Histories of rent stabilized and rent controlled apartments in NYC
The rent controlled and rent stabilized laws were first introduced to the public back in 1919; however, they became more prominent only after the WW2. Since there was an influx of people to the city; either returning war veterans or people who were in general looking for better work opportunities, a deficiency of housing was created. This market vulnerability created the opportunity for landlords to exploit that weakness and charge higher than usual rents. The government then appropriated the rent stabilized/ controlled ordinances which limited the ability the owner had to increase the rent of their properties beyond a certain amount. Hence we can say that the constant outcry of public rage against the unreasonable rent increases forced a government agency to interfere and do something for the sake of preventing possible public unrest.
Getting into More Detailed Explanation on Rent stabilized and rent Controlled Apartments in NYC
And still what does it mean when an apartment is rent stabilized or rent controlled? You might hear people to talk from time to time and share their fantasies explaining how nice it would be to have a rent stabilized, or rent controlled apartment with really cheap rent. Or maybe you even know someone in your building who has a rent stabilized apartment, and he pays only a fraction of what you pay.
Rent stabilized apartments in NYC:
Those are usually apartments in buildings which are at least 6 families or more and are built between January 1st 1947 and July 1st
1974. The rent stabilization law allows the rent to go up only a certain % which is not determined by the landlord. The increase comes into effect in accordance to the decision made by the Rent Guidelines Board (RGB). How does it feel to be a landlord and not be able to regulate the rents of the apartments in your own building? Rent stabilized tenants can care less for their landlord’s feelings. However, it could be a problem when some landlords whose buildings have high % of rent stabilized tenants are struggling with the constantly rising maintenance expenses and property taxes therefore the rent collected is not enough to cover the building costs.
There are certain conditions that have to apply in order to consider the apartment eligible as a rent stabilized one. First condition –the rent does not have to be more than $2000 monthly, and second the household income should not pass the threshold of 175K annually. Actually, RGB made some amendments last year and since July1st 2011, the upper limits of those numbers have been extended. So now a rent stabilized apartment does not have to rent for more than $2500 per month and the household’s income should not be of excess of 200K.
Rent controlled apartments in NYC:
Those are laws that apply to six family homes or more and restrict the landlord to increase the rent beyond a certain amount. The condition that applies here states that the tenant has to have rented the place before July 1 1974 and live there ever since. The apartment has to be used as the tenant’s primary residence. It can remain rent controlled only as long as it is occupied by the renter who initially rented it, or a direct successor of his. For instance, a son can inherit the rent controlled apartment by his parents; however, the rent control laws and regulations do not permit the extended family members to take advantage and abide as rent control tenants. The law allows the landlord to increase the rent if some major improvements have been made in the apartment. So once the original tenant vacates the apartment either willingly –move out, or not so willingly-die, then the landlord takes the apartment in his possession and as long as there is no lawful successor to take over the lease, the landlord can deregulate the apartment. The apartment comes back to market at market price unless it is rent stabilized and even after significant improvements, the landlord cannot justify a price increase of more than $2500 per month.
Problems with rent controlled apartments:
There has been a lot of noise around those apartments since, as stated above, in order for the tenant to lawfully reside and keep the lease of his rent controlled place he needs to use the place as a primary residence. It is common for a Landlord of large apartment buildings to sometimes hire a private investigator whose task would be to make sure that those rent controlled tenants are not illegally subletting their apartments to third parties, or using the place only as a pied-a terre. Stuyvesant town is one of the large apartment complexes in the city where Tishman speyer attempted to evict long term rent controlled residents on the premise of a false pretense and deregulate their apartments.
Rent control apartments in coop buildings:
Have you happened to come across a coop building with a rent controlled apartment with a tenant in place who pays a ridiculously low amount of rent?—maybe sometimes even less than the actual maintenance of the apartment itself? I have. It is possible for the sponsor to opt out and try to sell the apartment with the rent stabilized tenant into place. Usually, inheriting a tenant with the purchase of a new apartment can be a rather cumbersome endeavor for the buyer, so those apartments sell %30-%50 less than market price. The buyer can only use the apartment as a long term investment and wait on the tenant to die, or voluntarily leave the apartment before he can move in. There are investment funds whose main priorities are to pursue those long term investment opportunities. They use actuarial tables to determine if it is worth buying the property depending on how long it would be before the rent stabilized tenant dies. Yes, it is not only the undertakers that make living of death people. In new york we have more diverse ways to do that.
Why do we have rent controlled apartments in a coop building?
The answer is simple. When the building was converted to a coop, the sponsor/ owner offered the tenants to buy themselves out and become property owners rather than remain renters. In order to have a rent stabilized tenant into place 20 years after the conversion of the building to a coop, chances are there must have been some of those tenants who decided to remain renters and did not buy into the cooperation. So, there are two possible scenarios that could have unfolded. The faith of the tenants who decide to keep their status of renters depends on the offering plan.
1st Eviction plan
The tenant can stay in his apartment up to 3 years. If he does not become a shareholder by then, he has to leave the apartment. After the unit is vacated it belongs to the sponsor or owner of the building and it can be offered for sale. It is common to see some of those apartment come available for sale and they are usually advertised as—“ no board approval required apartments” when they go for sale.
2nd Non-eviction plan
This is when the sponsor allows the tenant to remain in the apartment and renew his/her lease. In this case the tenant continues to live in the apartment under the rent control laws and pays rent to the sponsor or the outside investor who purchased the apartment. Yes, they can remain there forever and the new owner has no right to evict the tenant in pace.
Final words on rent stabilize and rent controlled apartments in NYC:
Unless you have rented an apartment before July1st 1974, or you are a direct heir of someone who has, you can’t have a rent controlled lease in NYC. Those are not drafted anymore, and if you live in a rent controlled apartment, and neither of the above stated conditions apply to you, then you probably sublet the apartment illegally from the actual rent controlled tenant.
Rent stabilized apartments are more common and even after the numerous attempts of the landlords to deregulate those apartments and ask fair market price, you might still find them and if lucky, cut the competition and rent one of those.