What You Need to Know About Rent Regulation Before Buying A Rental Property
Becoming a landlord is something many people consider as a way of becoming their own boss while increasing their assets and holdings. Investing in a rental property can be a lucrative business provided you know what you are getting into in advance. Being a landlord carries a great deal of responsibility, both in terms of picking the right tenants and maintaining your property. While it may be tempting to simply look at the potential profits that can be made through the rents you plan on charging, it is important to consider the regulations governing rental properties in New York City. Understanding these regulations and requirements can help ensure you make a profit while protecting your assets against legal action from tenants.
According to the New York Attorney General’s Office, when purchasing property to rent, it is important to find out prior to making a purchase if the property in question is regulated or unregulated. There are two types of rent regulation in New York State:
Rent stabilization limits the amount of rental increases a landlord can make over the course of a lease. Rent stabilized apartments are usually found in buildings with six or more units that were built prior to 1974. If the building is under rent stabilization, as a landlord you will be required to follow guidelines in terms of the maximum amount you can charge for rent increases, which will apply to one or two-year rental leases. Tenants in these buildings are entitled to receive certain essential services, as well as to have their leases renewed, and can only be evicted for reasons defined by state housing laws. An apartment that is regulated under rent stabilization becomes deregulated when the monthly rent reaches $2,000 or more and the apartment is vacant. If the apartment remains occupied, it can be deregulated when the yearly rent reaches $2,000 or more and the yearly income of the tenants is in excess of $175,000 per year for each of the preceding two years.
Rent control limits the actual amount of rent a property owner or landlord can charge for a unit, and it also restricts the owner’s’ rights to evict tenants. An apartment may be under rent control if the tenant has been living there continuously since before July 1, 1971. In New York City, there is a maximum base rent for rent control apartments that is adjusted every two years, and tenants can challenge increases in rents if they exceed this maximum, if the building has code violations, or if the landlord is not maintaining essential services. A rent controlled apartment can become rent stabilized or deregulated once it becomes vacant.
Before You Buy A Prospective Rental Property
According to the New York City Rent Guidelines Board, if the building you are considering buying has not been correctly registered in terms of being regulated or unregulated, or if the current owner has not been complying with the state laws, you could find yourself being liable for legal claims from tenants once you purchase the building. Before purchasing a potential rental property, ask to see four years’ worth of records relating to rent registration. If the seller does not have these records, contact your attorney or the NY State Division of Housing and Community Renewal (DHCR) for answers to questions regarding the property.
Contact Our Experienced Real Estate Attorney
At Cavallo & Cavallo, our experienced New York real estate attorneys can help guide you through every step of the real estate investing process, and can assist you in finding the right property for your needs. With offices in the Bronx and New Rochelle, we are your neighborhood law firm, providing efficient and effective legal service to handle all your real estate needs.