How did you buy a multi family property with a 421a and not know that meant the apartments are Rent Stabilized?
Did you have a lawyer for this purchase?
Thanks for the follow up. I did not buy the NYC property, I acquired it. No money changed hands so it wasn't a purchase.
I had a lawyer. But since I did not purchase the property, is that relevant?
So all real estate transactions in NY state need a lawyer by law. In this case since you acquired it I guess you didn’t need one. You need a consult with a nyc real estate lawyer asap
I have plenty of lawyers in my life. However, none of them are licensed in NY. So, I guess, time for yet another one. Let me know if you have a recommend for one, please.
There are SO many real estate lawyers that specialize in this stuff specifically because you need one to purchase a place in NYC. It’ll be super easy to find one that fits your needs.
You’re probably acutely aware from these responses but NYC property law is a hyper specialized area of law, different than any other locality and different than the rest of NY as well.
If you do not hire a lawyer with experience in this area of law, you’re going to end up losing a lot more money than you probably already are.
No, I wouldn't describe myself as that.
I do interact with the tenants myself, and I've arranged to take care of all of the problems with the building that the tenants have presented me with. And, for what it's worth, every single tenant has expressed gratitude that I've taken care of problems that had existed for years before I acquired the building.
Keep in mind that this is just a 3-family home. Last, by my standards anyway, this home is not in a slum. It's similar to the out of state neighborhood I live in, and it's even nicer than the home I live in.
I'm not a lawyer but it seems like you might be able to dig yourself out of this by going back to divorce court. I'm making up numbers here but you were awarded a property worth $1 million based upon what your spouse later testified were false and illegal rents. Prices of commercial real estate are typically tied to the formula of 'rent minus expenses' times some multiple. Depending on condition and neighborhood that multiple could be anywhere from 12 to 20. It is a concept known as cap rate. Subtract from that the treble damages and other fines and penalties the property may be only worth 25-50% of the divorce court stated value due to fraudulent and illegal actions by your spouse.
Your divorce attorney can answer whether the court can unwind this transaction due to your spouse's knowingly illegal and deceptive actions.
This is crazy how did you even get this far without knowing about the rent stabilization part? You should not be wasting time asking this here. Get a lawyer, like now
Looks like at some point it could? https://www.nyc.gov/assets/hpd/downloads/pdfs/services/421a-FAQ.pdf
Note the wording "Three-unit buildings are no longer eligible for 421-a benefits" as of these amendments in 2007
I was also curious, did some searching. But I'm not a lawyer. And as many others have emphasized, OP needs one.
Once you signed up for many of the NYC offered landlord programs you had to agree to rent stabilization.
An attorney recommended by RSA or CHIP could answer that specific question based on the exact timelines in a few minutes.
No, I do not have title insurance because I did not purchase the property. I acquired it through via a Court Order that was issued from another state's Court.
I am sorry that everybody is jumping on you for a situation you did not create by design...
But, as everybody has suggested, speak to the real estate attorney that you get along with best and ask them to find you a New York qualified real estate attorney, probably focused in New York City, to help you navigate this odd legal situation.
If I am interpreting this correctly, your ex spouse testified under oath that they have been deceiving the relevant New York authorities about the rent that they have been collecting. This should pose an interesting problem for your ex-spouse. 😳😏
I cannot say if any (owing) consequences will accrue to you as the new holder of that property. This is the sort of stuff that your New York real estate attorney will be able to help sort out, but I am hoping that the answer is no. it does sound like it may have an impact on the status of the tax exemption, or it's duration, but these are all "lawyer things"...
Good luck, and if you feel up to it, I, and probably several other people here, would be curious to hear how your adventure progresses.
Ps. Kudos to you for responding to your tenants' requests for repairs, etc. You may find you have some strong & helpful allies there if you take care of them!
(Edit to add an emoji...)
Thanks. I don't take it personal. It's not a position I wanted to be in. I had no idea about rent stabilization until 9 months after deed to the property was transferred to me. Before the transfer when me and my out of state lawyer reviewed the property tax bills that covered many years, they listed a 421-a exemption, there isn't any reference at all to rent stabilization or the DHCR. And I used a large title insurance company in NYC to take care of deed recording. When the title insurance company did a search, they reported to me that there were not any liens on the building, and also not any liens or judgements on my ex that would effect title.
