2019 Newsletter Archive
Newsletter Exclusive Article:
June 2019 Bill Amends Article 7-C of Loft Law-
More Buildings and Units are Now Eligible
Loft Law changes you might have missed following HSTPA enactment
On June 25, 2019, Governor Andrew Cuomo signed a bill amending Article 7-C of the Multiple Dwelling Law (the “Loft Law), expanding the number of buildings and units now eligible for coverage (the “2019 Amendments”). The 2019 Amendment did not gain much attention, as they were largely overshadowed by the enactment of the HSTPA and its wide-ranging impact on rent-stabilized buildings. However, by removing the limitations on coverage imposed by the 2010 amendments to the Loft Law (the “2010 Amendments”) and creating a new window period for coverage eligibility, the 2019 Amendments will potentially impact hundreds of existing loft buildings, as well as hundreds of new buildings that were not previously eligible for Loft Law coverage.
Under the 2010 Amendments, which became effective on June 21, 2010, buildings that lacked a Multiple Dwelling Law § 301 residential certificate of occupancy on the effective date, which were at one time used for manufacturing, commercial, or warehouse purposes and were occupied by three or more families living independently from one another for 12 consecutive months between January 1, 2008 and December 31, 2009, became eligible for Loft Law coverage, provided that the units (1) had at least one window opening onto a street, lawful yard or court, (2) were at least 550 square feet in area, (3) were not located in a basement or cellar, (4) were not located in an industrial business zone other than Greenpoint/Williamsburg, North Brooklyn and certain areas of the Long Island City’s industrial business zone and (5) were not located in a building that contained certain inherently incompatible use listed in Use Groups 15 through 18 of the Zoning Resolution. In 2013, the Legislature softened the 2010 Amendments by reducing the size of eligibility units from 550 square feet to 400 square feet which, in turn, increased the number of units eligible for coverage. The 2013 Amendments also set a deadline by which landlords and tenants had to file a registration and coverage application in order to qualify for Loft Law protection.
The 2019 Amendments significantly alter the restrictions implemented by the 2010 and 2013 Amendments. The 2019 Amendments abolish the filing deadline for the 2008/2009 window period. Accordingly, any unit that was eligible for coverage under the 2008-2009 window period that missed the filing deadline can now file for coverage. The 2019 Amendments remove the window requirement, meaning that units that do not meet the minimum light and air requirements of applicable zoning and building codes are now eligible for coverage. As such, the amendments place the onus of legalizing loft units that do not have adequate light and air on the owner during the legalization process.
In addition, units located in a basement are now also eligible for coverage. This shifts the burden to the owner to determine how to legalize units that otherwise would not qualify for residential use. Under the 2019 Amendments, inherently incompatible uses are now limited to uses within Use Group 18 which creates an actual risk of harm that cannot be reasonably mitigated. Furthermore, the maximum civil penalty for the failure to comply with the Loft Law was increased from $17,500 to $25,000.
Most significantly, however, the 2019 Amendments established a new window 2015/2016 period for eligibility. Specifically, units located in commercial, manufacturing and warehouse buildings, which were residentially occupied by three or more families living independently for 12 consecutive months between January 1, 2015 and December 31, 2016, are eligible for Loft Law coverage, provided the other elements of coverage are satisfied.
Accordingly, the 2019 Amendments have far-reaching implications by removing restrictions for coverage eligibility and establishing a new coverage window period.
In addition to the legislative changes contained in the 2019 Amendments, the Loft Board is in the process of amending its rules to address issues of coverage, the requirements for protected occupancy status and the rules governing legalization. These changes, like the 2019 Amendments, will significantly affect owners of buildings subject to the Loft Law. Of course, we will not know the true effect of the rule amendments until they are promulgated.
Newsletter Exclusive Article:
The Housing Stability and Tenant Protection Act of 2019 (“HSTPA”) was signed by the Governor on June 14, 2019.
Hailed by tenant advocates and the bill’s sponsors and simultaneously decried by the real estate industry, there is no dispute that HSTPA makes dramatic changes to the landscape of rental housing in New York City and throughout New York State. This article will discuss some of the most important changes. This article is not intended to be a complete recitation of every change in the law, in fact it cannot be that. HSTPA is made up of 15 different parts, each addressing a different subject, and is over 74 pages long.
Rent Laws are made Permanent
HSTPA makes the rent regulation statutes permanent by removing reference to any “sunset” date. However, the laws still require that New York City periodically declare a housing emergency following a vacancy study.
Vacancy and Longevity rent increases are repealed
Automatic one- and two-year vacancy increases, longevity increases and low rent increases have been repealed. Further, “rent guidelines boards shall no longer promulgate adjustments for vacancy increases.” Because there is no rent increase, the incentive to obtain a vacant apartment is gone. The unintended consequence is that landlords have no incentive to remove tenants who don’t reside in their apartments or who illegally sublet them – so those units will not be freed up for tenants who need housing.
