NYC Landlord Tenant Litigation Law Firm Secures $1.75 Million Lease Buyout
This past week, Farber Schneider Ferrari turned an artist client into a millionaire overnight. Born and raised in this apartment, used as a live/work space, our client was the last tenant remaining in a rent stabilized building the landlord had worked hard to empty of its other occupants in recent years.
Why Tenancy Buyouts Command Value
Downtown Manhattan property values are some of the highest in the nation. In order to maximize the value of its building the owner intends to demolish its interior units which formerly contained several lofts and artist studios. A gut renovation is far more efficient for an owner who does not have to build around any occupied units; so a tenant remaining occupancy poses serious costly logistical problems for any developer undertaking a gut renovation in its building.
Importantly a rent stabilized tenant has the right to remain in a building undergoing renovation, but living in such conditions can be burdensome and unpleasant. Living amidst a construction zone comes with dust, noise, vibrations, and interior demolition raises the possibility of disturbing asbestos and other toxic inhalants used in old building materials.
Notably, a rent stabilized tenancy has the right to refuse a landlord access if their planned renovation construction requires demolition and alteration of the tenant's apartment since that constitutes a taking of property rights. In this case, in order to carry out its development in a cost-effective manner, the landlord planned to run utilities through our client's unit, and when they sought permission to enter our client's apartment, we refused the landlord access.
Negotiations and Maximizing Value
In order to maximize our client's leverage and incentivize the landlord to compensate our client in exchange for surrendering possession of his apartment, we prepared a petition to enforce, through litigation in Manhattan Civil Court, several of the landlord's violations of New York City's Housing Maintenance Code. Once the landlord realized that our client was willing to remain in occupancy and demanded repairs to his apartment, they were motivated to negotiate a buyout of his tenancy.
Sometimes tenancy buyout negotiations can be litigated in court and can involve costly contentious legal battles. In many such situations the landlord—usually a deep pocketed entity part of a larger portfolio—is perfectly willing to outspend and outgun a tenant in court, hoping to wear down the tenant's reluctance to vacate possession through a war of attrition over legal fees. For that reason, FSF was prepared to litigate the issues of the violations in the apartment, and hold fast to remaining in occupancy.
Fortune Favors the Prepared
In the course of FSF litigation preparation we retained a design professional—a licensed, registered architect—to opine on the landlord's building plans, to help us assess what the likeliest end result would look like in the building, in order to determine how critical, it was for the landlord to have our client's apartment empty, rather than building around his unit, which is always costlier and time consuming. We learned that the building would likely have been turned into either luxury condominiums, or a 1 or 2-family townhouse, commanding maximum value per square foot in this neighborhood, located right in the middle of Manhattan's most luxurious shopping, fashion, and food hub, SOHO. We soon learned that there was no way the landlord could construct their intended project without needing to gut our client's apartment.
Time is Money
For real estate developers, time is money: the carrying costs of property and project financing can be burdensome and oftentimes lenders condition financing on timely commencement of construction schedules with attendant milestones in place to ascertain spending. For every day a landlord cannot start demolition and construction work, they are bleeding cash. In this case, the landlord and FSF engaged negotiations for several weeks knowing all the while the landlord had a drop-dead date in mind after which point they would be desperate and, if they chose to fight us in a court action, that could be disastrous.
When choosing a law firm to represent you in tenancy buyout negotiations, you need NY real estate attorneys who understand the interplay of NY landlord-tenant law and real property construction issues; the right property lawyer will educate you as to your rights, navigating litigation and possible court action against the litany of factors impacting how to maximize the value of your leasehold. Evaluating the value of a rent regulated tenancy is a nuanced science requiring competency across several spheres. FSF regularly represents parties in these industries in New York City. If you are a tenant in a rent stabilized apartment, we encourage you to request a consultation with our firm. Our attorneys have the knowledge, experience and resources to find you the best buyout terms possible.
You can contact us online or call 212-972-7040 and ask to speak to Michael Farber.