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IT'S TIME TO ACT

05/26/2009


For those of you involved in any aspect of real estate ownership and development in New York city, take serious note of the recent sweeping rent regulation revisions passed by the New York State Assembly.  The summary that appears below is for informational purposes only.  It is not a detailed analysis and should be used only in conjunction with a more careful review of the text of each bill.  

This package of bills include the following:

1.  Repeals the Urstadt Law thereby allowing cities to strengthen rent regulations beyond New York State law.  This would place rent regulation in New York City under the jurisdiction of the City Council.

2.  Eliminates luxury deregulation by vacancy of the prior tenant.

3.  Changes the thresholds on high income rent deregulation to a rent of $2,700 and tenant  income of $240,000.

4.  Reduces rent stabilized vacancy increase from 20% to 10%.

5.  Re-stabilizes certain previously deregulated apartments renting for less than $5,000.

6.  Turns major capital improvements (MCIs) to a surcharge rather than a permanent rent increase.

7.  Allows preferential rents (i,e - below legal maximum rents)  to be ended for tenants only on vacancy, not on annual renewal.

8.  Sets last rent paid before dissolution of Mitchell-Lama developments as the initial legal regulated rent.

 
9.  Subjects former Section 8 projects, completed after 1974, to rent regulation.

10.  Limits owner occupancy proceedings for multiple units; changes the Agood faith@ standard to Aimmediate and compelling necessity;@ and gives long term tenants, relocation rights.

A quick analysis of some of these provisions follows:

$    Paragraph 1 would permanently, negatively affect landlords, because it would place rent regulations under City Council jurisdiction.  The Council has no equivalent of the State Senate, to limit new anti-owner legislation.

$    Paragraph 4, reducing the vacancy increase from 20% to 10% hits all owners very hard.  Many vacancies occur after many years of continuous occupancy by the prior tenants.

$    Paragraph 6, which makes MCI=s a temporary surcharge, instead of a permanent rent increase, will seriously reduce the value of all future major capital improvements.  It also will damage all the New York City housing stock, because of the inevitable reduction in MCI work that will occur.

$    Paragraph 7, allowing preferential rents to be ended only on vacancy instead of renewal also directly affects all annual renewals of every tenant that has a preferential rent, i.e., a rent below the maximum allowed rent for that apartment.  This law will prevent landlords from catching up with annual increases in the Fair Market Value of our apartments.  It is also counter intuitive, since landlords will be more inclined to keep apartments vacant.

At the end of the day this collection of draconian legislation is both anti-improvement as well as anti-landlord.

Several of the provisions will seriously reduce the level and number of improvements to  the City=s housing stock.  Playing with the MCI=s does the most damage in this area.

Limiting preferential rents, in most instances, will also deter landlords from improving their housing stock.  APreferential Rents@ are one of the few ways for a landlord to recoup his investment when upgrading an individual apartment.  

For all our friends who are commercial property owners, please don=t think for a moment that Christine Quinn and the other barracudas on the New York City Council are not Agunning for you in their sights@.  If the State Legislature can get succeed in passage of some of these proposed bills, it is only a matter of time before the City Council takes aim at commercial landlords throughout the City.  

 
So what can you do about it?

$    You must lobby your State Senator and Assemblyman.  Tell him in no uncertain terms that this legislation is anti development and against our interests generally.  

$    Send protest letters to Governor David Patterson.

$    Pass the word to your fellow real estate friends and clients about these terribly one sided real estate pieces of legislation.

If you don=t fight the passage of these laws now, you will have to fight even more damaging  legislation later.  The time to Adraw the line in the sand@ has arrived.  Stand up for your rights and do it now.

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