Luxury Deregulation is repealed
The repeal applies to both High Income/High Rent and High Rent Vacancy Deregulation. An amendment to the HSTPA (signed just a week later) clarifies that apartments previously deregulated are not re-regulated. The amendment also clarifies that market apartments in the new Affordable New York Housing Program are still eligible for deregulation as it existed prior to the HSTPA.
Upon renewal of a lease, only the applicable renewal guideline above the previously collected preferential rent may be charged. Preferential rents may no longer be eliminated upon lease renewal or increased to any amount below the legal rent. Owners may continue to charge up to the full legal rent upon vacancy. An exception exists for buildings subject to stabilization by virtue of a regulatory agreement with a local government agency and which receive federal project based rental assistance.
The amendments relating to rent overcharges apply to all claims pending on the effective date of HSTPA. Among other things, the overcharge recovery period is extended to six years and the treble damage penalty applies to the entire six years. The base date for determining legal rent is extended to six years but the look back period could be longer if the registration from six years ago is not “reliable.” Review of rent records and other information, even prior to the six-year look back, can be reviewed if “reasonably necessary” to determine regulated status or legal rent. This is much broader than mere reliability of the base date registration and could allow a complete review of all records. The voluntary refund of an overcharge after a complaint is filed will no longer be considered evidence that the overcharge was not willful (i.e., such a refund no longer prevents treble damages from being assessed). In a nod to the tenant bar, HSTPA requires that DHCR shall (rather than may) impose attorney’s fees where an overcharge is found. HSTPA also provides that DHCR and the courts have concurrent jurisdiction “subject to the tenant’s choice of forum.” In reality tenants always had the choice of forum. The question is whether this language prevents a court from referring the matter to DHCR.
ETPA Extended Statewide
HSTPA declares a housing emergency statewide and extends the provisions of the ETPA to “all counties within the state of New York outside of the City of New York.” Municipalities in all New York counties may thus adopt the provisions of the ETPA.
Owner Occupancy. Amendments to owner occupancy proceedings are effective immediately and apply to any tenant in possession on the effective date of HSTPA, regardless of whether the owner’s proceeding commenced prior to the effective date. The amendments preclude an owner from recovering possession of more than one apartment for owner use. The rent control law now limits recovery to those instances where the owner intends to use the apartment as his primary residence. A tenant in occupancy for 15 years cannot be evicted. The stabilization law requires that recovery must be based upon “immediate and compelling necessity.” A new restriction precludes recovery of an apartment where a tenant has been in occupancy for 15 years or more. Both statutes now provide that where a tenant is required to surrender possession, the tenant shall have a cause of action for damages against a landlord who made a fraudulent statement regarding proposed use.
Individual Apartment Improvements (IAIs)
This was a hot button issue in the days leading up to passage of HSTPA. Owners complained about low rents and predicted deteriorating apartment conditions, conjuring up images of NYCHA housing. Contractors and workers marched on Albany to save their livelihoods which rely on apartment renovations. Tenants opposed the provisions which allow for rent increases in vacant apartments. In the end, a compromise was reached which is not satisfying to any of the affected groups. Now the monthly rent increase for buildings with 35 or fewer apartments is 1/168th and for buildings with 36 or more apartments is 1/180th of the IAI cost. Moreover, although the increase becomes part of the rent for purposes of RGB compounding it must be removed after 30 years “inclusive of any increases granted by the applicable rent guidelines board.” Finally, the IAI cannot be based on more than $15,000 spent in a 15-year period beginning with the first IAI installed after the effective date of HSTPA. The maximum rent increase every 15 years is therefore less than $90 per month. The $15,000 limit is not enough for even a standard bathroom renovation.
DHCR, the agency which oversees all the rent laws, is required to issue rules requiring IAI work be done by a licensed contractor with no common ownership with the landlord, require that the owner “resolve” all outstanding hazardous and immediately hazardous violations in the “dwelling space,” and include a schedule of reasonable costs for IAIs. Gone are the days of Sub-Zero refrigerators and Wolf ranges. Beginning June 14, 2020 DHCR must provide for the electronic retention of IAI documentation inclusive of photographic evidence documenting the conditions before and after the work. Major Capital Improvements (MCIs). MCI costs will be amortized over a 12-year period for buildings with 35 or fewer units and over 12 ½ years for buildings with 36 or more units and must be removed from the legal rent after 30 years. DHCR is required to issue a notice 60 days prior to the end of the 30 years stating the total amount to be removed. DHCR must also issue rules which establish a schedule of reasonable costs for MCIs setting a ceiling for allowable costs, prohibit MCIs for buildings with outstanding hazardous or immediately hazardous violations and prohibit MCIs for buildings with 35% or fewer rent regulated units. The market tenants will subsidize the regulated tenants. MCIs are prospective only. Collection is limited to 2% (rather than 6%) per year. In addition, DHCR must establish an annual inspection and audit process to review 25% of MCI applications that have been approved in the prior year.
