Is New York Senate Bill S2892B Good Cause Eviction Bill a Good Idea?

(F) THE TENANT HAS UNREASONABLY REFUSED THE LANDLORD ACCESS TO THE HOUSING ACCOMMODATION FOR THE PURPOSE OF MAKING NECESSARY REPAIRS OR IMPROVEMENTS REQUIRED BY LAW OR FOR THE PURPOSE OF SHOWING THE HOUSING ACCOMMODATION TO A PROSPECTIVE PURCHASER, MORTGAGEE OR OTHER PERSON HAVING A LEGITIMATE INTEREST THEREIN;

The landlord is allowed to re-occupy an apartment for personal use in smaller buildings

The below sections of the proposed bill allows owners to evict a tenant for good cause, presumably after the expiration of any lease, if the owner intends to occupy the property for personal use and no other unit is available in the building. This would be allowed in buildings with fewer than 12 units if there is an “immediate and compelling necessity,” again as to be determined via a court proceeding, to recover the property to use as a primary residence for either the owner or an immediate family member. Only one unit is allowed to be recovered, and no recovery is allowed if the tenant is over 62 years old or disabled. The bill is less strict for buildings with less than 5 units, and an owner is allowed to recover any or all units to use as a primary residence.

(G) THE LANDLORD SEEKS IN GOOD FAITH TO RECOVER POSSESSION OF A HOUSING ACCOMMODATION LOCATED IN A BUILDING CONTAINING FEWER THAN TWELVE UNITS BECAUSE OF IMMEDIATE AND COMPELLING NECESSITY FOR HIS OR HER OWN PERSONAL USE AND OCCUPANCY AS HIS OR HER PRINCIPAL RESIDENCE, OR THE PERSONAL USE AND OCCUPANCY AS PRINCIPAL RESIDENCE OF HIS OR HER SPOUSE, PARENT, CHILD, STEPCHILD, FATHER-IN-LAW OR MOTHER-IN-LAW, WHEN NO OTHER SUITABLE HOUSING ACCOMMODATION IN SUCH BUILDING IS AVAILABLE. THIS PARAGRAPH SHALL PERMIT RECOVERY OF ONLY ONE HOUSING ACCOMMODATION AND SHALL NOT APPLY TO A HOUSING ACCOMMODATION OCCUPIED BY A TENANT WHO IS SIXTY-TWO YEARS OF AGE OR OLDER OR WHO IS A DISABLED PERSON;

(H) THE LANDLORD SEEKS IN GOOD FAITH TO RECOVER POSSESSION OF ANY OR ALL HOUSING ACCOMMODATIONS LOCATED IN A BUILDING WITH LESS THAN FIVE UNITS TO PERSONALLY OCCUPY SUCH HOUSING ACCOMMODATIONS AS HIS OR HER PRINCIPAL RESIDENCE.

Yes, the Good Cause Eviction Bill would enact universal rent control for most residential real estate in New York. Landlords, including owners of individual condo and co-op apartments, would be required to perpetually renew a lease to a tenant with rent increases of no more than 3% per year.

Furthermore, there are no provisions to protect property owners from operating at a loss if property taxes, common charges or maintenance fees or other operating expenses increase more than 3% per year.

Furthermore, the proposed bill will limit property owners’ ability to access the unit to make repairs, unless the court determines that a repair is legally necessary. In theory, once an apartment is rented out, the owner may never be able to access his or her apartment again due to mandated lease renewals and restrictions on recovering their property.

Moreover, the proposed bill enables an occupant to obtain an injunction to stop a holdover tenant, nonpayment or objectionable tenancy court proceeding for years while a judge determines whether there’s a good cause for eviction. This is no embellishment given that the borrower friendly courts allow the foreclosure process in New York to drag out for 3 to 5 years on average.

Furthermore, New York has enacted an ever expanded set of green initiatives for buildings to reduce their carbon footprint, and along with the likely increase in income and property taxes due as a result of lost revenues from the COVID-19 shutdown, it’s extremely unlikely that property owners will be able to keep expenses from increasing less than 3%.

In the following section, a former assisted FSBO customer who successfully sold his Downtown Brooklyn co-op apartment in 2018 shared with us a letter he wrote to State Senator Julia Salazar, the primary sponsor of Senate Bill S2892B, as well as twelve co-sponsors.

Act Now: Email, call or visit your state representative to share your views on this bill. You can find out who your NY State Senator is here. You can find out who your New York State Assembly Member is here. You can find a compelling memorandum in opposition of this bill written by the Rent Stabilization Association here.

I’m posting today to express my serious concern over the multiple detrimental effects, perhaps unintentional, that Senate Bill S2892B will have on shareholders in coops which permit subletting, especially coops which have a liberal sublet policy, such as University Towers in Downtown Brooklyn.

