you’re leaving anyway, so the likelihood of getting a buyout will be lower,” Himmelstein says. “The best buyouts are negotiated when the landlord approaches the tenant.”
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Sam Himmelstein, Esq. represents NYC tenants and tenant associations in disputes over evictions, rent increases, rental conversions, rent stabilization law, lease buyouts, and many other issues. He is a partner at Himmelstein, McConnell, Gribben, Donoghue & Joseph in Manhattan. To submit a question for this column, click here. To ask about a legal consultation, email Sam or call (212) 349-3000.