The landlord buyout is what many NYC renters dream about. Looking to empty out apartments (either to demolish the building or flip apartments for more money), landlords offer their rent-regulated tenants a certain amount of cash to vacate the premises. The amount can range from a $1,500 "cash for keys" program to a $1 million buyout, or in one very rare case, $25 million for a market-rate apartment. But buyouts, as we've covered before, are not always a slam dunk for the renters.
This weekend, the New York Times profiled a renter in an East Village building who hasn't received an allegedly agreed-upon $260,000 buyout to move out of his $1,720-a-month one-bedroom East Village apartment. The landlord who owes him the money, Raphael Toledano, has reportedly had business problems and seems unable (or unwilling) to pay his tenants their promised buyouts—the largest one, according to the Times was $600,000 for a tenant living in a $1,900-a-month one-bedroom apartment for the last 25 years. (Note: We've previously chronicled in a podcast last summer how some of Toledano's tenants had banded together to confront him.)
The tenant who was owed $260,000 hired a lawyer who got him back into his apartment, but upon his return, he was faced with (old) water damage and (new) holes in the floor, according to the Times. The woman who was offered $600,000 has been paid just $50,000, per the Times, but she has been able to stay in her apartment rent-free while she waits for the rest of her money.
How to avoid a problem as a renter
To avoid being in a situation like this, it's imperative that any rent-regulated tenant faced with a buyout offer hire a lawyer, says SaMi Chester, of the Cooper Square Committee, a tenants rights group that has advocated for Toledano residents. "The very first thing you should do is make sure you have a good attorney," he advises. Your local tenants rights organization can help you find one. "Call the organization in your neighborhood," he says. "For example, If you're in the East Village, that's Cooper Square Committee or in the Bronx, Mothers on the Move; if you're in Hell's Kitchen call HCC. There are many. They can give you proper information and get you in touch with the right representation."
But Chester thinks tenants should hang on to their rent-regulated units as long as they can. "The first mistake is believing your landlord is your friend," he says. "The landlord is a speculator who's looking to make more money for himself. If you have a rent-stabilized apartment, why would you get rid of it?"
Chester argues that in a city like New York, where market-rate housing is so expensive, "there is no such thing as a worthy buyout. It makes more sense to stay in your rent-stabilized apartment and fight. There are certain laws that protect you and they can't just move you out. Based on that alone, it's worth saving your apartment," he said.
But assuming you've done the math and are considering taking a buyout, you'll want to be well-prepared to counter your landlord's offer and get the most money and protection you can. You need to keep in mind how valuable the apartment is to your landlord (judge by location, how long you've lived there, etc). There's even a buyout calculator to help you come up with the right number.
Steve Wagner, an attorney with Wagner Berkow (and a Brick Underground sponsor), agrees with Chester that hiring an attorney is most important when you're faced with a buyout offer. "I require that landlords put all the money they're offering in escrow 30 days before the move-out date," says Wagner, adding that this is not the kind of thing a landlord will just offer without being told by a lawyer, but it protects tenants against the problems those in the Toledano buildings are experiencing. The landlords, left to their own devices, "will give a renter an agreement that doesn't cover the expenses it needs to, including tax issues, and moving expenses," he says.
"Do not sign a buyout agreement without an escrow agreement," reiterated Sam Himmelstein, an attorney with Himmelstein, McConnell, Gribben, Donoghue & Joseph LLP, and a Brick Underground sponsor. In fact, Himmelstein says he worked with two Toledano renters and found the landlord unwilling to put the money in escrow. That, he says, is a red flag, and "I told them to stay in their apartments and not accept any buyout," he says.
"I've never seen an agreement I didn't have to negotiate on," says Wagner. "Sometimes they're terrible, other times they just need tweaking." They're especially bad, he says, when the landlord isn't working with a lawyer of his own, which does happen, he says.
Sometimes, landlords will threaten not to work with you if you get legal representation. But Wagner says that's just not true. "In my experience, every landlord who says they won't work with an attorney does."
If you don't get paid, "you have to go to Supreme Court for a breach of contract case," says Himmelstein. "They have jurisdiction for monetary cases over $25,000, and you can sue the landlord for breach of contract," says Himmelstein.
And even if a landlord declares bankruptcy, the renter can get their money back. "If they've been cheated, and the court decides they've been defrauded, the entity that owns the building will have to pay. They're not off the hook for the buyout," says Wagner.
Himmelstein says he's heard rumblings that Madison Capital, the company that's come in and taken over the buildings from Toledano, is thinking about making good on the buyouts.
And while the Toledano case is a worst-case-scenario situation, Himmelstein stresses that it's very rare. "I've been negotiating buyouts for 25 years, and I have never had a single experience when an agreement was signed and the deal fell apart. In most cases, it's beneficial to both parties to get it right," he says.