Owners: Don't Jeopardize Your Free Market Unregulated Buildings

Many clients who have buildings of less than six (6) legal units think they are able to safely charge free market rents, not be required to offer leases to their tenants, and not be subject to any government restrictions.

Be aware that if your building had at any time 6 or more separate units or households (or as defined by the statute "Housing Accommodations"), you could still be labeled "defacto rent stabilized," and subject to all the statutory restrictions of much larger rental properties. The definition of what might constitute a separate "housing accommodation" is very broad and could easily encompass a single-room occupant or individual who need not even be a rent-paying tenant.

For example, we have seen dire situations develop when a landlord of a legal two-family house with 3 bedrooms in each unit decides to rent out each of the bedrooms separately with the occupants sharing the common areas of each apartment... although configured physically as a two-family dwelling, the building, now housing a total of six individual lessees, would most likely be considered defacto rent stabilized. The above result would not be any different even if some of the individual occupants were family members or friends of the landlord and not rent-paying tenants.

Another common example of defacto stabilization is where a legal one to five-family house has additional living space(s) elsewhere, such as in a basement or attic area, which when totaled up with the legally-used units, brings the number of "accommodations" or occupants to 6 or more. It matters not that the additional illegal space(s) were pre-existing or not created by the current landlord. Worse still is that once the total hits 6 or more, even if the owner de-constructs or removes the additional spaces (or the extra occupants vacate), the building may still be classified as defacto rent stabilized.

The result of a free market or unregulated small building being branded as rent stabilized can most certainly bring drastic and dire consequences to the owner.
To better understand this thorny problem and discuss possible options when faced with this dilemma, please call our office to schedule a consultation with one of our experienced attorneys.

Over the past four decades of representing property owners and renters, our office has constantly striven to offer personalized and friendly service to our clients and their acquaintances. We truly appreciate our clients' steadfast loyalty to our staff, our attorneys and ourselves, and promise that we will always be just a phone call or email away to answer any of your legal questions.