NYC multifamily rental basics
There are roughly 3.5 M housing units in New York City. Two thirds of them are rental housing. Clearly a majority of people rent. Multifamily rental is a big part of real estate business in NYC. Significant capital (domestic and foreign) continues to flow into this sector.
But there are investors who are hesitant to enter the market. A lot of it has to do with cumbersome rules and regulations around rental housing and many of them are unique to the city. Here are some basics about the business addressing many of the common questions. I hope the information will help clear some concerns due to unfamiliarity about the sector.
Type of Housing
There are regulated and unregulated housing in New York State. Rent control and rent stabilization are two types of regulated housing. An unregulated apartment is considered “free market” or “market rate” unit.
Rent control (RC) limits the rent a landlord can charge for an apartment and significantly restricts the right of the landlord to evict tenants. The rent control program applies to residential buildings constructed before February 1947 and the tenant has been living in the building continuously since July 1, 1971.
Rent stabilization (RS) has requirements on rent increase (more on this later), lease renewal, level or service, etc. It applies in buildings 1) six or more units built between February 1, 1947 and December 31, 1973; 2) built before February 1, 1947, with tenants who moved in after June 30, 1971; or 3) buildings with three or more apartments constructed or extensively renovated on or after January 1, 1974 with special tax benefits.
Lease
Lease is a contract between the tenant and the landlord. It can be written or oral for unregulated apartments. An oral lease for more than one year cannot be enforced legally.
Lease must be written and signed by both parties for RS units. RS tenants must also be given a rent stabilization lease rider, prepared by Division of Housing and Community Renewal (DHCR), which summarizes their rights under the law and provides specific information on how the rent was calculated. Landlords can face overcharge claims if the lease rider was not provided to the tenant.
Renewal
If a lease contains auto-renewal clause, the landlord must provide reminder notice about this clause 15-30 days before the agreed upon notification deadline when the tenant is required to inform the landlord of his/her intent to vacate.
For market rate apartments, the landlord could choose to renew or terminate leases at will.
RS tenants have the rights for 1 or 2 year renewal with the same terms as the original lease. The landlord cannot terminate RS lease on renewal at will.
Renewal notification
If the landlord of a market rate apartment plans to terminate the lease or renew the lease with a rent increase of more than 5%, he/she must provide advanced written notice: 1) 90-day notice if the tenant lived in the unit for two or more years, or less with a 2-year lease, 2) 60-day notice, if the tenancy is between one to two years, 3) 30-day notice if less than a year of tenancy.
For RS apartments, the landlord must give written notice to the tenant of the right to renewal by mail or personal delivery not more than 150 days and not less than 90 days before the existing lease expires. After the notice of renewal is given, the tenant has 60 days in which to accept.
Rent increase
The landlord is free to institute any rent increase on market rate apartments.
For regulated apartments, NYC Rent Guidelines Board (RGB) establishes maximum rates for rent increases once a year for RS apartments on a 1 or 2-year lease, historically 1.5% on average. There are additional ways for landlords of regulated apartments to increase rent beyond the RGB limit, e.g. MCI, IAI, hardship, fuel cost.
Landlords of RS apartments may seek temporary rent increases (capped 2% per year) for certain types of building-wide Major Capital Improvements (MCI) that benefit all tenants, such as the replacement of a boiler or the installation of new equipment.
Landlords of RS apartments can also collect a temporary rent increase based on the cost of the Individual Apartment Improvements (IAI). A landlord can only claim up to three IAIs in a 15-year period, total costs eligible for a rent increase calculation cannot exceed $15,000. IAIs are temporary and must be removed from your rent after 30 years.
Alternatively, landlords of RS apartments could generate additional legal income through 421a surcharge, see my other post What is 412a surcharges.
Rent overcharge
The landlords must register each RS apartment with DHCR in April every year and provide tenants annually with a copy of the registration statement. Tenants may also get a copy of the rent history for their apartment directly from DHCR.
The penalty for a rent overcharge is the amount an owner collected above the legal regulated rent, plus accrued interest. If the overcharge is willful, the landlord is liable for a penalty of three times the amount of the overcharge.
