How to handle a lease buyout offer (NYC)
May 16, 2015 7:01 PM   Subscribe

The management company for my apartment has approached me with a lease buyout offer in NYC. I am open to discussion but am unsure of the best way to handle it. Should I get a lawyer or some other professional? Any specific recommendations or types of people to look for? Other things I should do?

My apartment is rent stabilized and my leaving would allow them to bring the apartment past the threshold and it would turn into a market rate apartment. I'm not really looking for advice on whether or not I should leave (I have options that could make this worth it). Mostly, I'm unsure if I should get a lawyer or not because I have no idea what a fair price is. I can see arguments for both low and high ranges.

Do I want a lawyer or someone else? Is there a rough estimate to determine at what point a professional is worth it? What should I expect in terms of fees? Or are they going to want a percentage of the total amount? If I should get a professional, do you have any suggestions on who or how to find someone trustworthy?

I'm not sure if more details help, but in case they do:
- Like I said, if I leave, the apartment would pass the threshold to become de-stabilized
- My rent is not ridiculously lower than market rate (probably about ~$1000). The management company did allude to this when saying I can make a counteroffer, but maybe it was a negotiation tactic? I mean, if I stay here, and assume a 2% rent increase yearly (which is not a given seeing as how this last year went - it was only 1%), it will be a while before they get up to that number
- The neighborhood is already a great place and is still exploding
- I'm not sure how motivated they are. They haven't been hounding me or anything and when approached it was more of a 'would you be open to this'? But, maybe they just aren't horrible landlords and know fighting isn't worth it
posted by anonymous to Work & Money (13 answers total) 2 users marked this as a favorite
The NYC Bar offers a lawyer referral service with initial consultations that are $35 or free, depending on the type of case, for up to 30 minutes. More information about how to find an attorney is available at the MeFi Wiki Get a lawyer page. It sounds like a consultation with an attorney could be helpful, and an attorney may be able to help you find a real estate professional to consult with as well.
posted by Little Dawn at 7:24 PM on May 16, 2015 [1 favorite]

how much are they offering you?
posted by jayder at 7:38 PM on May 16, 2015 [2 favorites]

The NYC Bar offers a lawyer referral service with initial consultations that are $35 or free, depending on the type of case

That would be $35 for the OP.
posted by John Cohen at 7:41 PM on May 16, 2015 [1 favorite]

Note that stabilized rent increases have been much higher than 2% in the recent past - you can see the history of increases in the Summary Chart of RGB Apartment Guidelines from the Rent Guidelines Board.
posted by moonmilk at 8:33 PM on May 16, 2015


They said the first number, so they lose. You can negotiate yourself. I want you to think reallllllly hard about how much you will be giving up. You are giving up A LOT. Affordable rent in NYC is like the Holy Grail. I want you to understand that NOTHING they can offer you right now matches what you'll be giving up. Full stop.

Several factors come into play - value of rent, value of the building, and like I said - the hardship of losing your lifestyle and affordable rent.

15 years ago, I would have walked for 75K in NoLita. Looking back, it still would not have been worth it.

There are all sorts of rules about this, I think they're not even really allowed to approach you about it, although things may have changed. It might be illegal for you to take $$, although obvs people do.

Were I you today, once I apprised myself of the legalities on all sides, including my risk of even replying to such an overture... I would quote a really high figure if that did not put me in jeopardy. And then I would do nothing.

I think your attitude is soft, and they sense this. My gut feeling is that you are already under-playing the value of your rent stabilized lease. A lawyer may take too much if you contract one for the whole process, I wouldn't spend more than 2k for the paperwork and escrow part.

Again, unless you are the type to be savvy about legal stuff, I think you should not even respind unless you put in the footwork to get VERY up to speed on how this process works today. Be careful of anyone you are getting advice from (maybe not me, I had my RE license in Manhattan and have not lived there in a decade, but generally, lay advice will be clouded by jealousy, professional advice clouded by greed hoping to cash in on your windfall.)

It's like you've almost won the lottery, but not quite. If you love your home and neighborhood, no amount will compensate you. Know this. If you were looking to move anyway, then this could be awesome if YOU do your homework.

Good luck.
posted by jbenben at 9:22 PM on May 16, 2015 [4 favorites]

You need to talk to somebody who can help you establish the value of what leaving would be to them, perhaps a real estate person or a real estate lawyer - my completely wild guess that it is worth a MINIMUM of high 5 figures, and quite likely into 6 figures, given that you are literally the tipping point between rent stabilized and not. But I don't know any details, how big the building is, etc etc.

Are there other tenants who could also make the tipping point happen? Adjust accordingly, or know that if you want to do this you need to beat those other tenants to the punch.
posted by zug at 10:36 PM on May 16, 2015

If you have not been thinking of moving, tell them no. If you have been thinking about moving, get every cent you can.

Jbenben says it very well just there. If you were to have three drinks with me I'd start to advise you take a big payout and flee that smelly, angry city. So my advice would be clouded by hatred, survivor guilt, lapsed Yankee-fan guilt, shake shack envy,...
posted by vrakatar at 10:38 PM on May 16, 2015 [1 favorite]

I find that people who haven't looked for housing in awhile or are in rent stablized housing really don't know how much their apartment is worth per month.

