No lease in place on rent controlled unit?

Question

Hi Everyone,

Just looking for some feedback on this scenario from anyone that is familiar with rent controlled units in NY.

Looking at a small multi-family in Brooklyn, most units are rent controlled.

1 unit is occupied by an elderly lady and her son. What would be the logical reason this unit has no lease in place but is still honoring the rent controlled rate?

Johann Jells · Answer

Well @Nick G., there's a reason the prices don't reflect the free market potential! I recently stumbled across a sheet on a property we were negotiating a contract on in 1996: an 8 unit on 95th & Columbus for $500k. They said 2 units could be delivered vacant, we wanted to live there. The Broker had all sorts of ideas of reducing the units and decontrolling it, hearsay was the ground floor tenant didn't actually live there.  She made it seem like a game. We finally realized that for us the game was Russian Roulette. We were newlyweds, this was our 1st purchase, and if we lost the game we were dead. we set our sights on JC and bought a multi the next year. It's been great here, but that property could have made us many millions, or ended in divorce from the stress.

Nick G. · Answer

Yeah, it’s one of my partners that’s really interested in it. He sees as a long term play, the appreciate would be huge if you could ride out the terms of the rent control and turn units back to market rent over time. But with NY in general and new legislation I’m not optimistic that things take a turn for the better from the landlord side @Johann Jells

Johann Jells · Answer

You can be certain all expired rent stabilized leases default to MtM even if new lease is not signed.  I don't know the law, it may be rent cannot be raised even the permitted amount without a lease. I hope you have deep pockets and big stones! Rent controls create a cage match between landlords and tenants.  NYC landlords get a bad reputation because once rents get far enough under market only someone willing to be a total scumbag will buy it.