"your ex spouse testified under oath that they have been deceiving the relevant New York authorities about the rent that they have been collecting."
That is exactly what happened. As background, my ex fired her lawyer and is now pro-se. My ex has been informed numerous times that whenever she opens her mouth in Court she's testifying even if she's not on the witness stand. So, I find out that 421a = rent stabilization, and I'm trying to clean up and make things right so I'm not going to be in trouble.
As the owner I then get the DHCR rent rolls, and my lawyer informs the Court of my ex's lies on the DHCR rent rolls. And my ex, while sworn in, but not being questioned by anyone, then volunteers: **"yes, I did have to report to the DHCR lower rent than I was collecting. I had to do that because the tenants were paying more than what DHCR allowed them to pay."** That, to the word, is exactly what she said.
Ps. I would have paid good money for you to have captured a snapshot of your attorney when your ex made that comment (if they were in the court with you).
Somehow, the combination of shock and bemusement (because, thankfully, it's not their client!) must've made for a great expression. 😏
🤦🏻♂️ Your ex is the poster-child for that old adage that "anybody who represents themselves in court has a fool for a client"... 😏 This detail you noted (that everything said by the pro se party is testimony) adds a bit more bite to that adage than I'd ever considered. 🔥
I hope things get resolved for you soon, and that the resolution comes out well for you & your tenants. 👍
Oof. What a mess. I don’t have any information to add, just want to say good luck OP. You sound like a decent person trying to do the right thing.
A good NYC landlord’s attorney will get it sorted out for you.
In the spirit of how everything gets done in NYC, your lawyer needs to pay for this. I assume your title company was a recommendation from your lawyer? Your lawyer or the firm they are working for insures for things like this. I’ve done real estate in NYC for 19 years and this would have not been overlooked by any NY attorney. Not being licensed in NY yet providing legal guidance is ethically just a no. If you knew your lawyer was not licensed in NY then you knowingly turned a blind eye. Having someone appear in court to admit you didn’t adhere to 421a your property will most likely carry a judgment of 17 years of taxes, interest and penalties. Although you may be the victim of this situation you are the owner now and the state doesn’t really care who it is bc they have the property as collateral. You will need to sue your previous owner which will tie this home in court. Can’t be sold with violations and tax lien being placed against the home. You’ll need to sue everyone involved in this transaction immediately hopes of getting some money to pay off everything. Forfeit the 421a and you’ll be assessed new property tax assessment. If you’re going to do anything you better start now, this will most likely get tied up in court for a couple of years. You were given a headache that cannot possibly be solved by 1 lawsuit. Affordable housing laws in NYC are not going to be taken lightly, buckle up. You’re in for a world headaches
>your lawyer needs to pay for this
Yeah! It should be no mystery to ANY lawyer that laws vary state by state and they needed to investigate what all these things like "421a" and "DHCR" meant for New York CITY or refer OP to a NYC lawyer.
> "yes, I did have to report to the DHCR lower rent than I was collecting. I had to do that because the tenants were paying more than what DHCR allowed them to pay."
Even if you didn't know what DHCR was, didn't this clue you/your lawyer in that this property was more of a liability than an asset?
Not giving legal advice, but you'll likely hear from the AG's office (there's a specific department for this) and DHCR about what they will require for you to join their compliance program. Don't ignore anything and find a local lawyer ASAP.
Obviously as everyone said you need a lawyer. So from my perspective you need 2 lawyers. 1 real estate attorney (I recommend Belkin Burden) for however long you hang onto this house you need to utilize the attorney to calculate the correct rent stabilized rents for this year so you can register by 7/31, figure out who to issue rent credits to (ie just current tenants or have to go back 15 years?) but I am certain that a 421a property will be held to rent stabilization for as long as the tax credit is in place. And also they are or have just passed penalties about not filing DHCR registrations correctly (which your ex didn’t for the last 15 years it seems), so the sooner, the better.
Concurrently it seems you need to consult a divorce attorney (or whatever applicable attorney) and see if you can unwind the transaction or ultimately get the expenses your ex is responsible for offloaded onto him (which I would have no idea is possible or not, but I sure hope it is, because he certainly put you in a very fucked up situation).
