This is why rent regulation must end...

Rent regs must end because of one crazy person posting a free ad on craigslist?

Clearly, the current landlord said no to the tenant, and so would anybody buying the apartment.

LOL. 300k+ in an era of dropping prices. Fuggedaboutit. If this is a stable, substantially owner-occupied condo version, assuming it's an average one-bedroom with okay views, okay light, worth max 700k in this market if that. And he wants 300k? Should have done this in '06.

LOL this is legal

That's a scam, completely illegal.

Rent stabilized tenants take buyouts all the time. Perfectly legal.

Wow, Steve, you are not having a good week.

you can only pass a rent stablized/control lease if the relative (close) has lived in the apartment with you for two years and the landlord had been notified about the prior two years.

Advertising on craigslist is brazen, but I PERSOANLLY know several people in SF (where I used to live) and in NYC who have black-marketed their way in or out of rent-controlled apartments.

Well-to-do people - I bankers, etc.

Perfectly legal. Person who wants the apartment buys it from the sponsor as an occupied unit, then buys out the tenant and moves in. It will never happen in this case, but there's nothing illegal about it.

West81st...you are good...I would never have thought of that..

LOL @ Steve.

Seems to me the tenant wants out out of the arrangement but can't afford it, and is simply looking to influence the sale. Rent stab tenants get trapped in those arrangements too.

Isn't there a loophole in rent stabilized apartments that lets an owner kick out a rent stabilized tenant so long as the owner uses it as their personal residence and the renter is under 62 years old?

Yes, but this doesn't apply in cases when the owner has already converted the building into co-ops.

The scenario the Craigslist poster outlined, and West81st did a much better job of explaining is perfectly legal since the building already converted to condo status. A more legally "grey" but very common practice is for landlords or conversion sponsors to offer rent regulated tenants money to move out so the apartment can be sold or rented at market rates (usually after a renovation). What Steve was probably referring to was the long time scam where people try to sell "rights to rent stablized apartments" to other people. Rent stablized apartments, as Julia noted, can only be "passed" to close relatives or domestic partners who have officially resided in the apartment for at least two years.

My disgust does not arise from the potential illegality of this practice. My disgust stems from someone trying to game the system, a system that has been subsidized by us taxpayers, into a major payday for him-/herself. The purpose of rent regulation is not to provide some kind of a golden parachute or reward for people who have been gifted with a subsidized living arrangement. It's about providing affordable housing for people of limited means. If this person needs to vacate their rent stabilized apartment after 20 years, he/she should just count his/her lucky stars for their good fortune and allow the owner to extend the privilege to the next person of limited means. Instead, it's a shameless cash grab for someone who has already been awarded hundreds of thousands of dollars worth of compensation in the form of cheap rent.

Hejiranyc. Put down the shovel and stop digging. You have no idea what you're talking about.

If the tenant graciously moves out, this apartment will not pass to another deserving and needy renter. It will almost certainly become the unencumbered, deregulated property of the sponsor, who will sell it to the highest bidder. There's nothing wrong with that, but it's a totally different narrative from the one you have dreamed up.

It is probable that when the sponsor bought this building, he discounted his bid appropriately to reflect the regulated status of certain apartments. His cost basis reflects the encumbrance of the asset. The tenant has an asset too (the regulated lease). How they divide the profits from the eventual liquidation of their respective assets is a matter for bilateral - or possibly, as the tenant has proposed, trilateral - negotiation. The only place the outcome has any impact on the marketplace, or imposes any hardship on the landlord is in your overheated imagination.

Agreeded. But there is "gaming" and outright fraud in every public or private program. How many people are faking disabilities to collect payments at the expense of taxpayers or others in the private insurance pool? One is too many but that does not mean we should stop paying disability benefits because the vast, vast majority receipeients are trully disabled and need assistance on either a short or long term basis.

Btw, in the 1980s when coop conversions were happening all over, it was very above board for existing tenants (rent regulated) to sell "insider rights" to buy their apartments at heavily discounted prices.

West 81st, you have no idea what you're talking about because you are not the owner of the unit in question and the financial circumstances of the owner. All I can see is that there is a renter who is trying to game the system to his/her benefit with someone else's property. Receiving public-subsidized housing is not a right, but a privilege- otherwise, EVERYBODY who meets the criteria would receive rent-stabilized housing. There is something fundamentally wrong with society when a renter, who has experienced zero risk/exposure/liability via ownership, feels they are entitled to a payout, as if somehow they earned it. I would have more respect for someone who faked a neck injury.

