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Rent Stabilization Due Diligence for Multifamily Properties and Predictions for 2019

February 15, 2019

Last monthMichelle Itkowitz spoke on a panel at a meeting of WARE (Women Attorneys in Real Estate). The meeting was designed to discuss the challenges and opportunities for real estate practitioners in the coming year. Michelle spoke about "Rent Stabilization Due Diligence for Multifamily Properties".

Here is an interesting excerpt from her presentation:

I. INTRODUCTION – PREDICTIONS FOR 2019 FOR THE WOMEN ATTORNEYS IN REAL ESTATE

A. The Basis of My Predictions


The bulk of this publication is my booklet on Rent Stabilization Due Diligence for NYC Multifamily Buildings, which I just updated for the first time since I created it in 2015. I offer it to you for two reasons. First (and less importantly), it has some interesting legal sections regarding Rent Stabilization. Second, I want to explain the basis of my knowledge, on which I base my predictions for 2019.

When I first wrote this pamphlet in 2015, I was trying so hard to get clients to avail themselves of this Rent Stabilization Due Diligence (“RSDD”) service, which I was certain would be valuable to them. At first, no one understood what I was talking about, “Rent Stabilization Due Diligence? But I already have an engineer inspecting the building…?!” “Rent Stabilization Due Diligence? But seller will not give me copies of the leases…?!” Finally, clients started taking me up on the offer. Since then, I have done about 300 RSDD analysis, for purchasers (pre contract, during due diligence periods, and after closing), families transitioning buildings between generations, banks. I have rendered this service for 180 unit projects all the way down to two-unit buildings. What was once a hard-sell engagement, is now ubiquitous in my practice, and, indeed, in the industry. Recently, I am being called on by seller’s counsel, to evaluate the RSDD work of purchasers. 

My RSDD work has caused me to review the regulatory status of hundreds of apartments all over New York City – far more than I would normally encounter in my small (6 attorney) landlord and tenant litigation practice. Furthermore, in my litigation practice, I am frequently called upon to evaluate, and then defend or attack (remember I represent as many residential tenants as I do landlords), the regulatory status of apartments. Thus, I have, indeed, noticed trends in this area that are relevant to multifamily real estate.

B. My Predictions

I hate making predictions for a new year. Man predicts and G-d laughs. In any event, here’s what I got.

One in three (two-thirds of all) “free-market” apartments allegedly deregulated in the last ten years, were ILLEGALLY deregulated; they are still subject to Rent Stabilization and they are a source of tremendous liability for a multifamily building owner. When a tenant successfully overturns an illegal deregulation:

o The tenant cannot be evicted
o The rent rolls way back, and will increase very slowly
o There is typically overcharge liability, which 80% of the time gets trebled
o The decreased rent roll lessens the overall value of the building

In 2019, everyone (sellers, purchasers, and tenants) is going to be way more cognizant of these illegal deregulations; this is so because:

o Practitioners, such as me, increasingly focus on this area.
o Purchasers of multifamily have gotten so badly burned by this phenomena.
o Many tenants now have the right to free counsel in Housing Court; counsel is more likely to detect an illegal deregulation then a pro-se tenant.
o Life is getting harder all the time. When a tenant is having trouble paying the rent, she starts looking more deeply into her rights.

In 2019, this heightened awareness will lead to the following:

o More litigation whereby tenants seek to get a ruling that their free-market apartment is actually Rent Stabilized
o More purchasers demanding due diligence periods in sales contracts for multifamily assets, specifically for the purpose of confirming the regulatory status of the tenancies
o More purchasers pushing back on price on the basis of the vulnerability of deregulations
o Multifamily buildings will simply be worth less because of this trend

II. MULTIFAMILY BUILDINGS ARE NOT JUST BRICKS AND MORTAR; THEY ARE TENANCIES

The old saying goes that the three most important things about real estate are: location, location, and location. Keeping that rule in mind, one should add a rule about the three other most important things about multifamily real estate in New York City, and those things are: the tenancies, the tenancies, and the tenancies. A building's value is a function of the tenancies.