Security deposit
Security deposit is limited to no more than one month’s rent. The one-month limit means that a landlord cannot ask for last month’s rent and a security deposit.
A landlord may use the security deposit as a reimbursement for any unpaid rent, or the reasonable cost of repairs beyond normal wear and tear, if the tenant damages the apartment.
Tenants planning to move out can ask their landlord to inspect the apartment (or rental home or other type of home rental) before the move-out date. They must allow the tenant to be present during the inspection. At that inspection, the landlord must tell the tenant what needs to be fixed or cleaned. The tenant then has the opportunity to fix any issues to prevent the landlord from keeping part or all of the security deposit.
If the building is sold, the landlord must transfer all security deposits to the new owner within five days or return the security deposits to the tenants. Landlords must notify the tenants, by registered or certified mail, of the name and address of the new owner.
Rent overcharge
The landlords must register each RS apartment with DHCR in April every year and provide tenants annually with a copy of the registration statement. Tenants may also get a copy of the rent history for their apartment directly from DHCR.
The penalty for a rent overcharge is the amount an owner collected above the legal regulated rent, plus accrued interest. If the overcharge is willful, the landlord is liable for a penalty of three times the amount of the overcharge.
Security deposit
Security deposit is limited to no more than one month’s rent. The one-month limit means that a landlord cannot ask for last month’s rent and a security deposit.
A landlord may use the security deposit as a reimbursement for any unpaid rent, or the reasonable cost of repairs beyond normal wear and tear, if the tenant damages the apartment.
Tenants planning to move out can ask their landlord to inspect the apartment (or rental home or other type of home rental) before the move-out date. They must allow the tenant to be present during the inspection. At that inspection, the landlord must tell the tenant what needs to be fixed or cleaned. The tenant then has the opportunity to fix any issues to prevent the landlord from keeping part or all of the security deposit.
If the building is sold, the landlord must transfer all security deposits to the new owner within five days or return the security deposits to the tenants. Landlords must notify the tenants, by registered or certified mail, of the name and address of the new owner.
Late fee
A rent payment can only be considered late if it is received more than five days after it is due. The most your landlord can charge as a late fee is $50 or 5% of your monthly rent, whichever is less.
Roommate
The NYS “Roommate Law” allows apartment sharing regardless if the roommate(s) is/are named on the lease. When the lease names only one tenant, that tenant may share the apartment with immediate family, one additional occupant, and the occupant’s dependent children provided the tenant or the tenant’s spouse occupies the premises as their primary residence.
At least one of the tenants named on the lease or that tenant’s spouse must occupy the shared apartment as a primary residence.
Landlords may limit the total number of people living in an apartment to comply with legal overcrowding standards.
Sublet
The law allows tenants in buildings with four or more units to sublet given the landlord’s advance consent in a good faith. Any lease provision restricting a tenant’s right to sublease is void as a matter of public policy. However, under any sublet the tenant is still liable for any obligations of the original lease including all future rents.
Assignment
The law also allows lease assignment by the tenant but is much more restricted than subletting. A tenant may not assign the lease without the landlord’s written consent. The landlord may withhold consent without any cause.
Lease succession
The rights of a family member living in a RC/RS apartment to succeed a tenant of record who dies or permanently vacates are covered by DHCR regulations. This is a quite involved topic and I will write another post on it. See my other post Succession Rights.
DHCR regulations on succession rights do not apply in market rate apartments.
Lease termination
If you leave your rental apartment before your lease ends, your landlord must make a good-faith effort to fill the vacancy. If the landlord finds a new tenant and the new tenant’s rent is equal or higher to your rent, your lease is considered terminated and you are no longer liable for the rent.
Eviction
A tenant with a lease is protected from eviction during the lease period so long as the tenant does not violate any substantial provision of the lease or any laws or codes. Landlords must give formal notice of their intention to obtain legal possession of the apartment.
