Although the applicability of discounted rent may depend on the building size and age, discounted rent apartments in NYC predominantly come in the form of rent stabilization or rent controlled apartments. Usually, in the context of free market rent apartments, landlords are motivated to charge as much rent as possible, however the ability to charge as much rent as possible is curtailed in a discounted rent apartment.
Therefore, the landlord may seek to get the tenant out of the apartment by means of a “buyout” so that the landlord can then charge a new tenant higher rents in accordance with the rent stabilization laws.
What is a Buyout and What is its Purpose?
A buyout is a method the landlord may employ in which the landlord offers the tenant a lump sum payment of money in order to induce the tenant to move out of their rent-stabilized or rent-controlled apartment. A buyout situation may present itself in the context of neighborhood redevelopment, availability of renters willing to pay a higher price, new management/ ownership of an apartment complex and more [1].
How is the Buyout Calculated?
A buyout is usually only offered by the landlord if he or she believes that paying a tenant money to move out of the apartment in order to charge a new tenant a higher rent is financially feasible and in accordance with their budget. Buyouts may range from a couple thousand dollars to well over a million dollars depending on the nature of the property and the desire of the landlord to get the tenant out of the premises. To arrive at an accurate estimation of a buyout, a balancing of various factors is required. In general, a tenant should look at the difference between the current rent the tenant pays and the market rate. Then the tenant would have to consider how much more money the landlord could make if the landlord rented the same apartment to another tenant at market rate. Tenants should also consider the cost of moving, legal fees, taxes and paying a potentially higher rent elsewhere.
What a Landlord Must Do in Terms of Disclosures to the Tenant Regarding the Buyout
Generally, it is important for any landlord, owner or other person proposing a buyout offer to a tenant to know that he or she must provide written notice regarding the buyout offer to the tenant along with other information as provided in the New York City Administrative Code, specifically Title 27, Chapter 2, Subsection 1, Article 1, § 2004 (a)(48) [2].
The administrative code provides that the following information must be incorporated into the written notice: (1) that the tenant is being contacted by the landlord in regards to a proposed buyout offer; (2) that the buyout offer is being made by or on behalf of the owner/landlord; (3) that the tenant may seek legal counsel before responding or coming to a decision in regards to a buyout offer; (4) that the tenant has a right to reject a buyout offer and doing so will not have any negative consequences on the tenant’s ability to remain in occupancy of his/her residence; and (5) that the tenant can, in writing to the landlord, refuse to be contacted by the landlord in regards to any proposed buyout and the landlord must not contact the tenant after such a refusal for a period of 180 days [3].
Tenants Rights
The New York City Administrative Code § 2004 (a)(48) also sets out specific regulations that govern the buyout offer conversations with tenants. It prohibits the landlord from making a buyout offer while (a) threatening, intimidating, or using obscene language; (b) initiating communication with such frequency and at unusual hours that can reasonably be expected to abuse or harass such person; (c) initiating communication of the buyout offer at the place of employment of the tenant without the prior written consent of the tenant; or (d) knowingly falsifying or misrepresenting any information provided to the tenant [4].
Additionally, the Administrative Code § 2004 (a)(48) also prohibits landlords and owners from reaching out to a tenant to make a buyout offer within 180 days after the tenant has informed the landlord in writing not to be contacted in regards to a buyout offer [5]. As mentioned earlier, landlords may also be punished if they make a buyout offer while not informing the tenant of his or her rights under NYC Admin. Code § 2004 (a)(48) (f-2). Landlords are also prohibited from repeatedly contacting/visiting the tenant on weekends, holidays, or outside normal business hours (Monday- Friday 9am-5pm) or in such a manner that could be reasonably expected to abuse or harass the tenant [6].
Additionally, the Attorney General’s office introduced the Tenant Protection Act, which is aimed at holding New York’s landlords criminally accountable for tenant harassment [7]. Therefore, landlords and others proposing a buyout offer to a tenant in a residential rental building should carefully and completely follow the guidelines set forth by the Attorney General’s office.
The provided list of prohibited activities in the context of tenant buyouts is not exhaustive and rather emphasizes the need to consult an experienced attorney because the laws governing tenant buyouts can be complex and difficult to comprehend.
Negotiating a Buyout
Tenants should be aware that they do have the right to refuse a buyout. Generally, buyouts occur after a period of negotiation between landlord and tenant. The process of negotiation depends on a plethora of factors, a series of back and forth exchanges between the parties and therefore it is not uncommon for at least one side to enlist the assistance of an attorney in negotiation such agreements.
The information above is intended to provide limited information only and is not legal advice. The laws relating to tenant buyout agreements in New York are complex. If you are a party to a matter concerning a tenant buyout agreement or otherwise need further guidance in this or a related area of law, Singh & Rani, LLP can assist you.
[1] https://www.braschlegal.com/who-are-the-primary-targets-for-tenant-buyouts/
[2] https://www1.nyc.gov/assets/buildings/pdf/HousingMaintenanceCode.pdf
[3] Id. at § 2004 (a)(48) (f-2).
[4] Id. at § 2004 (a)(48) (f-3).
[5] Id. at § 2004 (a)(48) (f-1).
[6] Id. at § 2004 (a)(48) (f-4).
[7] https://ag.ny.gov/press-release/ag-schneiderman-introduces-legislation-criminally-crack-down-tenant-harassment
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