How do you know, before you buy a piece of multifamily real estate in New York City, that the tenancies are what the seller says they are? That the allegedly “free-market” units are really deregulated? That the Rent Stabilized unit’s rents are legal? That the tenant, whom, seller tells you will be easy to evict over non-primary residence, really can be? How, for that matter, can the seller be sure?  

EXAMPLE

Two gals in Brooklyn bought an eight-family building with only three Rent Stabilized apartments occupied. One of the occupied Rent Stabilized apartments was clearly not being used by the tenant as his primary residence. In fact, the tenant lived elsewhere and he was using the apartment solely as an office for his party-planning business.  

The new owners were excited to start a case against this tenant. But they could not! The tenant’s Rent Stabilized lease had long ago expired. You can ONLY do a non-primary residence case by first sending what is known as a “Golub Notice”, a special notice of non-renewal that can only be tendered between 150 and 90 days of the lease expiration. If there is NO LEASE, the lease can’t end. NO ENDING DATE means no Golub Period. NO GOLUB PERIOD means NO NON-PRIMARY RESIDENCE CASE. The only thing these new owners could do was to send this tenant, who was so clearly not living there, a new Rent Stabilized lease and wait two more years, until 90 to 150 days before the next lease expiration, to do a non-primary residence case!  

This would have been detected if these gals had run a proper Rent Stabilization Due Diligence Analysis. 

[END OF EXAMPLE]

Children have the same problem understanding their multifamily buildings when they inherit multifamily real estate from their parents. Banks have the same problems when lending on multifamily assets. 

Tenants have rent regulatory status problems too. How is a tenant to know if their free market tenancy is actually subject to Rent Stabilization? As with all my publications, this booklet has something for tenants as well – see below § Rent Stabilization Coverage Analysis for Tenants.

III. WHY IS IT SO HARD TO TELL IF AN APARTMENT IS SUBJECT TO RENT STABILIZATION?


There is no official list somewhere that definitively tells the world which apartments are subject to Rent Stabilization and which are not. The New York State Division of Housing and Community Renewal (“DHCR”) has jurisdiction over matters relating to Rent Stabilization and the DHCR maintains some records. But the records the DHCR maintains contain information that is largely self-reported by landlords and that is not controlling with regard to an apartment’s Rent Stabilization status. Therefore, year after year, a landlord can report to the DHCR that an apartment is “permanently exempt”, but that does not make it so.  

Moreover, a current or former tenant may have signed a document acknowledging that an apartment is not subject to Rent Stabilization. But this, also, does not make it so. Parties may not contract out of Rent Stabilization coverage. See RSC § 2520.13 (Waiver of benefit void); Drucker v. Mauro, 30 A.D.3d 37 (1st Dept 2006) (“It is well settled that the parties to a lease governing a rent-stabilized apartment cannot, by agreement, incorporate terms that compromise the integrity and enforcement of the Rent Stabilization Law.”) 

It is very important to keep in mind that a court or the DHCR can look back as far as they want to determine whether an apartment is subject to Rent Stabilization. While a rent overcharge claim is subject to a four-year look back period, a claim for improper destabilization is not. 72A Realty Associates v. Lucas, 28 Misc.3d 585 (N.Y.City Civ.Ct., 2010), Affirmed as Modified by 72A Realty Associates v. Lucas, 32 Misc.3d 47, (AT1st 2011), Affirmed as Modified by 72A Realty Associates v. Lucas, 101 A.D.3d 401, (1st Dept. 2012); Gersten v. 56 7th Avenue LLC, 88 AD3d 189 (1st Dept. 2013).

How do you ever get a definitive answer on an apartment’s Rent Stabilization status? With some exceptions, the last word on whether an apartment is Rent Stabilized is in the hands of the courts or the DHCR. Until a judge is satisfied that an apartment is not Rent Stabilized, the matter is always, in some measure, unsettled.  