Roommate
The NYS “Roommate Law” allows apartment sharing regardless if the roommate(s) is/are named on the lease. When the lease names only one tenant, that tenant may share the apartment with immediate family, one additional occupant, and the occupant’s dependent children provided the tenant or the tenant’s spouse occupies the premises as their primary residence.
At least one of the tenants named on the lease or that tenant’s spouse must occupy the shared apartment as a primary residence.
Landlords may limit the total number of people living in an apartment to comply with legal overcrowding standards.
Sublet
The law allows tenants in buildings with four or more units to sublet given the landlord’s advance consent in a good faith. Any lease provision restricting a tenant’s right to sublease is void as a matter of public policy. However, under any sublet the tenant is still liable for any obligations of the original lease including all future rents.
Assignment
The law also allows lease assignment by the tenant but is much more restricted than subletting. A tenant may not assign the lease without the landlord’s written consent. The landlord may withhold consent without any cause.
Lease succession
The rights of a family member living in a RC/RS apartment to succeed a tenant of record who dies or permanently vacates are covered by DHCR regulations. This is a quite involved topic and I will write another post on it. See my other post Succession Rights.
DHCR regulations on succession rights do not apply in market rate apartments.
Lease termination
If you leave your rental apartment before your lease ends, your landlord must make a good-faith effort to fill the vacancy. If the landlord finds a new tenant and the new tenant’s rent is equal or higher to your rent, your lease is considered terminated and you are no longer liable for the rent.
Eviction
A tenant with a lease is protected from eviction during the lease period so long as the tenant does not violate any substantial provision of the lease or any laws or codes. Landlords must give formal notice of their intention to obtain legal possession of the apartment.
Landlords of RC/RS apartments may be required to seek approval from DHCR before commencing a court proceeding for possession, for example, if the owner seeks to demolish the building.
If a tenant fails to pay rent, is causing a nuisance, damages the apartment or building, or commits other wrongful acts, the owner may proceed directly in court. Your landlord cannot bring you to court for non-payment of rent unless they have given you a 14-day written “rent demand.”
Real estate brokers
A prospective renter may retain a real estate broker to find a suitable apartment. New York State licenses real estate brokers and salespersons. Brokers charge a commission for their services, which is usually a stated percentage of the first year’s rent.
Background check
Before signing a lease, a landlord can charge for a credit and background check up to a maximum amount of $20. The landlord must provide the applicant a copy of the credit or background check, as well as an invoice from the company that performed it.
A landlord cannot deny a rental apartment based on a past legal conflict with a landlord. For example, a landlord cannot deny an applicant an apartment because they sued their previous landlord to make repairs.
If a tenant fails to pay rent, is causing a nuisance, damages the apartment or building, or commits other wrongful acts, the owner may proceed directly in court. Your landlord cannot bring you to court for non-payment of rent unless they have given you a 14-day written “rent demand.”
Real estate brokers
A prospective renter may retain a real estate broker to find a suitable apartment. New York State licenses real estate brokers and salespersons. Brokers charge a commission for their services, which is usually a stated percentage of the first year’s rent.
Background check
Before signing a lease, a landlord can charge for a credit and background check up to a maximum amount of $20. The landlord must provide the applicant a copy of the credit or background check, as well as an invoice from the company that performed it.
A landlord cannot deny a rental apartment based on a past legal conflict with a landlord. For example, a landlord cannot deny an applicant an apartment because they sued their previous landlord to make repairs.
Discrimination
Landlords may not refuse to rent to, renew the lease of, or otherwise discriminate against, any person or group of persons because of race, creed, color, national origin, sex, disability, age, AIDS or HIV status, alcoholism, marital status or familial status, lawful occupation, sexual orientation, partnership status, immigration status, and lawful source of income.
Landlords may not refuse to rent to, renew the lease of, or otherwise discriminate against, any person or group of persons because of race, creed, color, national origin, sex, disability, age, AIDS or HIV status, alcoholism, marital status or familial status, lawful occupation, sexual orientation, partnership status, immigration status, and lawful source of income.
Warranty of habitability
Under the warranty of habitability, tenants have the right to a livable, safe and sanitary apartment, a right that is implied in every written or oral residential lease.
