New local laws add to changing landscape for New York City landlords

June 18, 2019

Real Estate Alert

Author(s): Erica F. Buckley, Ruben M. Ravago

New York City’s new local laws place new obligations on developers and landlords of residential buildings, as well as design professionals and contractors, particularly surrounding construction, renovations and buyouts. This alert discusses what owners, developers and landlords need to know.

Although much attention is being dedicated to the New York State rent laws, the local legislative landscape relating to tenant protections is also changing. On May 8, 2019, the New York City Council passed a package of 17 bills for local laws, implementing modifications to the New York Administrative and Fire Codes, all with the stated objective of combating the displacement of tenants, particularly those of rent-regulated or rent-stabilized apartments. The slate of bills became new local laws as of June 8, 2019, when the 30-day mayoral review period ended without a veto being issued by Mayor de Blasio. The legislation increases regulation of buyout agreements (i.e., the negotiated surrender of regulated apartments) as well as construction practices which tenant advocates argue are used to unfairly coerce tenants into abandoning their below-market apartments, and places new oversight, enforcement and reporting responsibilities on city agencies.

New obligations for landlords of regulated apartments

The new local laws impose new and ongoing obligations on landlords:

  • Local Law 1274 requires owners of multiple dwellings to obtain the previous four years’ rent history from DHCR for each apartment, if available, and to provide such information to the current tenant of the apartment.
  • Local Law 1247 requires owners of residential buildings to provide copies of any notice of violation issued against a property to the residents of that property. If the violation is in a common area or otherwise affects all residents, the notice must be posted in the lobby. If relating to a condition in a particular apartment, notice must be given to the tenant of the affected apartment as well as adjacent apartments.

Responsibilities and penalties for construction work and documents

The new laws also add to the information that must be included in DOB work filings, including the Tenant Protection Plan (TPP) required in connection with construction, renovation or demolition (LL 1107). Responsibility for submitting the TPP is shifted from architects and engineers to contractors, an approved TPP is required as a condition to issuance of a permit and the DOB must periodically inspect the work site to ensure compliance with the TPP (LL 1278). The TPP must be signed by the owner and the architect, and failure to submit a TPP may be subjected to a minimum $10,000 penalty, with subsequent offenses subject to a minimum $25,000 penalty (LL 1280).

In addition to a design professional being subjected to penalties for making false certifications, the new laws render the professional’s supervisor liable (including permanent revocation of certification privileges) for directing the professional to make a false certification, or being aware of such conduct and failing to prevent it (LL 1241). A design professional may be subject to discipline or suspension for submitting two applications for construction document approval within any 12-month period containing errors that result in a stop work order (LL 977).

Failure to allow DOB to inspect a work site will result in a stop work order (LL 1257).

DOB will deny building permits for buildings having too many hazardous violations (with the number of violations depending on whether the building has 35 units or more) (LL 975), and will deny permits for one year for a building where a false statement about the occupancy status was made on the permit application, or where work is performed without a permit in an occupied building (LL 1275). Neither Local Law 975 or 1275 applies to condominiums or cooperatives, and both contain exemptions for permits sought to correct outstanding DOB or HPD violations, permits necessary to protect public health and safety, properties that are the subject of certain court proceedings and permits required for certain DOB or HPD programs.

Expanded agency powers, auditing and reporting

The new laws also impose a number of new oversight, auditing and enforcement obligations on various city agencies. Nearly all of the new agency functions noted below also entail that the agency report to the city council and the mayor on the results of the actions required under the new laws:

  • DOB must audit annually at least 15% of all certificates of correction of hazardous violations, and confirm the conditions have been corrected (LL 1279).
  • The Department of Consumer Affairs (DCA) must audit annually the records of at least 20% of licensed process servers who have served at least one summons, subpoena, notice, citation or other process for a housing court proceeding (LL 1258).
  • HPD’s online property owner registry must be expanded to include DOB violations related to construction as harassment, violations of work without a permit and work in violation of a stop work order. HPD must also obtain rent overcharge information for such owner from DHCR, if available, and incorporate that information into the registry (LL 1242.)
  • DOB and the Department of Finance (DOF) are now required to share information in order to identify cases of false statements regarding occupied and rent-regulated housing, and to request such information from DHCR (LL 1171.) In addition, DOB must audit:
    • all of an owner’s properties if the owner has been caught either failing to obtain a building permit or submitting false statements regarding occupied and rent-regulated housing on an application for a building permit.
    • 25% of buildings on HPD’s “speculation watch list” on an annual basis.
    • the whole portfolio of owners who have an unusually high number of amended building permits that indicate a change in occupancy, a change in whether the building contains rent-regulated units or a change that would require the owner to submit an application for a new permit to the department.
  • DOB must conduct preliminary inspections of no less than 20% of buildings containing six or more units where (i) an application for construction documents is submitted to the department and (ii) the applicant has indicated that the building that is the subject of such application is unoccupied, in order to verify the occupancy status of such site (LL 1277).

Buyout agreements

As widely reported in the news media, new state legislation will dramatically curtail landlords’ ability to raise rents of regulated apartments, or to remove apartments from stabilization altogether. While this will almost surely reduce the prevalence of buyout agreements, those who still seek to negotiate a voluntary surrender of a regulated apartment will face additional requirements:

Local Law 59 adds disclosures that must be provided in the requisite notice to the tenant along with the buyout offer, including information regarding the median rent in the same community district, that there is no guarantee that the tenant will be able to rent a similarly sized apartment in the same community district for the same rent and that additional factors (such as employment and credit history) may impact the tenant’s ability to rent another apartment.

  • Local Law 551 requires that, within 90 days following the execution of a buyout agreement, the landlord must report to HPD information about the buyout arrangement, including the name of the owner, the address of the apartment and the amount of monetary or other consideration (such as dismissal of a pending lawsuit) exchanged in connection with the buyout. This law also requires HPD to report annually, beginning in January 2021, to the mayor and the city council regarding all buyouts reported for the prior year.

Landlords and developers of residential properties must familiarize themselves with these new local laws (as well the new state rent laws) to ensure they and their contractors and design professionals adhere to best practices in construction, tenant notifications and agency reporting obligations. Not doing so could delay permitting and construction, result in fines and complicate buyouts.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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