Why is this so complicated? Because it is. There are many statutes and mountains of case law, stretching back to the 1970’s, that, when woven together, make up the rent regulatory scheme in New York City. Often enough the various courts and agencies do not agree with one another on vital topics and when the authorities do not agree, it takes years for their disputes to percolate up to the New York’s highest court for a definitive answer (think High Rent Vacancy Deregulation under J-51 or the Altman case - each took half a decade each to resolve). There are rules, and exceptions to the rules, and exceptions to the exceptions to the rules. And it’s getting harder all the time…

IX. RENT STABILIZATION COVERAGE ANALYSIS FOR TENANTS

I get multiple inquiries from tenants who want to know if they are Rent Stabilized. There are very few places for tenants to find accurate and actionable answers to their questions. I am such a place. Therefore, I created Rent Stabilization Coverage Analysis for Tenants.  It is the same high-level service I offer to landlords with my Rent Stabilization Due Diligence Analysis, but this is designed for tenants and delivered at a flat rate price.

If tenant is likely Rent Stabilized, she has different options for enforcing her rights. Some options are faster than others; some cost more than others; some are more aggressive than others. In general, tenant has the options of: going to DHCR; withholding rent, getting sued, and playing the situation out in Housing Court; suing for a declaratory judgment in Supreme Court; or doing nothing. In the Rent Stabilization Coverage Analysis I will cover separately the pros, cons, costs, time frames, and risks of each in detail.




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Suing a Good Guy Guarantor of a Restaurant Tenant Post-Possession

On January 16, 2019, Michelle Itkowitz taught an accredited continuing legal education (CLE) program for the Clear Law Institute, entitled "How to Handle Frequent Defaults Under Restaurant Leases". A full link to the materials will be available soon.

Here is an interesting excerpt from the program:

Suing a Restaurant Tenant Guarantor Post-Possession – Often a Huge Waste of Time

I like to say that one of the reasons I do so well practicing landlord and tenant litigation in New York City is because I spend 80% of my time talking potential litigants out of litigating. I have been at the law in this area for twenty-five continuous years, and I can say with a perfectly straight face that most plenary lawsuits [fn1] are simply not worth bringing. Most lawyers are not going to tell you that. It is not in their interests to do so. To a hammer – everything is a nail. To a litigator, everything is a lawsuit. In any event, I offer you the following words of wisdom regarding post-possession, tenant-guarantor actions:

1. Most guarantors are just as broke as the single-asset restaurant corporation that was the defunct tenant.

Most guarantors are just as broke as the single-asset restaurant corporation that was the defunct tenant. I do not know why this is, but it has been my frequent observation. I always begin my work on a post-possession guaranty lawsuit by running a credit report on the guarantor. I cannot possibly tell you how often the report produces a long list of judgments that are ahead of my client in time and priority. Sometimes the would-be-debtor owns a family home, with a spouse by the entirety, that is heavily mortgaged. Maybe via a bank account search run by my licensed private investigator, I discover that the would-be-debtor has $212.13 in a bank account somewhere in New Jersey. I fully understand that “someday” the would-be-debtor might have attachable assets. Many things might happen someday. Personally, I question whether a landlord who has just lost a bunch of money on a defaulting restaurant tenant should incur more legal fees to obtain a worthless judgment. 

2. If the guarantors are not broke, the amount owed is not worth pursuing in a New York Court if it is under $100,000. 

If the guarantors are not broke, the amount owed is not worth pursuing in a New York Court if it is under $100,000. 

There is no case worth bringing in a New York City or State Court for less than $100,000. Court is a black hole for resources – time, money, mental energy. You have to go back again and again and again. So even using a bad, cheap lawyer will eventually stop making economic sense for the less than 6-figure case. Actually, it is especially the bad, cheap lawyer that makes the typical morass even longer and harder. 

3. Questioning the Wisdom of a Post-Possession Collection Effort Against the Guarantors 

A money judgment is just a piece of paper unless you can collect on it, and collecting on judgments is very difficult.

Let’s say you pursue the case with all vigor, and win. Now what do you get? You get a judgment, which is a piece of paper, unless you turn the judgment into money. How do you get the judgment debtor to pay the judgment? The answer is longer than what I have said so far. In essence, collecting a judgment is a whole other legal case - a longer and harder one. If you have done business in New York for any length of time, you know I speak the truth. 

