what happens when multi family tenants have no leases?

7 Replies

Looking to purchase a multi family property (small 4 units, not rent controlled, not rent stabilized) in New York (don't know if state matters, but I am sure it does because different states have different rent/eviction laws) The current tenants are all paying the rent, however the current landlord has not raised rents in 20 years! So these tenants are paying super low rents, the building is barely breaking even, and needs some costly repairs.  Discussing with landlord to purchase property, question is, how does it work if I buy the property and these tenants have no leases? Am I allowed to come to them and say "we are making new rent?" or "we need to increase your rent" for example one tenant is paying $620 on a unit that is market rate at $1500, appreciate all advice.

@Isaac El It totally depends on if there are any rent controls or regulations in that area. Let's assume that there is not, then you have a couple choices. You can raise the rents to market rate, but then none of the tenants will likely stick around. You can raise by a couple hundred bucks and see how many stay. It just depends on what you are trying to do with the property. If you can afford the vacancy, I would raise the rents close to market, let tenants vacate, refresh the units and rent at full market rate. 

Good luck, 

Carmen Dettloff
 

@Isaac El , I'm not sure if it passed, but I believe there was a law trying to cap market increases in the NYS Senate.  I'd consult with an attorney.  I can recommend one if you'd like.

In New York right now, you're only allowed a 5% raise in rent annually. NYC properties may have additional protections that I'm unaware of. Also, if you wanted to evict to improve units, you'll be waiting for a long time. There is a huge backlog of evictions and not enough judges to work through all of them in a timely manor. Add to that current COVID restrictions and you're looking at a tough path forward. If you're considering this one, I'd be looking at it as a very long term deal.

@Carl C. according to this release by the NYS AG, that is not true: https://ag.ny.gov/sites/defaul...

"If you live in an apartment that is not rent stabilized or controlled, there is still
no limit on how much your landlord can increase your rent. However, your
landlord must give you advanced written notice before they can raise your
rent 5% or more."

Although, any increase is usually in writing, so I'm not shocked that the State has made this one more confusing as always.

@Isaac El , if you can afford it(the carrying cost & perhaps extra cost the seller may ask for), you can also ask the seller to deliver it vacant.

Originally posted by @Carmen Dettloff :

@Isaac El It totally depends on if there are any rent controls or regulations in that area. Let's assume that there is not, then you have a couple choices. You can raise the rents to market rate, but then none of the tenants will likely stick around. You can raise by a couple hundred bucks and see how many stay. It just depends on what you are trying to do with the property. If you can afford the vacancy, I would raise the rents close to market, let tenants vacate, refresh the units and rent at full market rate. 

Good luck, 

Carmen Dettloff
 

Hi Carmen,  yes the plan is to get building empty, that is one thing I was thinking of, going to try it out.

 

Originally posted by @Carl C. :

In New York right now, you're only allowed a 5% raise in rent annually. NYC properties may have additional protections that I'm unaware of. Also, if you wanted to evict to improve units, you'll be waiting for a long time. There is a huge backlog of evictions and not enough judges to work through all of them in a timely manor. Add to that current COVID restrictions and you're looking at a tough path forward. If you're considering this one, I'd be looking at it as a very long term deal.

yes was not aware of the 5% cap - are you sure that applies to free market unit? but your other points are what I am worried about, my goal is to work with tenants to see how we can work it out willingly first before going to forceful route, but yes this a long term play

 

Typically in my state if there is no lease you can just give them a 30-day notice to vacate, or a 30-day notice of rent increase and if they don't agree then they can vacate.  The problem right now is that with Covid they may know that if they refuse to leave you could have a long time in the courts trying to get them out.  Not all tenants will do that because it can ruin their rent history and etc. but they definitely have the leverage right now, even though they will eventually get evicted.

My personal thought is that given the environment right now its best to try and be diplomatic and set expectations.  While also understanding it may be hard for them to find another place so they may want to dig their heels in.  If you can get the building delivered vacant that would probably be the best option.