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Legal Rent, Renewals and Covid?

Rent stabilzed lease renewals and how to apply Rent Guidelines Board (RGB) percentage increases

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Legal Rent, Renewals and Covid?

Postby nyclifer » Fri Aug 21, 2020 4:29 pm

I have a rent-stabilized apartment and without giving my actual legal registered rent, let's say for the sake of discussion that it is $1,000 and was worth that much based on market comps in 2019. Right now in the midst of Covid, the apartment 's market value has been reduced to under the legal rent and it's now worth let's say $750. My lease renewal is coming up and if the landlord doesn't reduce my rent to $750 I will move. If the landlord agrees to charge me $750 if I stay, what happens in 2021, when my lease is up again and let's say the rental market is like it was pre-Covid?

Is he allowed to go back to charging the pre-Covid legal rent upon renewal or is he stuck with whatever the new guidelines increase is over the $750 figure regardless of the market?

Seems kinda crazy if he's stuck with $750, but hey, his loss, my gain. Just need to be sure of the facts before I decide.
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Re: Legal Rent, Renewals and Covid?

Postby TenantNet » Fri Aug 21, 2020 5:25 pm

So you want a Preferential Rent? Most PRs are not based on market values, and the laws for PR changed in 2019. You sound very entitled here. Remember that RS is for fairness in the market, not making a profit.

You know there are thousands of tenants facing possible eviction and you want to get some sort of advantage over the LL? Yes, some (many) landlords are jerks and deserve bad things, but some are facing financial difficulties themselves.

As to what is possible, well it most likely depends on how any agreement is drawn up or executed.
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Re: Legal Rent, Renewals and Covid?

Postby nyclifer » Fri Aug 21, 2020 6:20 pm

Hold on a minute. Why is it "an advantage" over my LL to have the rent reflect the current market value of the unit? Regardless, this isn't a question about fairness, it's about the law. I'm certainly not going to pay an amount significantly above the market value to remain here, so if my LL wants to keep me, he needs to adjust the rent downwards. As I understand the law, this lower rent will in effect be a preferential rent and he can't just raise the rent back up say 25% if the market goes back to its formerly inflated ways one year from now.
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Re: Legal Rent, Renewals and Covid?

Postby TenantNet » Fri Aug 21, 2020 7:11 pm

If you want market value, then you should get a market rate apartment where the rent will go up or down based on how active the virus seems to be. RS rents are not based on market value, or what might be a buyer's market. The entire system is designed to avoid and disregard market fluctuations.
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Re: Legal Rent, Renewals and Covid?

Postby nyclifer » Fri Aug 21, 2020 7:17 pm

I asked if the LL could go back to the pre-Covid rent in a year if he has to drop the rent temporarily to me (or anyone) to keep the place rented. Knowing the answer will help my negotiation with him.
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Re: Legal Rent, Renewals and Covid?

Postby TenantNet » Sat Aug 22, 2020 3:22 am

Pref rents have changed in the way they operate and are good for the life of the tenancy. However, it depends on how any agreement is made and executed. We believe LLs are still able to offer temporary reductions. Some might say such actions violate Riverside v. Munroe, see https://caselaw.findlaw.com/ny-court-of ... 90056.html -- "An agreement by the tenant to waive the benefit of any provision of the RSL [Rent Stabilization Law] or this Code is void..." This works both ways.

So if the LL is willing to give you a temporary rent reduction - depending on the life of the COVID emergency - that is probably OK, but to restrain him from putting the rent back to where it was, might not work. Pref Rents are different animals established by lease riders.

If you want more a complete view, consult with a tenant attorney.

But don't for a moment think any such agreement has anything to do with the market value of the unit. To do so would be a fundamental lack of understanding of the purpose and execution of the rent regulatory system.
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Re: Legal Rent, Renewals and Covid?

Postby BubbaJoe123 » Mon Sep 21, 2020 1:02 am

nyclifer wrote:I asked if the LL could go back to the pre-Covid rent in a year if he has to drop the rent temporarily to me (or anyone) to keep the place rented. Knowing the answer will help my negotiation with him.


Short answer is no. The LL can't (hypothetically) charge you $750 for the next year, but then go back to the $1000 legal rent if the market improves the following year. The law used to allow this, but the 2019 changes to the rent laws made preferential rents binding for the remainder of the tenancy (with the annual RGB increases). So, this has made LL's a lot less willing to offer preferential rents, since they're potential locking themselves into a discount for the long-term.
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Re: Legal Rent, Renewals and Covid?