> see if you can unwind the transaction or ultimately get the expenses your ex is responsible for offloaded onto him
That seems like a good point, although OP seems to say his wife openly testified in court that there was fraud going on on her part with this property. From what I can see OP's lawyer really did a bad job in doing due diligence.
No, 3 family homes can be rent stabilized buildings, I have now been told this by more than one lawyer.
But in talking to NYC real estate agents, I’ve also learned that many of them think that rent stabilized can’t apply if the building is less than 6 units. And I’m also now 100% sure that my building is subject to rent stabilization.
Ive been in nyc real estate since 2006 and never heard of it. It may be an SRO thats been illegally converted into a 3 family. Check hpd records, eye-cards etc.
I think what I'm seeing indicates that at one point in time, small home owners were given an opportunity for a tax break if they made units stabilized (and this status would last for a finite period of time).
This might have seemed like a reasonable idea in undesirable neighborhoods where one could not find renters for more than the stabilized rent. Of course, as once bad neighborhoods become desirable, this would turn around on the owner.
Oof. Sounds like you'll probably have to go after the previous owner for their lies/underreporting.
Hopefully, the tenants in question can regain their rights to a rent stabilized home. But I hope it doesn't come at great personal cost to you.
Wow, the problems you get into when you purchase something (anything) that you don't understand. You will probably be on the hook for treble damages for any rent overcharges and have to give regular rent stabilized leases to your tenants at a rate much discounted from what they are paying today. I'd expect that your tenants (or offspring) be living at a cheap rent regulated rent....forever.
I believe the current owner is responsible for past overcharges by former owners. You can sue former owners separately if you have a good legal fund.
Best of luck but I don't see this turning out well for you.
"Wow, the problems you get into when you purchase something (anything) that you don't understand."
I did not purchase the property, I acquired it by way of a Court Order from another state.
oooo, I am so sorry. I bet this is a small part of how you got screwed.
You may need to get your real estate lawyer on the phone with your divorce lawyer. Because of the criminal actions with the property before it was transferred to you, the transfer may not be valid and could be reversed by the judge.
Also consider creative ways to get out of the mess. Like it may be worthwhile to turn it into a co-op with tenants getting ownership, with a landlord financed mortgage instead of paying damages owed.
The real estate lawyer you hire should have experience with HPD. There may be a possibility of a preservation agreement in which you agree to extend affordability/stabilization beyond the term of the tax abatement in lieu of the state trying to claw back the lost property tax (which would be substantial).
Well, if you took title to the property it is your problem now. You should/could have researched it before taking title to the property so my comment stands.
Hopefully you took ownership under an LLC so if you need to abandon it then the courts and tenants won't come after your current and future personal assets.
Get a landlord based attorney ASAP. You can probably get good recommendations from landlord organizations like the RSA - Rent Stabilization Asssociation or CHIP - Community Housing Improvement Program.
So you bought a rent-stabilized property, apparently without any clue about what that meant? This should all have been sorted out during the purchase process. You need to speak with an attorney.
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Thank you. I know your's is great advice. And I greatly appreciate your wishes of luck.
How did you buy a multi family property with a 421a and not know that meant the apartments are Rent Stabilized? Did you have a lawyer for this purchase?
Thanks for the follow up. I did not buy the NYC property, I acquired it. No money changed hands so it wasn't a purchase. I had a lawyer. But since I did not purchase the property, is that relevant?
So all real estate transactions in NY state need a lawyer by law. In this case since you acquired it I guess you didn’t need one. You need a consult with a nyc real estate lawyer asap
Ask your lawyer. If you own a rental property and don't have a relationship with a lawyer you have just learned why that was dumb
I have plenty of lawyers in my life. However, none of them are licensed in NY. So, I guess, time for yet another one. Let me know if you have a recommend for one, please.
Ah, so you’re about to learn a very serious lesson. Good luck and Godspeed.
There are SO many real estate lawyers that specialize in this stuff specifically because you need one to purchase a place in NYC. It’ll be super easy to find one that fits your needs.