Adding insult to injury HSTPA also raises the registration fee for RS apartments in NYC from $10 per unit to $20 per unit. The additional $10 is to be shared equally between ORA and TPU.
Newsletter Exclusive Article:
REAL ESTATE LAW FIRM Rosenberg & Estis, P.C. ESTABLISHES TAX INCENTIVES & AFFORDABLE HOUSING DEPARTMENT
Daniel M. Bernstein Named as Member of Firm to Head New Department
Rosenberg & Estis, P.C., a leading New York City real estate law firm, has named Daniel M. Bernstein as a Member to head the firm’s new Tax Incentive & Affordable Housing Department. Bernstein, formerly Of Counsel to Rosenberg & Estis, will focus on the tax incentive programs and affordability requirements that are critical to New York City residential and commercial projects. The establishment of a department dedicated specifically to tax incentives and affordable housing further demonstrates Rosenberg & Estis’ commitment to providing comprehensive legal representation in the real estate arena. The announcement of this department follows the firm’s recent creation of a Property Tax Department, Construction Department and Co-Op / Condominium Department.
Rosenberg & Estis’ tax incentive services include obtaining and maintaining property tax exemptions and abatements (new and old 421-a, ICAP/ICIP, 420-c, 420-a, J-51, Article XI, etc.) and equivalent reductions in payments-in-lieu of taxes. Affordable housing services can include qualifying for affordable housing finance programs, property tax exemptions or abatements, as well as inclusionary housing benefits under both the voluntary and mandatory inclusionary housing programs and under various zoning benefits programs. The department also provides due diligence reviews for prospective lenders and purchasers of property, either completed or under construction, that are seeking tax exemptions or abatements, or that are subject to regulatory agreements involving affordability requirements.
Rosenberg & Estis attorneys are among the first in New York to represent clients seeking benefits under the new 421-a(16) program, including compliance with the new 421-a(16) program’s construction wage requirements. The firm also assists clients on the combination of the benefits from the 421-a(16) program and the inclusionary housing program, enabling developers to secure property tax exemptions and additional development rights through the same affordable units. The firm also structures condominium declarations that enable properties to maximize tax incentive programs and to reflect financing and business interests.
“The Tax Incentives and Affordable Housing Department is critical to clients who are developing, acquiring or financing a property in New York City,” said Luise A. Barrack, Managing Member with Rosenberg & Estis. “Daniel’s deep knowledge on these issues enables him to lead a team of top attorneys as we provide our clients a full suite of services.”
REAL ESTATE LAW FIRM Rosenberg & Estis, P.C. ESTABLISHES PROPERTY TAX DEPARTMENT
Benjamin M. Williams Joins Firm as Member to Lead New Department
Rosenberg & Estis, P.C., a leading New York City real estate law firm, has announced that Benjamin M. Williams has joined the firm as a Member to lead the firm’s new Property Tax Department.
The addition of Williams and the establishment of a property tax department demonstrates Rosenberg & Estis’ commitment to continue providing clients with comprehensive legal representation across all aspects of real estate. This department is an excellent complement to Rosenberg & Estis’ newly established Construction Department and Co-Op / Condominium Department.
Williams brings extensive experience in New York property tax issues to the firm. He has represented thousands of clients in property tax appeals and at New York City Tax Commission hearings. He has a depth of experience in real estate tax projections for development, acquisition, leasing, financing, and budgeting. Williams also has worked on Industrial and Commercial Abatement Program (ICAP), 421-a, and not-for-profit exemption applications and projections.
“The creation of a department focused on property tax issues helps us to further service our clients as the firm continues to grow,” said Luise A. Barrack, Managing Member with Rosenberg & Estis. “Williams’ deep experience on tax-related issues expands our scope and advances our mission to provide our clients a full suite of services. Real estate tax certiorari is a natural fit for the firm, and clients will benefit from the synergies with our other practice areas.”
“I am excited to help establish this new department in one of the largest and most esteemed New York City real estate law firms. We are already busy. Clients are asking how they can prepare for their 2019 property tax protests, which start in only two months and run from January 15 to March 1,” said Williams. “We expect that within a week, the City Council will vote on the final 2018/19 tax rates, and the Department of Finance will mail the third quarter tax bills.”
Prior to joining Rosenberg & Estis, Williams was an associate attorney with Podell, Schwartz, Schecter & Banfield, LLP. He graduated from Rutgers University School of Engineering with a Bachelor of Science degree and received a Juris Doctor degree from Rutgers University School of Law.