Postby TenantNet » Mon Sep 21, 2020 5:50 am

And that's not a good thing?

First, the OP hasn't stated if the LL is willing to do anything. Some might be, but many are not.

So yes, it's true LLs still have to pay building employees, utilities, taxes and mortgages, I would consider that in the same universe where they have had a windfall for the last 25 years, often charging illegal rents, illegally deregulating units, harassing tenants to move out, loss of services and so on.

There might be other ways for a LL to give a tenant a break without locking them into preferential rents that last for the duration of the tenancy.

I know in unregulated units, some LLs might give - depending on the current market - a few months free rent as an enticement for a tenant to move in. And if the market gets better, the free months offers seem to disappear. I do not know if such offers are seen in RS units, but I haven't seen any that I can recall. It would have to be a side agreement, not part of the lease, where the LL agrees to not commence a non-pay for certain months. And any contract has to have "consideration," meaning the LL gives something to the tenant in exchange for the tenant giving something to the LL. I don't know how that would work.

As unregulated leases are not constrained by RS laws, perhaps that could be a legal rider to the lease.
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Re: Legal Rent, Renewals and Covid?

Postby TenantNet » Mon Sep 21, 2020 11:00 am

Here's an interesting and just published article from Brick Underground, some of which touches on this thread.

One caveat is that according to the 2019 changes in the rent laws, depending on how long your tenancy has been, the LL might have to give you a 90-day notice if they seek to evict you -- this is mentioned below. I'll have to look it up and see how much time (if any) ahead of leaving a M2M tenant must submit a notice to the LL. Prior to 2019 and in NYC for M2M tenants, there was no requirement for a tenant notice ... I don't know if that has changed. For tenants with leases, the lease provision would rule.

My landlord won’t let me go month to month, but offered an opt-out clause if I renew. What’s the catch?

Question:

Our lease ends this month and we asked our landlord if we could go month to month because one roommate is unemployed as a result of Covid. The management company said no. Instead, they offered to renew our lease for one year with a clause that says we can move out early, without penalty, if we give 30-days notice. Isn't this pretty much the same as going month to month? Are there any downsides to this?

Answer:

Leases with opt-out clauses are more popular these days in New York City because of hardships and insecurity related to the Covid-19 pandemic. As a renter, it’s actually better for you and your roommates to sign a one-year lease with an opt-out clause, rather than go month to month, says Sam Himmelstein, a lawyer who represents residential and commercial tenants and tenant associations (and a Brick Underground sponsor).

That’s because you'll have the legal protections of a lease, and it locks in your rent for the full year if you do stay, Himmelstein says. “And you still get to move out early if needed,” he notes.

However, if the city starts to return to normal before you move out, and you are month to month, your landlord might decide to increase your rent, which isn’t ideal if you’re already dealing with Covid-related hardships.

There are several variations of opt-out clauses, and depending on the terms in your lease, and the situation for you and your roommate, some might be more beneficial than others—so read the wording of the clause carefully.

Some opt-out clauses require you to live in the apartment for at least 90 days before you can move out. Others allow you to move out anytime during the lease, as long as you give advance notice, which is typically 30 to 60 days, Himmelstein says.

However, some opt-out clauses say you cannot move out during a “blackout period,” usually from November to January 1st. Those months are the hardest to rent apartments. So, if your roommate doesn’t find a job by then, or you or another roommate are laid off during those months, you are legally obligated to stay until the end of the blackout period.

Unless any of the provisions in your opt-out clause violate public law, it’s not illegal for your landlord to include those specific terms.

You should also understand your obligations as a tenant if you do sign a lease with an opt-out clause, says Steven Kirkpatrick, a partner at the law firm Romer Debbas. For example, some landlords will require you to inform them of your early move out by certified mail, or even return receipt. So, simply sending an email to your landlord might not be an option.

From a landlord’s perspective, the benefit of having you sign a one-year lease with an opt-out clause, rather than letting you go month to month, is two-fold, Kirkpatrick says.

If you have a lease, you're required to give advance notice before you move out, which gives your landlord time to list the apartment and find a replacement. If you’re month to month, you can basically move out whenever you want, potentially leaving your landlord with a vacant apartment unexpectedly.

In addition, New York City laws require landlords to give month-to-month tenants 30- to 90-day notice if they want you to vacate, depending on how long you’ve lived there. And, they have to serve the notice through a process server, which can be costly, Kirkpatrick says. If you have a lease, they can simply choose not to renew it.

