Clients and Colleagues,
A significant change to the “tenant-protection” landscape has been pending before the New York State legislature over the past months. As of yesterday, it seems the legislature has come to terms on new regulations, which are to be implemented “immediately” and which will serve to change some of the legal standards for converting occupied residential rental buildings in New York. These changes do NOT apply to offering plans that have been submitted to the Department of Law. In addition to eliminating the “eviction plan” process and adding an additional “exclusive purchase period” for tenants in occupancy (by way of a 6 month right of first refusal should the unit be sold to a third-party), the most notable change is that the legislature reforms Section 352-eeee of the General Business Law as it relates to conversions to condominiums and cooperative regimes by adding a new obligation that 51% of tenants in occupancy on the date the offering plan is accepted for filing must agree to purchase dwelling units before the offering plan can be declared effective. Previously, it was required that 15% of units be under contract with either tenants or bona-fide purchasers that intend to occupy their units in order to declare the offering plan effective.
We have attached the blackline of the relevant section of the legislation that pertains to conversions of occupied buildings. In addition, the press release from the NY Assembly can be found at the following link:
https://nyassembly.gov/Press/files/20190611a.php
We will keep you updated as continued developments unfold. As it stands now, this legislation in its current form is incredibly impactful to the conversion process in New York, both from a legal perspective as well as from an asset valuation perspective. We are available to discuss these changes and their impact on your current or potential projects.