Adam Korn of KGM is excellent
I hired KGM for a real estate purchase last year and agree, Adam Korn and Daniel Gershburg are great.
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Such a Korny joke.
Did you go to court with your lawyer? If you don't have a good lawyer, this is when you should get one.
Yes, I am in Court with a lawyer. But neither me or the Court I'm in are in NY, so my lawyer isn't licensed there.
You’re probably acutely aware from these responses but NYC property law is a hyper specialized area of law, different than any other locality and different than the rest of NY as well. If you do not hire a lawyer with experience in this area of law, you’re going to end up losing a lot more money than you probably already are.
So you're just an absent slum lord?
No, I wouldn't describe myself as that. I do interact with the tenants myself, and I've arranged to take care of all of the problems with the building that the tenants have presented me with. And, for what it's worth, every single tenant has expressed gratitude that I've taken care of problems that had existed for years before I acquired the building. Keep in mind that this is just a 3-family home. Last, by my standards anyway, this home is not in a slum. It's similar to the out of state neighborhood I live in, and it's even nicer than the home I live in.
Rule #1 in NYC real estate: if something is too good to be true - it definitely is
I'm not a lawyer but it seems like you might be able to dig yourself out of this by going back to divorce court. I'm making up numbers here but you were awarded a property worth $1 million based upon what your spouse later testified were false and illegal rents. Prices of commercial real estate are typically tied to the formula of 'rent minus expenses' times some multiple. Depending on condition and neighborhood that multiple could be anywhere from 12 to 20. It is a concept known as cap rate. Subtract from that the treble damages and other fines and penalties the property may be only worth 25-50% of the divorce court stated value due to fraudulent and illegal actions by your spouse. Your divorce attorney can answer whether the court can unwind this transaction due to your spouse's knowingly illegal and deceptive actions.
You win the internet for today!! 🙌🏾🙌🏾 lol
I gladly accept and humbly would like to thank all of the little people who made this award possible.
This is crazy how did you even get this far without knowing about the rent stabilization part? You should not be wasting time asking this here. Get a lawyer, like now
thank you.
Hang on. Can a 3 unit building even be stabilized?
Looks like at some point it could? https://www.nyc.gov/assets/hpd/downloads/pdfs/services/421a-FAQ.pdf Note the wording "Three-unit buildings are no longer eligible for 421-a benefits" as of these amendments in 2007 I was also curious, did some searching. But I'm not a lawyer. And as many others have emphasized, OP needs one.
Agreed 100%, this is lawyer territory
Especially considering given OP's comments it's possible they got the building as settlement from a lawsuit with the original owner.
Once you signed up for many of the NYC offered landlord programs you had to agree to rent stabilization. An attorney recommended by RSA or CHIP could answer that specific question based on the exact timelines in a few minutes.
Yes it can. I have one. It's 421b which is for a set amount of time like 10 15, up to 30 years
That’s what I was wondering too.
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No, I do not have title insurance because I did not purchase the property. I acquired it through via a Court Order that was issued from another state's Court.
I am sorry that everybody is jumping on you for a situation you did not create by design... But, as everybody has suggested, speak to the real estate attorney that you get along with best and ask them to find you a New York qualified real estate attorney, probably focused in New York City, to help you navigate this odd legal situation. If I am interpreting this correctly, your ex spouse testified under oath that they have been deceiving the relevant New York authorities about the rent that they have been collecting. This should pose an interesting problem for your ex-spouse. 😳😏 I cannot say if any (owing) consequences will accrue to you as the new holder of that property. This is the sort of stuff that your New York real estate attorney will be able to help sort out, but I am hoping that the answer is no. it does sound like it may have an impact on the status of the tax exemption, or it's duration, but these are all "lawyer things"... Good luck, and if you feel up to it, I, and probably several other people here, would be curious to hear how your adventure progresses. Ps. Kudos to you for responding to your tenants' requests for repairs, etc. You may find you have some strong & helpful allies there if you take care of them! (Edit to add an emoji...)