Recently, I have had several landlord clients who have had defaulting restaurant tenants, where the leases were guaranteed by Foreign Nationals. That, in my opinion, is a useless guaranty. 

Unless your guarantor is local and you are certain she has attachable assets, and you feel confident that she will remain local and continue to have such assets, then seeking to get a judgment against a guarantor is often waste of time.

How a Guaranty Can Be Used Effectively

In light of the questionable wisdom of a post-possession collection effort against the guarantors, what utility can a guaranty have? 

I like to begin collection efforts against guarantor while the tenant is still in possession and relatively early into the default. This achieves two things. 

First, it puts to guarantors on notice that tenant is in default. Sometimes the guarantor is not the restaurant’s principal and would not otherwise know of the default situation. Often enough, this alone gets my landlord client paid.

Second, if the restaurant tenant’s principal is the guarantor, it puts intense pressure on that individual to deal with the situation. Sometimes the restaurant has trouble getting its revenue to where it wants and, as a result, lags behind on the rent. If a landlord has tolerated this for a period of time, the restaurant tenant begins to see landlord as her bank. A complacency that a simple rent demand might not wake tenant’s principal out of. A guarantor lawsuit, however, is a wake-up call.

I have had a lot of success in situations where I simultaneously combine a nonpayment proceeding with a guarantor action, while tenant is still in possession.

For other advice on doing Good Guy litigation successfully, see my recent blog post in the Our Stories blog. 




[1] Black’s Law Dictionary defines a “plenary action” as a “full hearing or trial on the merits, as opposed to a summary proceeding.” When we use that word in New York we are referring to a regular action in Supreme Court, one that includes discovery and where the court is one of original jurisdiction, as opposed to a special summary proceeding for the recovery of real property, pursuant to RPAPL Article 7 and CPLR Art. 4, in a local court of limited jurisdiction.


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A Landlord’s Right to Access a Tenant’s Apartment in Emergencies and for Repairs Laws and Best Practices

On December 12, 2018, Michelle Itkowitz conducted a webinar for Vendome Media, the publishers of "Apartment Law Insider", entitled "A Landlord’s Right to Access a Tenant’s Apartment in Emergencies and for Repairs Laws and Best Practices".

Here is a link to the Vendome rebroadcast of the program

Here is a link to the materials prepared for the program

Here is an excerpt from the materials:

A.   Statute Regarding Access

1.    The Statute


As always, the best place to start any legal inquiry is by looking at the statute that relates to your question. Owner’s right to access a residential apartment contained within a multiple dwelling is governed by the New York City, N.Y., Rules, Tit. 28, § 25-101 (Owner’s Right of Access and Requirements for Notification) and states:

(a)(1) Owner to give notice. Where an owner or his or her representative seeks access to a dwelling unit, suite of rooms or to a room, under the provisions of §27-2008 in order to make an inspection for the purpose of determining whether such places are in compliance with the provisions of the multiple dwelling law or the administrative code, such owner or representative shall notify the tenants not less than twenty-four hours in advance of such time of inspection.

(2) Where an owner or his or her representative seeks access to make improvements required by law or to make repairs to a dwelling unit, suite of rooms or to a room, such owner or representative shall give written notice to the tenant not less than one week in advance of the time when the improvements or repairs are to be started, except where otherwise provided in paragraph (3) of this subdivision.

(3) Where an owner or his or her representative seeks access to make repairs

(i) that are urgently needed to a dwelling unit, suite of rooms or a room, as in the case where a class C violation of the Housing Maintenance Code has been issued, except where such class C violation is for the existence of a lead-based paint hazard, or

(ii) in the case of an emergency where repairs are immediately necessary to prevent damage to property or to prevent injury to persons, such as repairs of leaking gas piping or appliances, leaking water piping, stopped-up or defective drains, leaking roofs, or broken and dangerous ceiling conditions,

such owner or representative shall not be required to provide written advance notice, but shall be required to notify the tenant or tenants by such actions as telephone, email, or by knocking on the occupant’s door at a reasonable time when he or she would be expected to be present.