Examples of a breach of this warranty include the failure to provide heat or hot water on a regular basis, or the failure to rid an apartment of an insect infestation. Public areas of the building are also covered by the warranty of habitability.
Rent reduction
If a landlord breaches the warranty of habitability, the tenant may sue for a rent reduction. Alternatively, RC/RS tenants can also file a rent reduction complaint with DHCR.
A landlord’s liability for damages is limited when the failure to provide services is the result of a union-wide building workers’ strike.
Under some circumstances, tenants may make necessary repairs and deduct reasonable repair costs from the rent. Tenants should keep receipts for such repairs and copies of all communications with the landlord about the repairs.
Duty of repair
Landlords of multiple dwellings must keep the apartments and the building’s public areas in “good repair” and clean and free of vermin, garbage, or other offensive material.
Landlords are required to maintain electrical, plumbing, sanitary, heating, and ventilating systems, and appliances that the landlord installed (such as refrigerators and stoves) in good and safe working order.
Lead-based paint
Federal law requires landlords to disclose known information about lead-based paint (LBP) or LBP hazards before a lease becomes effective and all leases must include a warning statement about LBP for all properties built prior to 1978.
Under the warranty of habitability, tenants have the right to a livable, safe and sanitary apartment, a right that is implied in every written or oral residential lease.
Examples of a breach of this warranty include the failure to provide heat or hot water on a regular basis, or the failure to rid an apartment of an insect infestation. Public areas of the building are also covered by the warranty of habitability.
Rent reduction
If a landlord breaches the warranty of habitability, the tenant may sue for a rent reduction. Alternatively, RC/RS tenants can also file a rent reduction complaint with DHCR.
A landlord’s liability for damages is limited when the failure to provide services is the result of a union-wide building workers’ strike.
Under some circumstances, tenants may make necessary repairs and deduct reasonable repair costs from the rent. Tenants should keep receipts for such repairs and copies of all communications with the landlord about the repairs.
Duty of repair
Landlords of multiple dwellings must keep the apartments and the building’s public areas in “good repair” and clean and free of vermin, garbage, or other offensive material.
Landlords are required to maintain electrical, plumbing, sanitary, heating, and ventilating systems, and appliances that the landlord installed (such as refrigerators and stoves) in good and safe working order.
Lead-based paint
Federal law requires landlords to disclose known information about lead-based paint (LBP) or LBP hazards before a lease becomes effective and all leases must include a warning statement about LBP for all properties built prior to 1978.
Landlords are also required to provide their tenants with a pamphlet prepared by the NYC Department of Health and Mental Hygiene and the NYC Department of Housing Preservation and Development (HPD).
NYC also requires that landlords of buildings with at least 3 apartments constructed before 1960 (or between 1960 and 1978 where the landlord knows there is lead-based paint) ascertain if a child under seven years old lives in an apartment and inspect that apartment for LBP hazards.
Smoke detector/carbon monoxide detector
Landlords of multiple dwellings must install approved smoke detectors in each apartment, within ten feet of each room used for sleeping. Each smoke detecting device shall include a test device to allow a tenant to ensure that the device is functioning properly.
Landlords of all multiple dwellings must also provide and install an approved carbon monoxide alarm within 15 feet of the primary entrance to each sleeping room.
Combination smoke/carbon monoxide detectors are permitted.
Safety and crime prevention
NYC also requires that landlords of buildings with at least 3 apartments constructed before 1960 (or between 1960 and 1978 where the landlord knows there is lead-based paint) ascertain if a child under seven years old lives in an apartment and inspect that apartment for LBP hazards.
Smoke detector/carbon monoxide detector
Landlords of multiple dwellings must install approved smoke detectors in each apartment, within ten feet of each room used for sleeping. Each smoke detecting device shall include a test device to allow a tenant to ensure that the device is functioning properly.
Landlords of all multiple dwellings must also provide and install an approved carbon monoxide alarm within 15 feet of the primary entrance to each sleeping room.
Combination smoke/carbon monoxide detectors are permitted.
