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Key Takeaways
- If an apartment has a preferential rent that’s below the legal limit, the landlord may offer a buyout to raise the rent closer to what the law allows.
- Landlords pursue buyouts in rent-controlled apartments so they can charge more when the unit is converted to rent-stabilized.
- Apartments in buildings slated for redevelopment, major renovations, or reconfiguration are common targets for buyout offers.
- To get a realistic sense of what an apartment is worth, review current market rents, DHCR rent history, and any DOB filings related to the building.
- A lease buyout advisor will explain your rights and options, and negotiate a higher payout on your behalf.
If you live in a rent-stabilized or rent-controlled apartment in New York City, you may have a rare opportunity to get a buyout from your landlord. An apartment lease buyout is when your landlord pays you a lump sum of money to leave your apartment voluntarily.
This is a good option if you want to move, need extra cash, or have other plans for your future. Here are the top 4 ways to increase your chances of getting a buyout for your rent-regulated apartment.
1. Find Out if You’re Renting a Unit Owned by a Sponsor
Many rent-stabilized or formerly rent-stabilized buildings in NYC were converted to co-ops or condos decades ago. “Sponsor” refers to the original owner or developer of a co-op or condo conversion who still owns and rents out unsold apartments. Individual shareholders or owners can sell or rent out units as they wish, unlike units that are still rent-stabilized and privately owned by a sponsor. If you are renting from the sponsor, you have a good opportunity for a buyout.
The sponsor can’t charge you market rent as long as you stay. However, once you leave, they can sell or rent it at full market value, generating a substantial profit for them.
The sponsor may be willing to pay you, the rent-stabilized tenant, a large amount of money to leave your apartment and deregulate the unit. This benefits them because they “unlock” the apartment’s full value, and benefits you if the amount is large enough to make relocating worthwhile.
2. Find Out if You Are Paying Preferential Rent
Preferential rent is when you pay less than the maximum legal rent for your apartment. The legal rent is the highest amount that your landlord can charge you under the rent stabilization laws. The preferential rent is a lower amount that your landlord agrees to charge you, usually to attract or keep tenants in the building when the market rent is lower than the ‘legal’ rent.
For example, the legal registered rent on unit A is $2,600/month. However, after marketing the space, the most someone was willing to pay was $2,200/month. If the landlord agrees, the monthly preferential rent the tenant pays is $2,200, and the legal registered rent is $2,600/month.
Before 2019, preferential rent was often a short-term incentive. Landlords could attract tenants with a lower “teaser” rent and then raise it to the full legal rent when renewing the lease. This changed after New York’s rent laws were updated in 2019. Now, once you have a preferential rent, it stays in effect for as long as you remain in the apartment. The landlord can only increase your rent by the small annual percentage set by the Rent Guidelines Board.
If you vacate your apartment, your landlord can charge the next tenant the full legal rent. If your current, preferential rent is much lower than that amount, your landlord has a strong incentive to offer you a buyout. They may pay you part of the difference between your discounted rent and the higher legal rent to encourage you to leave.
Before you consider any offer, it’s worth checking the market in your area to see what similar apartments are going for. You can also confirm your apartment’s legal registered rent by requesting your rent history from the New York State Division of Housing and Community Renewal (DHCR).
3. Find Out the Market Rent if You’re Living in a Rent-Controlled Apartment
Rent-controlled tenants typically live in buildings built before 1947 and have occupied their apartments continuously since before July 1, 1971.
When a rent-controlled tenant moves out, the apartment usually transitions to rent stabilization, and the first rent set after vacancy becomes the new legal rent for that unit.
For example, if a rent-controlled tenant was paying $1,200 per month and then vacates, the landlord can now register the unit as rent-stabilized at the current market rate of $4,600 per month. This gap in potential income makes the apartment much more valuable to the landlord, creating an incentive for a buyout offer to encourage the tenant to leave.
4. Find Out if There Are Redevelopment Plans in the Works
Sometimes landlords plan to change the use or layout of their buildings. They may want to demolish the property and build something new, such as a luxury condo or hotel, or combine it with other properties to create a larger development. In other cases, they may choose to reconfigure the space to create fewer, larger, or more upscale apartments that command higher rents.
Rent-stabilized tenants have strong protections under HCR laws, making it difficult for landlords to remove them. When redevelopment plans involve occupied rent-stabilized units, landlords need to negotiate buyouts with tenants to move forward.
This creates an opportunity for a buyout, especially if your apartment is in a prime location or has unique features that make it attractive for development. For example, a corner unit with lots of windows and light, or one with private outdoor space like a balcony or terrace. In cases like these, your landlord could offer a higher buyout to regain possession of the apartment.
Turn Your Rent-Stabilized Apartment into Cash
While no offer is guaranteed, knowing your options and consulting with an experienced lease buyout advisor will help you make the right decision. At Lease Buyout Advisors, we specialize in helping tenants in New York City negotiate the highest possible buyout for rent-stabilized and rent-controlled apartments. With over 18 years of experience in real estate and finance, our clients typically receive offers 40% higher than similar leases.
If you’re thinking about a buyout, start with an evaluation to see what your apartment could be worth.
FAQ: Rent-Stabilized Apartment Buyouts
Do I have to accept a lease buyout for my apartment?
No, you do not have to accept a lease buyout offer. You can negotiate, decline, or stay in your apartment.
How is the buyout amount decided?
The buyout amount depends on the difference between your current rent and market rent, apartment features, and location.
Are there risks to accepting a buyout?
Yes, there are always risks involved with accepting a buyout offer. Moving out means losing your rent-stabilized protections, possibly paying higher rent elsewhere, and incurring moving costs. It’s important to understand all terms and consult a lease buyout advisor before agreeing.
How can I find out if redevelopment or buyout opportunities are likely in my building?
Check NYC Department of Buildings (DOB) filings, local zoning and planning boards, local news, and tenant associations.
Why hire a lease buyout advisor?
While not required, a qualified advisor helps you understand your rights, evaluate offers, and negotiate a higher buyout.
