I’ve heard that when a landlord is converting a rental building to condo, they can’t warehouse apartments. What exactly is warehousing?
Warehousing apartments refers to when landlords deliberately keep apartments in their buildings empty. It is not illegal except under specific circumstances during a condo conversion, says Sam Himmelstein, a lawyer at Himmelstein, McConnell, Gribben, Donoghue & Joseph, who represents residential and commercial tenants, and tenant associations.
When a landlord wants to convert a rental building to a condominium, they have to follow a specific procedure, which includes issuing a red herring notice—a preliminary draft of a plan to convert the building—to all tenants, as well as submit the plan to the Attorney General.
“No more than 10 percent of the units can be vacant for a period of more than four months prior to the issuance of a red herring,” says Kevin McConnell, a partner at HMGDJ. “After the red herring, all bets are off.”
Such a situation is rare, but when it happens, the Attorney General cannot accept the landlord’s conversion plans.
“If a red herring has been issued and your landlord is violating the warehousing law, file a complaint with the Attorney General’s office and keep a record of what apartments are vacant and when the last tenant moved out,” McConnell says.
But keep in mind that if fewer than 10 percent of apartments are vacant, or if 10 percent or more have been vacant for less than four months, it won’t be considered a violation of the warehousing law. (Read more here about what you can do as a rent-stabilized tenant when your landlord plans to convert your building to condos.)
Since the passage of the new rental laws, some landlords may be warehousing apartments for reasons other than an intended condo conversion.
“In the absence of condo conversions, we’re hearing stories that since the new laws passed, more landlords are doing this,” Himmelstein says. “We think some may be waiting until adjacent apartments are vacant so they can combine units and charge rent to the next tenant that that tenant can’t challenge under a DHCR-created doctrine called first-rent.”
Under this doctrine, when the outer perimeter of the apartment has been significantly altered, either by adding space, combing apartments or dividing an apartment into smaller units, even though the apartment will be subject to rent stabilization, the tenant can’t challenge the new rent being charged.
“Another theory is they’re keeping apartments off the market in the hopes that some provisions of the new law get struck down, and the current situation with the repeal of vacancy deregulation changes,” Himmelstein says. “Some think they’re doing it just to be petulant, and the idea that rent on stabilized apartments can only be raised after a vacancy by a small amount is so repugnant to them that they’d rather keep apartments off the market.”
In any of these instances, though, it’s not illegal for landlords to hold onto the empty apartments. What is against the law is landlords using methods like a failure to make necessary repairs or harassment to get tenants to vacate their apartments, and if you suspect your landlord of this, consider forming a tenants’ association.
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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.