This guy is the LOSER. He could have bought the apartment as an insider for peanuts when it converted, probably back in the 80's. The money he saved on rent is nothing compared to the gain he could have made. And most rent stabilized tenants in converted buildings are LOSERS.

hejiranyc, you are the one who has no idea what you're talking about:

1. "Receiving public-subsidized housing is not a right, but a privilege- otherwise, EVERYBODY who meets the criteria would receive rent-stabilized housing." --> this type of rent-regulated apartment is not public-subsidized. It is, as the name suggests, merely rent-regulated. There are no income criteria for getting such an apartment, and only relatively recent criteria for losing it.

2. Despite it being used as a straw man by both advocates and opponents of rent regulations, the purpose was never to provide housing for low-income people. It was to provide a substantial component of affordable, older housing to the city's residents at large. Those who put in the legwork, or could see decaying neighborhoods as diamonds in the rough, were the ones who got the nicer of them. The idea was that wealthier people would want (and be able to afford) nice new housing. If that didn't happen, it's because "pre-war" became the best-loved housing type; and because NY's constructions costs and associated corruption are nearly prohibitive.

3. Most likely this apartment, as with most of them, is owned by the sponsor or an aggregator of rent-regged apartments (Time Equities was the leader) -- not the poor little long-suffering individual that you set up as the victim in this sort of thing.

4. How do you know the renter took on zero risk? Maybe he got mugged twice a year, while paying rent so that the owner of the unit could benefit from the gentrification that his presence helped along.

alanhart: The widespread confusion of rent stabilization with Section 8 is a challenge you're unlikely to overcome with well-written posts on StreetEasy. I applaud the effort, though.

West81st, you're right, and thank you.

In fact, there are so many things to confuse: rent control, mandatory rent stabilization, incentivized voluntary rent stabilization on newer rental construction, Section 8 vouchers, 80/20 programs of various types, Mitchell-Lama coops, Mitchell-Lama rentals, etc.

But mostly it's the "economists" who deliberately obscure the true mechanisms at play so that they can "prove" their ideologies. The most frequent abuse of this sort is when an economist (never from NY) hides the fact that new construction isn't forced into rent regulation in NYC, then "proves" that those regs cause the housing shortage (which of course existed prior to the first rent regs, but that's also omitted from discussion). Then people like hejiranyc start frothing at the mouth about it.

Great summaries, both of you. Hadn't thought about this in a while.

hejira, some tenants and some landlords will try to "game the system", to the extent they think they can get away with it. Most tenants and most landlords take things as they are and go along quite peacefully. They send their representatives to Albany and to the shout-fests where increases are determined, and will jockey for advantage where they can, but otherwise don't get too het-up about it. The same with zoning and all the other intersections between business and government. To see some interesting cases (there really aren't that many compared to the number of stabilized apartments) go to eCourts and search on "Apthorp".

Back to the original offer, it looks as if the tenant proposed his deal to the owner, got nowhere with it, and is now trying his luck elsewhere. Nobody's going to lose who doesn't want to, and no big deal.

"Person who wants the apartment buys it from the sponsor as an occupied unit, then buys out the tenant and moves in."

Yes it is possible, but still illegal. The tenant is offering to sell tenancy rights which he does not own to someone who does not own the unit, contingent on their buying the unit. The contract is entirely unenforceable: you buy the unit from the owner, what if the tenant refuses to sell at the agreed price? What recourse do you have?

None, because the tenant does not have a right to sell his tenancy to anyone, not even to the owner. He can agree to a buyout, but cannot initiate one. On the face of it: if you are willing to sell your stabilized tenancy then you mustn't need it, and if you don't need it you are not eligible to have it.

Isolated cases are not reason to change policy. I have been pissed to see 6 figure earners in rent-controlled apartments but I have also seen landlords do truly despicable things to try to get rent controlled tenants out of building so they could raise the rents. This often includes the elderly who don't have the means or ability to effectively fight those actions and more than likely lived in the building through times when you wouldn't leave the apartment after daylight.

Stevejhx: OK, do it a different way. Tenant signs an assignable purchase contract, then sells his contractual rights and assigns the contract. I think that's a better route, actually, because it might save some red tape on deregulating the apartment when the tenant moves out. I don't think the first way is illegal, just messier.

