Proposed Rent Act of 2019 Causes Landlords to Develop Adaptive Business Strategies

LandlordsNY Member

LandlordsNY Member

2019 has the potential to be an incredibly disruptive year for the real estate industry throughout New York. The political tide has turned, and New York's progressives have made it clear that they want their elected officials to strengthen the state's rent laws and to allow the state to impose additional restrictions on the way landlords do business. The Democratic-led City Council passed or plans to pass dozens of laws that will go into effect this year, while the newly-elected Democratic majorities in the state Senate and Assembly are also looking to pass some landmark legislation this coming June when they vote to renew and expand the laws that regulate the city’s million stabilized apartments.

The fact that owners and managers are upset that there will soon be far more protections in place for problematic tenants is understandable. Many felt that the existing protections were already overbearing for landlords, particularly those with smaller portfolios and staffs of modest size. As upsetting as it may be, however, landlords who refuse to adapt to the new reality will face violations, penalties, and lawsuits.

As we learned from @STRATCO Property Group's Robert Sedaghatpour and David Goldfischer at the LandlordsNY February Meet-Up, the new laws and the changes to existing laws will require many landlords to make changes to their operations. This is especially true for landlords whose profitability relies heavily on tenant buyouts and vacancy deregulation. Some laws that have been proposed by the City Council will make buyouts more transparent (and, therefore, expensive). Meanwhile, bills introduced in both the Assembly (A433) and the Senate (S3482) could eliminate vacancy deregulation entirely. State Senator Julia Salazar (D-Dist. 18) has even proposed restricting rent increases on free market apartments.

There are numerous other proposed laws that could make current strategies obsolete. At the state level, these include:

  • A bill (Assembly bill A6285; Senate bill S6527) prohibiting an owner from raising a preferential rent by an amount more than the legal adjustment approved by the Rent Guidelines Board until that apartment has been vacated;
  • A bill (Assembly bill A11312A; Senate bill S9154) that would eliminate all rent increases due to MCIs and instead offer owners who perform major capital improvements tax breaks;
  • A bill (Assembly bill A9815; Senate bill S1593) eliminating vacancy bonuses and increases.
  • A bill that will require enormous sums be placed in escrow to cover relocation expenses should a vacate order be filed;
  • A bill that will deny permits when a residential building has too many violations imposed against it;
  • A bill that will require a more rigorous review of tenant protection plans;
  • Bills that will severely punish owner who submit falsified documents to city agencies;
  • Bills that will require landlords provide tenants with far more data on things like apartment rent histories and building violations.

The City Council, meanwhile, is currently considering so much legislation that one has a hard time believing that anyone is even bothering to read everything that gets drafted. As has already been said, some of them will require landlords give tenants far more information regarding market conditions when negotiating buyouts. Some additional highlights include:

While it is unlikely that all these bills will pass, it is certain that at least a few will. To reiterate, there has been a paradigm shift, and it will result in significant changes to the regulatory landscape. To remain successful, landlords and property managers will also need to change to find ways to remain profitable within the new legal framework that will begin to take shape over the course of this year.

As Mr Sedaghatpour and Mr Goldfischer noted during last month’s LandlordsNY Meet-Up, this is STRATCO’s specialty. They are a strategy company. They study the new laws to help owners develop adaptive business strategies that will allow them to thrive within any legal framework. If you want to ensure that you are prepared for the regulatory changes on the horizon this year, you should reach out to STRATCO Property Group to see how they can be of service to you.

  • LandlordsNY Member

    I have a tenant who currently has a preferential rent but their lease is expiring this summer (June or July 2019). I already sent them a Lease Renewal with no preferential rent option... Just the Legal Year 1 & Year 2 Rent options...

    If Assembly bill A6285 or Senate bill S6527 (prohibiting owners from raising a preferential rents to the legal rent) go into law... When will these new laws be effective as of (the date they are signed or in 2020)? And how should we handle Renewal Leases with preferential rents around this time since we need to send them to tenants 90-150 days before Lease Expiration?

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