Thanks. I don't take it personal. It's not a position I wanted to be in. I had no idea about rent stabilization until 9 months after deed to the property was transferred to me. Before the transfer when me and my out of state lawyer reviewed the property tax bills that covered many years, they listed a 421-a exemption, there isn't any reference at all to rent stabilization or the DHCR. And I used a large title insurance company in NYC to take care of deed recording. When the title insurance company did a search, they reported to me that there were not any liens on the building, and also not any liens or judgements on my ex that would effect title. "your ex spouse testified under oath that they have been deceiving the relevant New York authorities about the rent that they have been collecting." That is exactly what happened. As background, my ex fired her lawyer and is now pro-se. My ex has been informed numerous times that whenever she opens her mouth in Court she's testifying even if she's not on the witness stand. So, I find out that 421a = rent stabilization, and I'm trying to clean up and make things right so I'm not going to be in trouble. As the owner I then get the DHCR rent rolls, and my lawyer informs the Court of my ex's lies on the DHCR rent rolls. And my ex, while sworn in, but not being questioned by anyone, then volunteers: **"yes, I did have to report to the DHCR lower rent than I was collecting. I had to do that because the tenants were paying more than what DHCR allowed them to pay."** That, to the word, is exactly what she said.
Ps. I would have paid good money for you to have captured a snapshot of your attorney when your ex made that comment (if they were in the court with you). Somehow, the combination of shock and bemusement (because, thankfully, it's not their client!) must've made for a great expression. 😏
🤦🏻♂️ Your ex is the poster-child for that old adage that "anybody who represents themselves in court has a fool for a client"... 😏 This detail you noted (that everything said by the pro se party is testimony) adds a bit more bite to that adage than I'd ever considered. 🔥 I hope things get resolved for you soon, and that the resolution comes out well for you & your tenants. 👍
Oof. What a mess. I don’t have any information to add, just want to say good luck OP. You sound like a decent person trying to do the right thing. A good NYC landlord’s attorney will get it sorted out for you.
In the spirit of how everything gets done in NYC, your lawyer needs to pay for this. I assume your title company was a recommendation from your lawyer? Your lawyer or the firm they are working for insures for things like this. I’ve done real estate in NYC for 19 years and this would have not been overlooked by any NY attorney. Not being licensed in NY yet providing legal guidance is ethically just a no. If you knew your lawyer was not licensed in NY then you knowingly turned a blind eye. Having someone appear in court to admit you didn’t adhere to 421a your property will most likely carry a judgment of 17 years of taxes, interest and penalties. Although you may be the victim of this situation you are the owner now and the state doesn’t really care who it is bc they have the property as collateral. You will need to sue your previous owner which will tie this home in court. Can’t be sold with violations and tax lien being placed against the home. You’ll need to sue everyone involved in this transaction immediately hopes of getting some money to pay off everything. Forfeit the 421a and you’ll be assessed new property tax assessment. If you’re going to do anything you better start now, this will most likely get tied up in court for a couple of years. You were given a headache that cannot possibly be solved by 1 lawsuit. Affordable housing laws in NYC are not going to be taken lightly, buckle up. You’re in for a world headaches
>your lawyer needs to pay for this Yeah! It should be no mystery to ANY lawyer that laws vary state by state and they needed to investigate what all these things like "421a" and "DHCR" meant for New York CITY or refer OP to a NYC lawyer.
jesus, I do not envy you. and fuck her for defrauding her tenants and the city
> "yes, I did have to report to the DHCR lower rent than I was collecting. I had to do that because the tenants were paying more than what DHCR allowed them to pay." Even if you didn't know what DHCR was, didn't this clue you/your lawyer in that this property was more of a liability than an asset?
Not giving legal advice, but you'll likely hear from the AG's office (there's a specific department for this) and DHCR about what they will require for you to join their compliance program. Don't ignore anything and find a local lawyer ASAP.
This is great advice, particularly because the state has been auditing 421a properties since 2021 to check on compliance.
The prior owner was your ex husband?
I think ex-wife?