Himmelstein says it also gives your landlord a sense of security because a lease outlines what you can and cannot do in an apartment, like not having a pet or smoking in the apartment. If you’re month to month, there’s no legal obligation for you to follow those rules and regulations.

The last thing you and your roommates should consider before signing the lease is if any concessions are being offered. Obviously, if any rent credit or months free are given to you at the end of your lease-term, and you move out before, then you’re giving up those concessions.

But, if you got your first month free, and you move out before the lease is up, you might have to pay at least some of it back, Kirkpatrick says. Most landlords include a clawback provision that says you are responsible for paying it back if you don’t stay for the full-term of the lease.

You can try to negotiate this to only pay back the prorated amount though. “If you move out in month 10, then it wouldn’t make sense for you to pay all of the first month back,” Kirkpatrick says.

So, this lease gives you and your roommates, and your landlord, both security and flexibility.

Read the fine print and consider all of your options, but if staying in your current apartment works for everyone, signing the lease with the opt-out clause mostly works in your favor.
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Re: Legal Rent, Renewals and Covid?

Postby BubbaJoe123 » Mon Sep 21, 2020 1:43 pm

"And that's not a good thing?"

Not if it means that landlords hold apartments off the market in the hope that rents will rise, rather than renting them at lower rents and risking not being able to benefit from a rent recovery.
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Re: Legal Rent, Renewals and Covid?

Postby TenantNet » Mon Sep 21, 2020 2:34 pm

What planet are you from (don't get too argumentative on that - we already know).

Tenants can't pay rent and they're going to hold apartments off the market because a tenant (otherwise rent-paying tenant) wants to negotiate better terms? Should such a LL even be in the RE business?

We're in the middle of what will probably be a multi-year pandemic and many tenants who have lost their jobs can't pay rent. So a tenant comes along and is able and willing to pay rent (albeit on better terms) so the LL can pay his taxes and mortgage, and he decides to hold it off market? What planet? Want to wait for rents to rise? Consider a short term or M2M lease if unregulated.
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Re: Legal Rent, Renewals and Covid?

Postby BubbaJoe123 » Mon Sep 21, 2020 3:43 pm

"Tenants can't pay rent and they're going to hold apartments off the market because a tenant (otherwise rent-paying tenant) wants to negotiate better terms? Should such a LL even be in the RE business?"

Lots of precedent on the commercial real estate side - it's the reason for a lot of the empty storefronts (pre-pandemic). Landlords didn't want to get locked into 10 year leases if they thought that by holding the location for 6-12 months, they could get a materially higher rent.

"Consider a short term or M2M lease if unregulated."

I was only talking about regulated apartments. This entire topic is moot for unregulated apartments, since the landlord can offer any discounts they want, for as long as they want (or not).

Think about the case of the OP's example numbers, where the legal rent is $1000, but the market rent is only $750. Let's also (to make the math simple) assume that the RGB increases are zero going forward. So, the LL can rent the apt now for $750/month. If the tenant's going to stay for five years, that's 750*12*5=$45k in rent for the next five years. If the LL thinks that the market rent for that apartment will be back to $1000 in a year, then, by holding the apartment vacant for a year, he'd get 1000*12*4=$48k over the next five years.

Lot of moving parts, but a landlord that believes rents will recover, and/or that the tenant is likely to stay a long time, could readily decide that keeping the apartment empty was better than offering a preferential rent.
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Re: Legal Rent, Renewals and Covid?

Postby TenantNet » Mon Sep 21, 2020 4:10 pm

As per the forum policies, this is not going to turn into an ongoing discussion of fairness or political issues. That policy has been in place for many years. And from the view of the OP, this thread is done.

As for storefronts, that situation is entirely the fault of landlords and their greed; you just admitted to it. But who suffers from the empty storefronts? Not the landlords ... all they need to do is offer a fair rent. Ten+ year commercial leases? Well, that's standard as no same store owner will invest in a location unless they have some guarantee of longevity. Some places spend $1,000,000 or more just to build out the interior and that's before rent, or taxes that are passed on.

And communities suffer as well. Residents are denied affordable goods and services. I don't blame people for going to Amazon or Walmart when they can't get affordable goods locally.

On your analysis, well you just made a great argument for re-regulation. it adds stabilization and certainty, both of which real estate people value over all else.

OK, this thread is closed.
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