Coops have long been exempt from Rent Control and Rent Stabilization guidelines.

The most troubling aspect of Senate Bill S2892B is the requirement to offer a lease to any occupant of a rental coop, regardless of legal status, even if there is no existing or previous lease.

This single requirement will have a drastic effect on the lives and financial futures of any coop shareholders who sublet their apartments, regardless of whether they are ordinary home owners or small private investors. It will also negatively impact all shareholders of coops which permit subletting by reducing property values.

How?

1) Resale Market

Investors in large apartment buildings or multi unit rental houses know when they initially invest in the building that it will always be occupied. Moreover, they know they will eventually sell the occupied building to the limited market of other investors. Their business plan is based on this assumption.

Coop home owners and small, private investors in rental coops face an altogether different situation.

Since rental units comprise only a small percentage of the units in any coop, owners of these units expect from the outset to eventually sell to buyers who will occupy the unit, not investors. Shareholders’ financial futures are based on this assumption.

I know from my seven years of Board service at University Towers that nearly all purchasers of individual coops will occupy the unit.

By effectively mandating permanent residency, Senate Bill S2892B will force ordinary shareholders to sell their unit occupied, thus eliminating most of their potential market.

Owners of these units will be forced to sell to the vastly smaller market of investors. Since the law will already be in effect, all prospective purchasing investors will expect to eventually resell to other investors. In addition, unlike buyers who will occupy the unit, investors’ expectation of monthly income will factor into the purchase. This will drastically reduce the market value.

Ordinary home owners who sublet, as well as small private investors will be forced to subsidize renters, in some cases, at the expense of their financial futures.

2) Reduced Property Values

This “permanent residency” requirement will also impact all shareholders by reducing property values.

When shareholders who occupy their unit decide to sell, they will have to compete with rental units, which will be priced much lower. Prospective buyers and real estate buyers’ agents will use the lower sale price of similar rental units as a bargaining chip, thus lowering the market value of all coops in the complex.

3) Shareholders Compelled To Subsidize Renters

In cases where rental coops cannot be sold because the investor market is unfavorable, unsuspecting shareholders will be forced into the role of a permanent landlord. With exorbitant increases in NYC property taxes and a government mandated limit of 3% yearly rent increases, it’s entirely possible that ordinary shareholders who were merely trying to supplement their retirement will be forced to actually take a monthly loss in order to subsidize a one time government mandated conversion of their units into permanent rental units.

4) Board Approval and Limited Leases Rendered Meaningless

Many coops employ an exhaustive Board approval process in an attempt to maintain a safe and community oriented atmosphere. Some coops also limit sublet leases to a one year term. In the event a renter disturbs or threatens neighbors, the Board can simply decline to approve a new lease without a lengthy and expensive eviction proceeding.

The requirement of offering a lease to all occupants, even illegal occupants, will render meaningless both the board approval process and the one year lease requirement.

5) Increased Maintenance

Coop Boards and shareholders may be quite resistant to the prospect of losing control over their own property, their community and their collective financial future. As a response to this law, coops may end all subletting, which would further restrict the rights of shareholders who wish to temporarily sublet because of a job relocation or unfavorable market conditions, or simply to build a financial future. An end to subletting and thus sublet fees would significantly reduce income to coops and would result in higher maintenance fees.

Ordinary shareholders, not just those who sublet, would effectively be forced to subsidize renters.

6) Reduced Housing Availability

Finally, by resulting in an end to coop subletting, Senate Bill S2892B would reduce the availability of housing to the very renters it was designed to protect.

The government has made it clear for generations that it does not wish to be in the business of providing housing. That’s why generous tax exemptions for mortgage interest, property taxes, maintenance or common charges (in full), depreciation, repairs and improvements are offered to investors, to create incentive for investors to provide housing. By fixing prices for all rent and effectively preventing the sale of investment real estate, the government is not only removing the traditional incentive, but is forcing investors to subsidize renters, potentially without compensation, and possibly at an economic loss.

How can the right of an owner to build a financial future and sell his/her own property be restricted in favor of the rights of an occupant who has no legal right to occupy that property?

If renters are not subject to existing laws, how can owners be expected to honor Senate Bill S2892B?

Simply stated, Senate Bill S2892B will protect the rights of renters by infringing upon the rights of owners.

It’s difficult to imagine the courts upholding a law which potentially compels one group of citizens into involuntary servitude for the benefit of another group of citizens.

If lawmakers believe that existing tenant protections are insufficient, then it is the responsibility of those lawmakers to find a way to create additional protections without infringing on the rights of property owners.

Russell F. Morrow