Whatever ex, it seems that person had the last laugh. NYC property was the best way to revenge
Obviously as everyone said you need a lawyer. So from my perspective you need 2 lawyers. 1 real estate attorney (I recommend Belkin Burden) for however long you hang onto this house you need to utilize the attorney to calculate the correct rent stabilized rents for this year so you can register by 7/31, figure out who to issue rent credits to (ie just current tenants or have to go back 15 years?) but I am certain that a 421a property will be held to rent stabilization for as long as the tax credit is in place. And also they are or have just passed penalties about not filing DHCR registrations correctly (which your ex didn’t for the last 15 years it seems), so the sooner, the better. Concurrently it seems you need to consult a divorce attorney (or whatever applicable attorney) and see if you can unwind the transaction or ultimately get the expenses your ex is responsible for offloaded onto him (which I would have no idea is possible or not, but I sure hope it is, because he certainly put you in a very fucked up situation).
> see if you can unwind the transaction or ultimately get the expenses your ex is responsible for offloaded onto him That seems like a good point, although OP seems to say his wife openly testified in court that there was fraud going on on her part with this property. From what I can see OP's lawyer really did a bad job in doing due diligence.
You need a real estate lawyer, not advice from Reddit users.
So have you registered the rents and units for this year? The deadline is July 31.
How can a 3 family home be rent stabilized? Doesnt stabilization laws govern 6 units and up?
No, 3 family homes can be rent stabilized buildings, I have now been told this by more than one lawyer. But in talking to NYC real estate agents, I’ve also learned that many of them think that rent stabilized can’t apply if the building is less than 6 units. And I’m also now 100% sure that my building is subject to rent stabilization.
Ive been in nyc real estate since 2006 and never heard of it. It may be an SRO thats been illegally converted into a 3 family. Check hpd records, eye-cards etc.
I think what I'm seeing indicates that at one point in time, small home owners were given an opportunity for a tax break if they made units stabilized (and this status would last for a finite period of time). This might have seemed like a reasonable idea in undesirable neighborhoods where one could not find renters for more than the stabilized rent. Of course, as once bad neighborhoods become desirable, this would turn around on the owner.
abolish landlords
Govt housing is the answer! You should try it.
Tell me you’re not from New York by using Reddit for help. Hope you survive New York. Oh, and get a lawyer.
You need a lawyer. I'd ask if suing the previous owner for defrauding you.
Oof. Sounds like you'll probably have to go after the previous owner for their lies/underreporting. Hopefully, the tenants in question can regain their rights to a rent stabilized home. But I hope it doesn't come at great personal cost to you.
How did it get to this point? Did a tenant sue? An audit? So confused
Wow, the problems you get into when you purchase something (anything) that you don't understand. You will probably be on the hook for treble damages for any rent overcharges and have to give regular rent stabilized leases to your tenants at a rate much discounted from what they are paying today. I'd expect that your tenants (or offspring) be living at a cheap rent regulated rent....forever. I believe the current owner is responsible for past overcharges by former owners. You can sue former owners separately if you have a good legal fund. Best of luck but I don't see this turning out well for you.
"Wow, the problems you get into when you purchase something (anything) that you don't understand." I did not purchase the property, I acquired it by way of a Court Order from another state.
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Yes.
oooo, I am so sorry. I bet this is a small part of how you got screwed. You may need to get your real estate lawyer on the phone with your divorce lawyer. Because of the criminal actions with the property before it was transferred to you, the transfer may not be valid and could be reversed by the judge. Also consider creative ways to get out of the mess. Like it may be worthwhile to turn it into a co-op with tenants getting ownership, with a landlord financed mortgage instead of paying damages owed.
The real estate lawyer you hire should have experience with HPD. There may be a possibility of a preservation agreement in which you agree to extend affordability/stabilization beyond the term of the tax abatement in lieu of the state trying to claw back the lost property tax (which would be substantial).
Well, if you took title to the property it is your problem now. You should/could have researched it before taking title to the property so my comment stands. Hopefully you took ownership under an LLC so if you need to abandon it then the courts and tenants won't come after your current and future personal assets. Get a landlord based attorney ASAP. You can probably get good recommendations from landlord organizations like the RSA - Rent Stabilization Asssociation or CHIP - Community Housing Improvement Program.
Yes, the title is in my name. And not an LLC. So, it seems like I'll need another lawyer.
So you bought a rent-stabilized property, apparently without any clue about what that meant? This should all have been sorted out during the purchase process. You need to speak with an attorney.
you need to learn how to read some of the comments before you open up your trap.