New York's rent laws changed dramatically a couple of weeks ago. The changes will have an immediate effect on landlords and tenants and how we transact our business. The new law will also impact property buyers and sellers, and there will most certainly be ripple effects in other industries, as well as the look, feel and overall health of our City and State.
Lawmakers passed legislation to keep more of New York apartments "regulated", creating new limits on how much landlords can charge tenants up front and throughout the year. Here are a few of the "highlights":
For all renters:
· Security deposits will be limited to one month’s rent. How will this affect prospective tenants with bad credit? Good luck to them!
Procedures will be adjusted to make it easier for renters to get security deposits back
· Tenants labeled troublemakers by landlords sometimes ended up on blacklists that would be shared among rental agencies. That practice is now banned. You've heard of "buyer beware!"; well, the new motto should be "landlord beware!" ·
Illegal evictions are now misdemeanors punishable by civil penalties between $1,000 and $10,000 per violation. This shouldn't be a major problem; there is little financial incentive to evict tenants for non-primary residence, illegal subletting, etc.
For renters in regulated apartments:
· If an apartment is either rent stabilized or controlled, there remain strict limits on how much rent a landlord can charge. In the past, regulated apartments could become deregulated if the tenant moved out. No longer. Under the new law, regulated apartments will remain regulated, regardless of the rent or the tenant’s income. Too many wealthy tenants will benefit by renting undervalued, rent regulated apartments.
· More apartments will be kept in the rent-regulated system. Real estate lobbyists warned that would diminish the supply of market-rate units and drive up those rents. ·
While rent hikes on existing tenants are relatively constrained, landlords have historically had much more room to maneuver when a new tenant moves in. Not so moving forward for rent regulated apartments.
Old Rules: The “vacancy bonus” can be as much as 20 percent for a new two-year lease
New Rules: There is permitted no vacancy bonus.
Individual Apartment Improvements (IAIs) - When a landlord makes upgrades to a vacant apartment, a fraction of the costs can be passed on to the incoming tenant.
Old Rules: There is no definite limit to how much can be spent on an IAI.
New Rules: IAI expenses are now capped at $15,000 over a 15-year period, and the rent change ratio has been reduced from 1/40 to a meager 1/168. Result: There will be little incentive for landlords to upgrade their properties which may fall into disrepair.
We will be closely monitoring how these regulations affect our clients individually and the real estate market as a whole. As always, we will continue to keep you updated. Please feel free to reach out with any questions.