Since the changes to the rent laws, landlords have less incentive to buy out rent-regulated tenants and are less likely to offer huge buyouts.

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Question:

I'm the last rent-stabilized tenant in a Cobble Hill building, where I've lived for many years. My landlord offered to buy me out, either through a lump sum or by allowing me to live in another of his apartments rent-free for one year. My current rent is about $2,000. Am I eligible to get a larger buyout? What's a reasonable amount to ask for?

Answer:

First of all, renters in this situation are under no obligation to move, unless the landlord can come up with grounds to force them out within the bounds of rent-stabilization laws (illegal sublets and non-primary residence claims are two main grounds for eviction from stabilized apartments), says Sam Himmelstein, a lawyer with the firm Himmelstein, McConnell, Gribben, Donoghue & Joseph who represents residential and commercial tenants and tenant associations.

And since the passage of the Housing Stability and Tenant Protection Act of 2019, landlords have less incentive to buy out rent regulated tenants and are less likely to offer huge buyouts. The main reason for this: HSTPA eliminated vacancy deregulation, which allowed landlords to deregulate rent-stabilized apartments after the tenants moved out and the rent reached a certain threshold.

“Landlords could deregulate rent-controlled and rent-stabilized apartments and then charge market rent, and the difference was tremendous in many cases,” Himmelstein says. “They were willing to pay large buyouts because they’d make that money back eventually. That was the main scenario for buyouts, and that’s gone for the most part.”

There are a few situations remaining in which landlords have incentive to buy out stabilized tenants. Some landlords may try to combine two vacant apartments, for instance, or chop up an existing one into multiple units, and charge “first rent” on them, which means they could increase the apartment’s monthly rent while keeping it stabilized.

Tenants who rent apartments in co-ops or condo buildings may also be able to negotiate sizable buyouts with their landlords.

“Those apartments would be immediately deregulated upon a vacancy because the new law doesn’t keep those in stabilization. In that scenario, the landlord could sell or rent the apartment at market value, so you still see buyouts there,” Himmelstein says.

Some landlords will also offer to buy out rent-controlled tenants, whose apartments can be converted to rent-stabilization status, which often means higher rents.

“Even though those apartments go into rent-stabilization, the formula is such that landlords can get the apartment’s rent close to market-rate,” Himmelstein says. “If they serve the tenant with the new registration and give notice that they have 90 days to challenge the new rent, and those 90 days pass, that rent is locked in forever.”

Finally, landlords who plan to demolish a rent-regulated building and develop a new property on the site are particularly willing to offer buyouts.

“Depending on the size of the project, the landlord stands to make millions and will usually pay tenants anywhere from six figures to multimillions,” Himmelstein says.

Keep in mind, though, that demolition and redevelopment plans take quite a while to come to fruition.

"He'd have to file a case at the Division of Housing and Community Renewal, which could drag on for years," Himmelstein says. This doesn't seem like your landlord’s plan, nor is it likely in a neighborhood like Cobble Hill, where zoning laws restrict the development of high-rises. 

If you are a stabilized tenant whose landlord plans to demolish the building, you may be entitled to a stipend, based on the difference between the rent you're paying now and what it would cost to get a new apartment. Tenants paying significantly below market rate, therefore, stand to get much larger stipends than ones paying a higher rent. However, in many demolition cases, tenants negotiate seven-figure buyout payments that are far above the stipend amounts. 

Being the last stabilized tenant in your building may also provide you some added leverage.

"The landlord doesn't have to worry that if he pays them a certain number, other tenants will find out and come also looking for buyouts," Himmelstein says of holdouts. "Being the last man standing is always something that's valuable."

A buyout isn't a question of eligibility, he adds, but rather a number of objective and subjective factors—most significantly, the temperament of your landlord.

"Are they a cheapskate or a big spender? I find that when negotiating buyouts, there's often no rhyme or reason to it other than the individual," he says. "Some never pay buyouts, some pay less than others, and some just want to get it done quickly and will pay the maximum so they can move on." 

Regardless, it's crucial that you speak to a lawyer before engaging in negotiations. Himmelstein cautions that a tenant who has had a conversation with her landlord about buyouts before retaining an attorney may have limited her prospects by suggesting an amount lower than what a lawyer could get.

"After a tenant says they'll take a certain amount, the landlord will probably say 'No way' to more," he says. "People begin negotiations and think they're being noncommittal, but they're not. Landlords are professionals who negotiate these things all the time."

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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.

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