Although tenant buyouts seem like they should be relatively straightforward (you give a tenant a sum of money in exchange for the keys to their unit), the truth is that there are a lot of tenant protections in place to ensure that they do not get swindled out of apartments that are rightfully theirs. As Robert Sedaghatpour of @STRATCO Property Group said during our November Monthly Meet-Up, landlords need to remember that they are coming from a position of power. With rare exception, you are in a better financial situation than your tenants, you have a better understanding of the law than your tenants, and you typically have an attorney at your disposal. Tenants, on the other hand, oftentimes do not. Furthermore, many struggle with understanding legal contracts, especially when English is not their first language.
The protections that the city and state have granted tenants stem from this disparity in power. Consequently, if it looks as if you are exploiting this disparity to get something from your tenant, even though they may have initially shown interest in your proposal, you can end up in trouble. The details from this installment of the case of the week are illustrative why.
An agent representing the landlord of a building in Harlem approached one of the rent-stabilized tenants about a potential buyout in 2016. The tenant had only recently signed a two-year lease, which was set to end October 2018, that set the legal rent at $659.79 per month. However, he was evidently receptive to the idea of the buyout and agreed to consider the landlord's offer.
Soon after, he agreed to the terms.
On December 23, 2016, the landlord/petitioner and the tenant/respondent signed an agreement stipulating that the tenant would surrender the apartment on or before March 15, 2017, in exchange for $20,000. At the signing, the landlord gave the tenant $3,000. The contract stated that landlord was not obligated to repair any conditions in the unit and that the failure to vacate on the part of the tenant would result in immediate eviction and an occupancy rate of $1,500 per day. There was no attorney present on behalf of the tenant/respondent at the signing of the agreement. Whether the landlord/petitioner failed to advise respondent to seek legal counsel was disputed at trial.
For some reason (perhaps one associated with the difficulty of finding an elevator apartment with a rent he could afford), the tenant decided against the agreement before the time to surrender the unit arrived. He offered to return the $3,000 to the landlord. The landlord refused. Meanwhile, an agent of the landlord threatened the rent-stabilized tenant with eviction and told him that the landlord was under no obligation to renew the lease. There were no other grounds for eviction besides this specious claim.
Not only was it an outright lie. It was also a form of harassing a 72-year-old, disabled and poor man whose relatives were all dead and who received Social Security for Disability, as well as Section 8. The Court wrote: “Even though Petitioner demonstrated no cause to seek Respondent’s eviction, Petitioner, and not Respondent, initiated the negotiation with Respondent to surrender Respondent’s tenancy. The New York City Housing Maintenance Code, amended in December 2, 2015, before Petitioner initiated contact with Respondent, defines as harassment an owner’s initiation of contact with a tenant to induce a tenant to vacate the tenant’s apartment in the absence of detailed written disclosures including, inter alia, that the tenant may reject an offer and that the tenant may seek guidance of counsel.”
It also was cause for the Court to ignore and effectively nullify the out-of-Court surrender. Referencing Merwest Realty Corp. v Prager, the Court wrote: “The Court will enforce an out-of-Court surrender when a landlord otherwise had cause to commence an eviction proceeding against a tenant, when it was the tenant who initiated the negotiation, and when the tenant obtained the advice of counsel.”
Consequently, the court ruled that the agreement was unenforceable and that the landlord had harassed the tenant. The landlord was fined a 2,000 penalty for the latter offence and the agreement was effectively nullified by an order filed on October 9, 2018, in Housing Court.
What to take away: If you are going to attempt to get your tenant to sign an out-of-court surrender, make sure they have an attorney present. If you have to find an attorney who will be willing to work pro bono on their behalf, do that. Furthermore, don’t threaten people with eviction if you don’t get your way because it won’t ever turn out in your favor. Ever. It will only get you into trouble.
To read more about this case, see what our friends at Landlord v. Tenant have to say.