Why would the owner agree to such a thing, W81?

I think this is obvious: either this is a scam, or the tenant has to vacate anyway (transferred, getting married, etc.) and is trying to make some money on the deal. A la Bloggo: "Hey, this is worth something!"

The entire thing is contingent on the seller selling at a discounted price because of the rent-regulated tenant. Any sort of sale like that or what anyone is discussing is fraudulent, would make the title defective, and litigation would ensue. Principle number 1 of contract law is good faith: you must negotiate in good faith. If you have a hidden deal to buy out the rent-regulated tenant after paying a discounted price because the apartment is occupied by the aforesaid rent-regulated tenant, don't you think the original owner would sue you and the said tenant for fraud?

Of course he would.

Who said it's a hidden deal?

Steve: Your convictions regarding rent regulation are an obstacle to civilized discourse. Were you beaten by a regulated tenant at a formative age?

The owner agrees to the assignment because it's his best available option given the difficulty of dislodging the tenant. He makes a sale and avoids the hassle, cost and risk of trying to deregulate the apartment by force. In his opinion, the cash in hand is better than the discounted, risk-adjusted present value of the income stream he otherwise expects from the regulated apartment.

As for good faith, all parties know exactly what's going on. That's why the sale contract is assignable. This is a crime? Find the victim. And please don't say "society". Whether the buyer's money winds up in the landlord's pocket or the tenant's is of no economic or social consequence.

Another important benefit for the sponsor in some situations is changing a regulated rental into an owner-occupied apartment. That boosts values throughout the building by, among other things, making it easier to obtain financing and improving the prestige of the occupant mix.

"Your convictions regarding rent regulation are an obstacle to civilized discourse. Were you beaten by a regulated tenant at a formative age?"

My grandmother. :0

"The owner agrees to the assignment because it's his best available option given the difficulty of dislodging the tenant."

That's the problem: the tenant has already agreed to be dislodged.

"Who said it's a hidden deal?"

It must be, or else why would the landlord sell it for less than market value? The only way the deal makes sense is if the landlord thinks that the tenant is staying, and therefore it behooves him to sell at a discount. If the landlord knows the tenant is leaving, he has no such incentive. Here the tenant is attempting to receive $300,000 to vacate his lease. That $300,000 (or presumably more, due to the risk) would go to the landlord if the tenant were to vacate on his own.

Why would you, as a rent-regulated tenant, agree to give up your lease for $300,000 if you weren't already going to give it up and merely wanted something for it. Because you're not going to get a better deal anywhere else. Presumably the tenant has made the offer to the landlord already - as he is the most likely purchaser - and the landlord has refused. Why would the landlord then knowingly sell the apartment to someone else for at least $300,000 less than the market price, and simply give that money over to the tenant?

None of it makes sense UNLESS the tenant MUST leave and is trying to get something for it.

Steve's logic on the situation is entirely sensible and correct.

Honestly, I'm quite surprised and think this might be the first time I've seen it in the 9-12 months I've been on SE.

Of course, separate from his logic, he does make some statements like "illegal" or "lawsuits would ensue" that should really just be translated into "bad" or "unethical" because the specifics don't point to illegalities nor do they point to necessary lawsuits. But let's leave well enough alone and let me just say, for the first time, Steve has made an impeccable logical argument.

And to top it all off, he did it with West81st who actually has a very very good grasp (other than entirely missing the logic here) of the actual facts and circumstances surrounding the rent codes.

Congrats Steve

i'm with gleeclub here on steve's logic of how the situation is a hidden deal. well done, steve. alanhart and west81, thanks for the discourse on rent stabilization - very helpful.

No, it isn't sensible and correct. Let's Duane Reade takes a 20-year lease on a space in Long Island City. Five years later, their business is comfortable at that location, but not spectacular. They're not planning on shutting it down. But the space could command a much higher rent in the current environment, because LIC is the most desirable place to live in all the five boroughs. Is it fraudalent for them to approach the landlord and ask to be bought out of the remaining 15 years? Is it even unethical?

The owner would sell in this case because market value doesn't apply and isn't presently possible -- it's an ideological straw man.