(4) Where an owner or his or her representative must make a repair in a public area or other area of a dwelling that may result in an interruption of essential services such as utilities (heat, hot water, cold water, gas, electricity, or elevator) that is expected to continue for more than two hours, the owner or his or her representative shall provide written notice to the tenants by posting a notice in a prominent place within the public part of the building and on each floor of such building at least twenty-four hours prior to such interruption. However, if such interruption is not expected to continue for more than two hours or is due to emergency repairs that were not anticipated and must begin immediately, advance notice is not required, provided that notice shall be posted as soon as possible if such work continues for two or more hours. Such notice shall identify the service to be interrupted, the type of work to be performed, the expected start and end dates of the service interruption, and shall be updated as necessary. Such notice shall be provided in English, Spanish, and such other language as the owner deems necessary to adequately provide notice to the tenants. Such notice shall remain posted until the interruption of essential services interruption ends. A sample notification form is provided in these rules.

(b) Notices to be in writing. Where an owner is required to give notice in advance of seeking access to a dwelling unit, suite of rooms or to a room, as required by subdivision (a) of this section, such notice shall be in writing, dated, and shall contain a statement of the nature of the improvement or repairs to be made, unless specifically stated otherwise in these rules.

(c) Authorization to be in writing. Where a representative of an owner seeks access to a dwelling unit, suite of rooms, or rooms, the authorization of the owner shall be in writing and the representative shall exhibit such authorization to the tenant when access is requested.

(d) Hours when access to be permitted. Except as provided in paragraph (3) of subdivision (a) of this section, access to a dwelling unit, suite of rooms, or rooms, shall be limited to the hours between nine antemeridian and five post-meridian, unless otherwise agreed to by the tenant. Access shall not be required on Saturdays, Sundays or legal holidays, unless otherwise agreed to by the tenant, except as provided in paragraph (3) of subdivision (a) of this section.

Sample Notification Form for Interruption of Essential Services
NOTICE OF INTERRUPTION OF SERVICES
Please be advised that due to repair work in the building located at _______________, there will be an interruption in the following building services:
heat hot water cold water gas electricity elevator
The interruption in service is expected to begin on ____________________ and to end on ____________________.
The repair work is for the purpose of ________________________________________
AVISO DE INTERUPCION DE SERVICIOS
Por favor tenga en cuenta que debido a reparaciones en el edificio localizado en ____________ ______________, habra una interrupcion en los siguientes servicios del edifico:
Calefaccion Agua Caliente Agua Fria Gas Electricidad Elevador
La interrupcin en servicio se espera comenzar en ____________________ y terminar en ____________________.
El trabajo de reparacion es para el proposito de ________________________________________

[Emphasis supplied.]

I put the full text of long statutes in my materials when I think they are very important and that people – both real estate professionals and tenants – should read them. Sorry, the law is words, not emojis. In any event, now let us unpack this important statute.

2.    Unpacking the Statute – Three Different Types of Access: Inspections, Repairs, Emergencies and Form of Notice


The statute anticipates three different types of access. First, it talks about access for inspections, which require twenty-four hours’ notice. Second, it talks about access for repairs, which requires a week’s notice.

The notice called for is very specific. The notice must be “in writing, dated, and shall contain a statement of the nature of the improvement or repairs to be made…”. The hours access is permitted are between 9:00 am and 5:00 pm on weekdays, excluding holidays.

Third, the statute talks about emergency situations, which require no written advanced notice. In such cases, the person seeking access “shall be required to notify the tenant or tenants by such actions as telephone, email, or by knocking on the occupant’s door at a reasonable time when he or she would be expected to be present.”

Also, any representative of an owner needs to be able, upon demand by the tenant, to exhibit an authorization by owner, authorize their access.

There is a fourth section of the statute that discusses repairs in public areas, which is beyond the scope of our topic. I leave the full text of that portion of the statute in above anyway.

B.   Rent Stabilized Tenants Have Further Rights Regarding Access

          When the landlord seeks access to a Rent Stabilized unit in New York City for the purpose of an inspection or a showing, tenant must first be afforded at least five days’ advance notice (actually ten, if served by mail) so that the parties may attempt to arrange a mutually convenient appointment.[1]

           C.   A Lease Provision Regarding Access


Of course, a lease can always make those requirements more stringent, so check your leases. 