First thing, aside from a lawyer, I would do is check out rent prices in the neighborhood that are not rent stabilized to give you an idea if you wanted to move back to the area exactly how much it would cost you per month and if you could afford it. Also rent stabilization is permanent. Are your other options that way?
posted by AlexiaSky at 5:20 AM on May 17, 2015

I've been in the same situation. The questions are: what's it worth to you, and what's it worth to them? For you, if you're ready to leave the city, and your regulated rent is not that far below market, maybe not that much. But if your landlord plans to renovate, convert, or demolish and replace your building, then your apartment's value to them may be in the millions, and you should be negotiating at the top of that range.

You can check the city's records on-line to see if your landlord has filed for a permit to alter the building. You should talk to the other regulated tenants in the building to see if they've gotten offers too.

Remember that a payment to surrender your lease is taxable income, and in NYC that means you're only going to get about half of the money. If you are prepared to consider a buyout, you need to talk not only to a lawyer, but to an accountant or tax attorney as well.

And the lawyer you should talk to is not necessarily a tenants' advocate, but rather one who has negotiated buyouts from both sides. The real estate section of the Times has a Q&A column which usually quotes a lawyer in the answer to some stabilized tenant's question, Google and call one of them. They'll answer your immediate questions for free up to a point.
posted by nicwolff at 5:30 AM on May 17, 2015 [2 favorites]

This is something going on in my building under different circumstances. We opened negotiations a few years ago but couldn't reach a deal; now there are new building owners, and we are going to try again. My advise below is based on talks I've had with a real estate attorney and accountant (we have a great one who specializes in tenants right, and is AMAZING, pm me for the name).

Yes, you can totally do the negotiations yourself. But you MUST have an attorney look over contract and make sure everything is as it should be. Also, make sure you have an attorney who will just charge an hourly fee for the work they do. There are lawyers who will offer represent you for a percentage of the buyout... don't do that.

Also, don't forget about taxes! This is taxable income, and may be counted as capital gains, which would be taxed at over 30%. Here is some pretty good information on the tax issues.

My situation is different, because we are rent control, not stabilized and once we leave the apartment will become a condo and sold. But as a benchmark, I have a friend who lives in a small 2BR rent stabilized apartment on the 5th floor of a walk-up on W 14th St who was offered a $250,000 buyout last year. And that was their opening offer. The market rate for her apartment (after they renovate) it will be about $3500.

But the above advice is solid... if you are planning to stay in NYC long term, it's probably better for you to keep your apartment. It's likely that you can approach them again in the future if you change your mind. This has been going on in my building since 2008, and some of my neighbors went through three rounds of negotiations before reaching a deal.
posted by kimdog at 6:41 AM on May 17, 2015

In the most recent "The Hunt" column in the NYT real estate section a similar situation was addressed. In that article the tenants would only accept the buyout if they could buy a similar apartment and "..only if the purchase price and all associated expenses, closing costs, moving costs and taxes, were fully paid for." And they did it. Well they had to move to Riverdale from Morningside Heights but still - they own now. That's the sort of thing I'd be going for.
posted by rdnnyc at 10:06 AM on May 17, 2015 [1 favorite]

I totally disagree that you can do the negotiations yourself. That is a terrible idea. You likely have no idea what this is worth to them or you. You are giving up a stable lifetime place to live and in exchange you need to be able to get something similar. Maybe right now you think you are at market rate for your apartment. You are probably seriously wrong if they are giving you a buyout. In other words. You need to get the amount of money that would be equivalent to buying a place. In the NY Times real estate section this week there was an article about a couple who did this. The company originally offered them$25k but they had been authorized to go as high as $199. A few years later the women got $290. This was a small 2 bedroom in Washington heights.

Again let m repeat that it is a terrible idea to negotiate this yourself. You are going up against a wholly non sentimental professional.

It is ludicrous to think you have any ability to do this and get anywhere near the amount your apartment is worth.

I am a lawyer j do not practice this kind of law and I have a rent stabilized lease and have been offered a buyout. I know a lot about this and there is no way I would dream of not hiring a lawyer in your situation.

Ok sorry for the dramatic tone. I just think a lot about this due to my own personal situation.
posted by goneill at 3:03 PM on May 17, 2015 [2 favorites]

OK a few more things. Everyone I know who has done this successfully - i.e. made a shit load of money, has hired a lawyer who has taken a percentage of whatever is negotiated. Overall unless you get an amount of money that makes it so that you can get a place you should wait.

Because of the way rent-stabilized laws work every rent-stabilized apartment can be illegally turned into a market rate apartment when anyone leaves. They do this by gut renovating the apartment and claiming that they spent whatever amount is required to get to $2500 (including the 20% turnaround money). Also there are companies that specialize in flipping buildings. These companies buy buildings that have all rent-stabilized tenants and then get rid of all the tenants and then sell the buildings for enormous profits. My building was just bought by one of these firms. My neighborhood hadn't started to gentrify when they bought the building, but in the past 6 months there have been about 8 turnarounds in the building where I live. An apartment where someone paid $100 a month, was turned into a market rate apartment, and now the people who live there pay $3800. (It was only $100 because of a lead paint settlement... natch the new people have a tiny baby - hope the gut renovation was thorough!!)

I'm sorry I am being so lecturing, anon; I am really hopeful that if you go this route you will make enough money so that you can buy yourself an apartment, or move out of the city. This is a great opportunity for you!!
posted by goneill at 7:35 AM on May 18, 2015

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