"Let's say"

2nd paragraph: "in this rent-reg case"

Put another way, if an owner/occupant puts a house on the market at a price that is a stretch, but for which they'd be willing to move, would you assume that they were planning on moving anyway? Not really willing to move at all? Or just that they'd move for the right price, which presumably would allow them to live a better life?

alanhart, the buyout isn't the issue. If the buyout of the tenant were "kosher" and the owner of the apartment had an interest in selling, there's no need for the tenant to need to induce someone to buy from the owner at a low price to then pay the tenant's buyout fee. If this were all above board, the tenant could simply strike the $300K deal with the current owner and the current owner could sell the apartment free and clear of a rent stabilized tenant, to a third party.

gleeclub, the tenant is crazy, as I said in my first post. But nothing about his proposal implies that he must leave, or has definite plans so to do.

If there's any logic to his proposal, it has to do with consumer behavior, LL owns in the hope that the apartment will decontrol via eventual death or change in law, and a buyout offer from tenant offends his sense of the game. But an offer of cash from an outside investor might be seen differently.

Not likely to happen, but not the moral outrage that some see it to be.

Gleeclub: The tenant is trying to sweeten the deal for the landlord by finding a buyer. The landlord saves marketing/sales expenses, maybe reno costs, plus the risk of having the apartment sit empty or possibly even remaining regulated. The theory from the tenant's point of view is that a bird in the hand (a sold unit) will be more attractive to the landlord than the same apartment, vacated but unsold. I don't think the numbers work in this case, but that doesn't make it a scam.

Steve also asked: "Why would you, as a rent-regulated tenant, agree to give up your lease for $300,000 if you weren't already going to give it up and merely wanted something for it?" I think Alanhart covered that one.

yes alanhart, the tenant is "crazy," yes you can say there is a sense of "moral outrage."

I commented on Steve's logic on exactly why this was "crazy" and "morally outrageous" -- but you said his logic was flawed. His logic in fact was perfect.

West, those are all nice things, but not quite significant. I wouldn't assume that the owner is less capable of finding a buyer than this tenant (who is using C-List).

gleeclub: I wouldn't make that assumption either, but it doesn't cost the tenant much to hope, or to try.

If you're just agreeing with Steve's underlying premise that the system is ridiculous, I think we can all agree with that.

logic based on flawed assumptions = imperfect logic

...and that's what we have here

"Is it fraudalent for them to approach the landlord and ask to be bought out of the remaining 15 years?"

It's an entirely different concept, alanhart. First of all, almost all commercial leases can be assigned. Second of all, they are very long-term (15 years, usually) so the longer you stay, the better. Third of all, they are made at market rates, freely by the parties.

Rent regulated apartments are a benefit granted because of a putative "housing shortage" in NYC, to the extent that if the vacancy rates rise about a certain level, rent regulation is suspended. Beyond that, it is a benefit granted only if you qualify in terms of income and housing needs: make too much, you don't qualify. Have another dwelling, you don't qualify. Don't live there full-time, you don't qualify. Sublet, but only for 1/2 of the regulated rent; more than that is not only a tort, but it will cause you to lose your rent-regulated status.

This entire deal does not make sense unless the tenant MUST leave but couldn't get the landlord to buy him out. If he moves out, recent court decisions have outlawed landlords from continuing to rent out the apartment - regulated or unregulated - under a noneviction plan because the plan is deemed an implied promise to sell. Therefore, when the tenant leaves the landlord MUST sell the apartment.

If a tenant cannot sublet (or even rent a room in) a rent-regulated apartment for more than the proportional part of the rent, what makes you think he could "sell" his "right" to stay there, when he has no such "right"? It's a privilege based on certain conditions; when he no longer meets them, he must give up that privilege.

Any "secret" deal between the tenant and a buyer would be void and unenforceable, suffering from the incurable defect of fraud and misrepresentation. The tenant misrepresents to the landlord his intention to stay, the landlord sells the apartment at a discount because of the rent-regulated tenant whom he cannot evict, and the tenant then sells his "tenancy" to the buyer under a misrepresentation. The buyer has also misrepresented his intention - saying that he will remain a landlord when, in fact, he plans to move in.

There is NO WAY that any such deal would hold water. Fraud voids contracts. I don't know if it's a crime (likely it wouldn't be prosecuted) but it certainly is a tort.

Haven't had time to stay on top of my favorite misfits and I swear I'm not stalking you Julia but West81 did not come up with it.
It's right there in the ad.
Please don't make me chnage my mind about you again.