[1] 9 NYCRR § 2524.3(e).

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Before Being Your Litigator on a Case, Your Landlord and Tenant Attorney Should First Be Your Consultant

October 28, 2018

On October 25th 2018, Michelle Itkowitz spoke on a panel at the LandlordsNY Symposium. The panel was about how it takes a team to properly manage a building, especially in times of crisis. Michelle explained how landlord-and-tenant lawyers should only be a small part of a larger team when it comes to dealing with illegal Airbnb, non-primary residence, or hoarders. Landlords could save themselves a lot in legal fees and get better results in these matters if they involve, at the outset, other expert vendors such as investigators and consultants, who understand and follow the laws and the rules of ethics when it comes to tenants. This panel discussed how mutually beneficial solutions for both landlords and tenants are achieved when the landlord and tenant attorney acts first as a consultant, before acting as a litigator.

Below is an excerpt from the booklet Michelle prepared for the Symposium. 


Before Being Your Litigator on a Case, Your Landlord and Tenant Attorney Should First Be Your Consultant

To a hammer, every problem looks like a nail.[1] To a lawyer who spends every day running around Housing Court doing 25 cases at once with carbon-paper stipulations, every problem looks like it can be solved with a summary proceeding (a Housing Court case).

When owners and managers come to lawyers with problems like non-primary residence, illegal Airbnb, and hoarding nuisances, many lawyers first and only response is – the lawsuit!, i.e. litigation. That is the WRONG place to start. The lawyer should begin every engagement not as your advocate, but as a healthy skeptic of your position. The right thing for your lawyer to start with is questioning everything. The lawyer should test the health of the particular tenancy and the strength of the admissible evidence, to see if they can withstand the rigors of litigation.

For example, in Nachajski v. Siwiec, 55 Misc.3d 133(A) (App. Term 2nd Dept. 2017), a non-primary residence case, the court found that the lease was not properly renewed, thus Golub (the non-renewal period) never opened, and no non-renewal notice could be served. The non-renewal notice is a prerequisite to a non-primary residence case, therefore, even though there was evidence that the apartment was not the tenant’s primary residence, the court found for tenant.[2] Let’s look at an example of an interaction I had with a potential client on this issue:

Landlord:  Hi! My tenant in 6A no longer lives in her apartment, so I want to evict her for non-primary residence.
Lawyer:  OK the first thing I need is a copy of the full lease chain. I need the original lease, and all renewals, all riders, everything. And the DHCR printout.
Landlord:  Well that’s easy. I only have the one lease from six years ago when she moved in.
Lawyer:  Wait! What?! You have not been regularly renewing the lease as per the Rent Stabilization law?
Landlord:  Well…no… told you she doesn’t really live there anymore! I am kicking her out, silly, why would I give her a lease.
Lawyer:  Look – Non-primary residence isn’t a basis for terminating a lease, it’s a bases for NOT RENEWING A LEASE. By law, landlords have to make an offer to renew a Rent Stabilized lease between 90 and 150 days before the end of a lease term (known as the Golub period, after a famous case). During that renewal window, if the tenant is not living in the apartment as his or her primary residence, that’s when you give the tenant the non-renewal notice.
Landlord:  OK well let’s just give her that notice now!
Lawyer:  How can we? Are in between 90 and 150 days of the end of the lease?
Landlord:  No, we are even better, we are 4 years after the last lease expired!
Lawyer:  No! That’s NOT “even better”. That’s not the statute, that’s not how the law works. Not even close! You need to be within the 90 to 150 days before the end of a lease. Not four-years after the end of the lease.
Landlord:  Michelle, I think you are too hung up on these details…calm down…
Lawyer:  OMG the law IS details! And in landlord and tenant law, in particular, details really matter.
Landlord:  OK so I messed up, but what if we just send the notice anyway and see if she leaves?
Lawyer:  I don’t file cases that are defective. That is against the code for attorney ethics and its bad business for me and you. If I file the case and she gets a lawyer and they counter-sue you for something, then I can’t just discontinue. Also, you could end up paying the tenant’s legal fees. And in the time it takes to litigate the losing case, you could have renewed the lease properly and be headed for the next Golub period.
Landlord:  Ok so you are suggesting that I renew her lease!? I want to get rid of her and you are telling me to give her a lease. You are all mixed up, Michelle.
Lawyer:  Sometimes the only way out is through, and you have to go through the proper steps to get to where you need to be in these cases. Here, without a lease renewal in place, you can’t do the right termination of tenancy. Let’s send the tenant a renewal offer. Make the one-year option a zero percent increase no matter what the Rent Guidelines Board says, and perhaps the tenant will take only a one-year lease. Then, while we wait, you can install a camera and collect solid evidence that the tenant is not there.