Safety and crime prevention
Landlords are required to take minimal precautions to protect against reasonably foreseeable criminal harm. Landlords can face lawsuits if crime takes place in the building partly due to landlord’s negligence on safety.
Entrance door lock and intercom
Multiple dwellings which were built or converted to such use after January 1, 1968 must have automatic self-closing and self-locking doors at all entrances. These doors must be kept locked at all times, except when an attendant is on duty.
Entrance door lock and intercom
Multiple dwellings which were built or converted to such use after January 1, 1968 must have automatic self-closing and self-locking doors at all entrances. These doors must be kept locked at all times, except when an attendant is on duty.
If this type of building contains eight or more apartments it must also have a two-way voice intercom system from each apartment to the front door and tenants must be able to “buzz” open the entrance door for visitors.
Multiple dwellings built or converted to such use prior to January 1, 1968 also must have self-locking doors and a two-way intercom system if requested by a majority of all the apartments. Landlords may recover the cost of providing this equipment from tenants.
Public area lighting
Entrances, stairways and yards of multiple dwellings must be sufficiently lit at night, from sunset to sunrise. The owner is responsible for installing and maintaining lighting in these areas.
Elevator mirror
There must be a mirror in each self-service elevator in multiple dwellings so that people may see, prior to entering, if anyone is already in the elevator.
Lock and peehole
Tenants in multiple dwellings can install and maintain their own locks on their apartment entrance doors in addition to the lock supplied by the landlord. The lock may be no more than three inches in circumference, and tenants must provide their landlord with a duplicate key upon request.
The landlord must provide a peephole in the entrance door of each apartment. Landlords of multiple dwellings must also install a chain-door guard on the entrance door to each apartment, to permit partial opening of the door.
Mailboxes
Multiple dwellings built or converted to such use prior to January 1, 1968 also must have self-locking doors and a two-way intercom system if requested by a majority of all the apartments. Landlords may recover the cost of providing this equipment from tenants.
Public area lighting
Entrances, stairways and yards of multiple dwellings must be sufficiently lit at night, from sunset to sunrise. The owner is responsible for installing and maintaining lighting in these areas.
Elevator mirror
There must be a mirror in each self-service elevator in multiple dwellings so that people may see, prior to entering, if anyone is already in the elevator.
Lock and peehole
Tenants in multiple dwellings can install and maintain their own locks on their apartment entrance doors in addition to the lock supplied by the landlord. The lock may be no more than three inches in circumference, and tenants must provide their landlord with a duplicate key upon request.
The landlord must provide a peephole in the entrance door of each apartment. Landlords of multiple dwellings must also install a chain-door guard on the entrance door to each apartment, to permit partial opening of the door.
Mailboxes
USPS requires landlords of buildings containing three or more units to provide secure mail boxes for each apartment unless the management has arranged to distribute the mail to each apartment. Landlords must keep the mail boxes and locks in good repair.
Window guard
Landlords must install window guards at the request of a tenant and in any apartment in which a child under the age of ten resides, whether requested or not.
Landlords are required to provide tenants with a form stating whether there are children residing in a household and to request installation of window guards. Tenants are required to notify their landlord when they have children of this age living in their apartment, or if they provide child care services in the apartment. Tenants may not refuse installation. Once window guards are installed, the tenant must not take down, make alterations to, or remove any part of the guard.
Heating season
Heat must be supplied from October 1 through May 31 to tenants in multiple dwellings. If the outdoor temperature falls below 55°F between the hours of 6 am and 10 pm, each apartment must be heated to a temperature of at least 68°F. If the outdoor temperature falls below 40°F between the hours of 10 pm and 6 am, each apartment must be heated to a temperature of at least 55°F.
Hot water
Landlords must provide all tenants of multiple dwellings with both hot and cold water. In NYC, hot water must register at or above a constant temperature of 120 degrees at the tap.
Tenant organization
Tenants have a legal right to organize by law. They may form, join, and participate in tenant organizations for the purpose of protecting their rights. Landlords must permit tenant organizations to meet, at no cost, in any community or social room in the building, even if the use of the room is normally subject to a fee. It is illegal for landlords in New York to retaliate against tenants for participating in tenant organizations.
