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HSTPA and Covid 19

July 10, 2020

 

New York City has been one of the best real estate markets in the world for decades.  But recently, the success of the real estate market, which is the true driving engine of the city, has come under unfair light.  Rising rents, gentrification of neighborhoods, and a growing income divide have created a situation that some have labeled “a tale of two cities”. 

In June of 2019, the NYS Assembly passed the Housing Stability and Tenant Protection Act of 2019 (“HSTPA”).  The law drastically impacted multifamily rent stabilized properties and ground transactions to a halt.  Among the main points that impacted rent stabilized buildings, was  the removal of the long standing twenty percent (20%) vacancy charge and the fact that individual apartment improvements (“IAI”) and major capital improvement (“MCI”) were made worthless.  Any improvement increases were made temporary and the increases themselves were capped.  Preferential rent became permanent, at least until the tenant vacated the unit.

Moreover, the HSTPA changed the way evictions could be commenced.  Non-payment cases now require that a 5-day rent demand be sent to a tenant, followed by a 14-day notice.  Holdovers require a 60-day notice for any tenant with a lease who resided for at least 1year and a 90-day notice for those tenants who have resided in the unit for more than 2 years.  The law was so poorly written that there is still ongoing debate as to whether a Landlord needs to wait the 5 days prior to sending the 14-day notice and what aspect of the Act apply to condos, coops, and commercial properties.  With all these laws impacting a Landlord’s ability to raise rents and evict Tenants, multifamily transactions slowed, and property value was cut by a third in some cases.  As 2019 ended, it found the NYC real estate market reeling.

In 2020, we all guessed the inevitable result that Covid-19 would end up coming to NY from China or Europe, but no one could have imagined how devasting it would be.  NYC quickly became the epicenter of the virus in the US.  As NYC, Westchester, Nassau and Suffolk counties went into lock down, stores closed, office buildings became vacant, and residents sheltered in place.  The virus affected industries across the board and individuals across the economic scale.  As businesses shuttered their doors and could not or would not pay their rents or their employees, and as employees were terminated, they also became unable to pay their own rents.  Realizing this problem, Gov. Cuomo passed the executive order to place a moratorium on evictions.  The slogan of the pandemic became “we are all in this together!”.  But if we are truly all in this together, then we have to act for the benefit of all, for the tenants, the landlords, the business owners and the employees.

As the moratorium on evictions is being lifted and Landlords can file for evictions electronically, it is expected that there will be nearly 50,000 evictions filed in NYC.  Tenants are screaming for a freeze on evictions for a year.  The Rent Guideline Board passed a rent freeze for one year leases and a partial rent freeze for the first year of a two year lease.  NYC passed a bill that removes the personal guarantor from being obligated under a commercial lease for any retailer or business that was affected by Covid-19.  Yet with all these measures for Tenants, there was nothing passed to consider the Landlords.  Landlords are still required to maintain their properties, pay taxes, and to provide utilities in many buildings.  If we are truly in this together, then petitions should circulate asking not only for rent freeze but for a mortgage freeze, a tax freeze, and insurance freeze, and a utilities freeze.  Perhaps a bolder step would allow forgiveness for all monies owed from March through June for 2020 by everyone involved.

As we enter the summer, we see that New Yorkers are leaving the City, some permanently.  The luster of the City has dimmed as Covid-19 has made living in close proximity to one another less appealing.  The thought of being in an elevator with others has made NYC high-rise luxury condos seem like perfect virus conduits, just like the subway system.  This will be reflected in potentially lower rentals prices in NYC, as well as lower sales prices, as demand is reduced in this new “normal”.  On the other hand, suburban living has become more attractive, as individuals seek more space, as families look for a backyard to enjoy, and as many seek to want to be surrounded by trees instead of people.

These and similar thoughts about changes in our world should guide decision making in the area of real estate.  We, as attorneys, should giving thought to where these trends may lead, including the new legal landscape after Covid.  Our clients can benefit from the insights gained from such contemplation.  We should also give thought to estate planning opportunities in a world of lower real estate prices.  Lastly, those who are keen observers may remember that in the past, real estate recovered and surpassed prior levels after each down market.  Investors may  have tremendous buying opportunities in the months ahead.  Interest rates are almost at their all time low which may allow some buyers to afford to buy much more than they could in the past.

The law office of Robert Bichoupan, P.C. stands ready to guide you through all the ups and downs that the future may hold.  Whether you are a Landlord facing hardship due to reduced rental collection, a Tenant impacted by Covid-19 and facing eviction, a Seller or a Purchaser looking to move out or to move into your future home or investment, or merely want to take advantage of the current normal to create a trust or transfer an asset at a lower price point, we can help you navigate these difficult times.  We are ready to help you achieve your goals and protect your interests.

 

 

 

 

 

 

 

Prior results do not guarantee a similar outcome. All information posted is general advice only, based upon the rules of NYS, and is not intended to be a substitute for personal legal advice. Although information provided here was accurate as of the date of posting, laws change frequently and rules in other jurisdictions may differ. Therefore, readers should not rely upon these postings but should consult an attorney to discuss their specific factual situation.

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