If your lawyer does not check the lease renewal, you could initiate a whole case, only to lose it on a technicality (a determination it would take about six months to get). In that case, you then need to renew the lease (which takes another three months). And wait for the lease (probably renewed for two years) to expire before bringing another non-primary residence case, assuming the tenant has not moved back in permanently by the next renewal window. If your lawyer discovered the problem before initiating the case, there would be better ways to handle the situation. Offering the tenant a proper, defensible renewal with no funny business might result in the tenant taking the one-year (lower increase) renewal. In this instance, the case is delayed by a year, but it is better than losing the three years in the previous example and it also gives you plenty of time to garner camera evidence before the next termination opportunity in 8 months. 


[2] See also 160 Eagle St. v. Butler, 2017 NY Misc Lexis 4260 (NYC Civ. Ct. Kings Cty. 2017).

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You Don't Need to Chase Your Previous Landlord to Get a Rent Abatement - Get the Abatement from the Building's New Owner!

September 30, 2018: This Q&A post originally appeared on the Tenant Learning Platform blog, where Michelle Maratto Itkowitz is an instructor and guest blogger.

Tenant’s Question:

I’m a tenant of a Rent Stabilized apartment in Brooklyn. The building was just sold and now I have a new landlord. The previous landlord of this building, however, was very bad.

I wish that I had sued my old landlord while he was still around. I want to find my previous landlord and go after that company for breach of warranty of habitability (i.e. no stove, gas turned off, bed bugs, broken flooring in apartment, no door chain etc.) and for a rent overcharge.

How do I sue my previous landlord?

TLP Instructor Michelle’s Answer:

You do not have to sue your previous landlord! Pursue those claims against your current landlord. It does not matter that the bad acts were committed by the previous landlord. Those claims – warranty of habitability and rent overcharge – they “travel with the land”. In other words, when the new owner bought the building, it bought the old owner’s liabilities.

If the old owner owed you a rent abatement for a breach of the warranty of habitability, then the new owner now owes you the same abatement. Dunbar Owner LLC v. Jones, 54 Misc.3d 134(A) (App. T. 1 Dept.; 1/25/17). If the old owner overcharged you, then it’s the new owner’s responsibility to pay you back the overcharge. Rent Stabilization Code § 2526.1 and Rent Stabilization Law § 26-516.

The law evolved this way so that tenants don’t need to chase previous landlords. Anyway, most buildings are owned by single-asset limited liability companies – the LLC is set up for the sole purpose of owning the building. Once the closing happens, the LLC (the previous landlord) has no assets for you to collect from anyway. That’s why you need to bring your claims against the current owner of the building.

Thank you for this question. Finally, I am obligated to say that this answer is for general informational purposes only, does not constitute legal advice, and does not create an attorney and client relationship between you and I or between you and the Tenant Learning Platform.

[End of Guest Blog Post]











The Tenant Learning Platform delivers on-demand, online classes for NYC tenants on specific legal topics, to help tenants prevent and solve problems concerning their apartments, without a lawyer. TLP's first two class offerings are: How To Do Airbnb Legally In Your NYC Apartment and The Laws About Painting Your NYC ApartmentMichelle Itkowitz is delighted to be an instructor on TLP and a guest blogger. 

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