Tenant privacy
Tenants have privacy right within their apartments. A landlord may enter a tenant’s apartment with reasonable prior notice, and at a reasonable time, and with the tenant’s consent, either to provide routine or agreed upon repairs or services, or in accordance with the lease.
If the tenant unreasonably withholds consent, the landlord may seek a court order to permit entry. In an emergency, such as a fire or water leak, the landlord may enter the apartment without the tenant’s consent or prior notice.
Window guard
Landlords must install window guards at the request of a tenant and in any apartment in which a child under the age of ten resides, whether requested or not.
Landlords are required to provide tenants with a form stating whether there are children residing in a household and to request installation of window guards. Tenants are required to notify their landlord when they have children of this age living in their apartment, or if they provide child care services in the apartment. Tenants may not refuse installation. Once window guards are installed, the tenant must not take down, make alterations to, or remove any part of the guard.
Heating season
Heat must be supplied from October 1 through May 31 to tenants in multiple dwellings. If the outdoor temperature falls below 55°F between the hours of 6 am and 10 pm, each apartment must be heated to a temperature of at least 68°F. If the outdoor temperature falls below 40°F between the hours of 10 pm and 6 am, each apartment must be heated to a temperature of at least 55°F.
Hot water
Landlords must provide all tenants of multiple dwellings with both hot and cold water. In NYC, hot water must register at or above a constant temperature of 120 degrees at the tap.
Tenant organization
Tenants have a legal right to organize by law. They may form, join, and participate in tenant organizations for the purpose of protecting their rights. Landlords must permit tenant organizations to meet, at no cost, in any community or social room in the building, even if the use of the room is normally subject to a fee. It is illegal for landlords in New York to retaliate against tenants for participating in tenant organizations.
Tenant privacy
Tenants have privacy right within their apartments. A landlord may enter a tenant’s apartment with reasonable prior notice, and at a reasonable time, and with the tenant’s consent, either to provide routine or agreed upon repairs or services, or in accordance with the lease.
If the tenant unreasonably withholds consent, the landlord may seek a court order to permit entry. In an emergency, such as a fire or water leak, the landlord may enter the apartment without the tenant’s consent or prior notice.
A landlord may not interfere with the installation of cable television facilities
Disability
Landlords are required to provide reasonable accommodations for tenants with disabilities so that they may enjoy equal access to and use of housing accommodations.
Additionally, a landlord may not refuse to permit reasonable structural modifications of existing premises occupied by a tenant with a disability.
Harassment
A landlord is prohibited from any action intended to force a tenant out of an apartment or to compel a tenant to give up any rights granted the tenant by law. No landlord, or any party acting on the landlord’s behalf, may interfere with the tenant’s privacy, comfort, or quiet enjoyment of the apartment.
Pets
Tenants may keep pets in their apartments unless their lease specifically prohibits it. Landlords may be able to evict tenants who violate a lease provision prohibiting pets.
Tenants who are blind or deaf are permitted to have guide dogs or service dogs regardless of a no-pet clause in their lease. Also, tenants with a chronic mental illness are permitted to have emotional assistance animals.
Disability
Landlords are required to provide reasonable accommodations for tenants with disabilities so that they may enjoy equal access to and use of housing accommodations.
Additionally, a landlord may not refuse to permit reasonable structural modifications of existing premises occupied by a tenant with a disability.
Harassment
A landlord is prohibited from any action intended to force a tenant out of an apartment or to compel a tenant to give up any rights granted the tenant by law. No landlord, or any party acting on the landlord’s behalf, may interfere with the tenant’s privacy, comfort, or quiet enjoyment of the apartment.
Pets
Tenants may keep pets in their apartments unless their lease specifically prohibits it. Landlords may be able to evict tenants who violate a lease provision prohibiting pets.
Tenants who are blind or deaf are permitted to have guide dogs or service dogs regardless of a no-pet clause in their lease. Also, tenants with a chronic mental illness are permitted to have emotional assistance animals.
Comments
Post a Comment