If 421a benefits require an investor to offer rent stabilized lease

Rent stabilization does not apply to condos under 421-a whatsoever, even if the unit is being operated as a rental. It's a huge loophole.

Is there someplace to see this loophole in writing? Do you have a link? I thought if a building benefited from 421a then apts were RS? It does seem odd to pay a market price, maybe even a premium for the tax benefits, then be restricted on how you use the property.

If a rental building benefits from 421-a, the units must be rent stabilized. Note that stabilization under 421-a is very different from normal rent stabilization %u2013 e.g. the $2,000 vacancy decontrol limit does not apply. Indeed the initial stabilized rent can and frequently does exceed $2,000 %u2013 the only limit is imposed by HPD as a function of the building%u2019s total cost of development. For this reason, the maximum stabilized rent is nearly always far above market value, so savvy landlords choose the legal maximum as their initial rent and employ %u201Cpreferential rents%u201D for their leases, rendering the rent stabilization functionally meaningless.

If a new building is developed as a condo, rent stabilization does not apply, period. It doesn%u2019t matter if every single unit is sold to an investor and operated as a rental. By law, the only reason a project initiated as a condo would lose the exemption from rent stabilization requirements is if the condo plan fails to become effective and the entire building becomes rental without individual condo tax lots. In that case the developer is required to amend the 421-a application to classify the project as a rental and becomes subject to rent stabilization. As a practical matter, I happen to know that this is never enforced and plenty of rental buildings that are failed condos are exempt from rent stabilization for this reason.

See section (g) of this link http://24.97.137.100/nyc/rcny/Title28_6-02.asp

This link explains how initial rent is established: http://24.97.137.100/nyc/rcny/Title28_6-04.asp

PMG, Wellheythere is right. You'd have to read section 421-a of the NYSRPTL (real property tax law) to see that coops and condos are exempt, but this is an extremely hard law to read. I suggest you call the tax exemption unit at HPD to confirm.

thanks, wellheythere
thanks, flatironj

If I live in a 421a rental building that uses preferential rent rates, am I still entitled to a renewal lease and rent stabilization riders?

Great article. Thanks for the info, you made it easy to understand. BTW, if anyone needs to fill out a “rent stabilized lease form", I found a blank fillable form here:Blumberg Lease Apartment. I also saw some decent tutorials on how to fill it out.