Post-HSTPA Deregulation For Rent Stabilized Apartments

Overview Of Today’s Presentation

• NOT about Good Cause Eviction Law–apartments not Rent Stabilized, may still be covered by GCEL (watch the HCA training on GCEL for more info)
• HSTPA Overview (quick)
• Remaining “Loopholes” For Deregulation - Current and Recent
• Substantial Rehabilitation
• Demolition
• “Frankensteining” – (not anymore)
• COOP/Condo Conversion
• J-51 & 421-A
• Final Thoughts and Questions

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Universal Advice When Fighting Back Deregulation

• ORGANIZE!!! ORGANIZE!!! ORGANIZE!!!
• The Law Is Punitive and Abusive. But Tenants Power is Fierce and Unstoppable!!
• Tenants Have A Right To Organize A Tenants Association. You Dont Have To Fight Alone. Form A Tenants Association.
• Reach Out And Work With A Local Tenants Rights Organization For Assistance: Click here.
• RESPOND!!! CHALLENGE!!! DON’T IGNORE NOTICES!!! DONT SELF EVICT!!!
• Extensions Are Granted Far More Easily Than a Request To Reopen A Decision.
• DHCR Will Not Independently Do Any Fact Finding If Tenants Do Not Present

Information To The Agency.

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HSTPA & POST-HSTPA CHANGES

• Housing Stability and Tenant Protection Act of 2019 (HSTPA)
• Was the biggest overhaul of housing law in decades, covering all sort of tenancies, more than just Rent Stabilized ones.
• Preferential Rent is locked in for the entire tenancy
• High Rent Vacancy deregulation is no longer allowed
• Major Capital Improvement (MCI) is allowed for increases but can no longer deregulate
• Today’s presentation is on the post-HSTPA means an owner can use to deregulate Rent Stabilized units and what can be done to challenge them.
• Today’s presentation (June 27, 2025) include current updates, more than five years post-HSTPA.
• This is evolving area. Check with a community legal service provider for updates.

Substantial Rehabilitation

• What Is This?
• Landlords can take a building out of Rent Stabilization Status if the landlord can prove to DHCR that a building has been Substantially Rehabilitated.
• DHCR Fact Sheet # 38: https://hcr.ny.gov/system/files/documents/2025/06/fact-sheet-38-06-2025.pdf

And

https://hcr.ny.gov/system/files/documents/2023/11/operational-bulletin-2023-3.pdf

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What Criteria Must The Landlord Meet?

1. Landlord must prove that at least 75% of the building-wide and apartment systems were replaced. Systems from the following list:

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• Plumbing
• Heating
• Gas Supply
• Electrical wiring
• Intercoms
• Windows
• Roof
• Elevators
• Incinerators or waste compactors

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• Fire Escapes
• Interior Stairways
• Kitchens
• Bathrooms
• Floors
• Ceiling and wall surfaces
• Pointing or exterior surface repairs as needed
• All doors and frames including the replacement of non-fire rated items with fire-rated ones.

What Criteria Must The Landlord Meet? CONTINUED…

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• Additionally, all ceiling, flooring and plasterboard or wall surfaces in common areas must have been replaced;
• & ceiling, wall, floor surfaces in apartments, if not replaced, must have been made as new as determined by DHCR.

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• Exception to System Replacement: Landlord shows that a particular system has recently been installed or upgraded, or is structurally sound AND does not require replacement, OR is desirable or required by law due to its aesthetic or historic merit.

What Criteria Must The Landlord Meet? CONTINUED…

2. Rehab took place when the building was substantially OR in seriously deteriorating condition.
• Exemption: Space converted from non-residential to residential use.
3. All systems must comply with building codes, requirement and owner must submit copies of certificate of occupancy before and after rehabilitation.
4. After 1/1/2024: Substantial Rehabilitation performed after 1/1/2024 must seek approval from DHCR within 1 year of completion of the work.

Terrible rule: If an occupied unit was not rehabilitated but rest of building receives Sub. Rehab. Determination. Unit remains Rent Stab while the tenant continue to live there but once vacated then no longer Rent Stabalized.

What Criteria Must The Landlord Meet? CONTINUED…

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Landlord is required to submit the following documents (Work completed after 11/2023):

• Records demonstrating the scope of the work actually performed in the building.
• Such as: itemized description of replacements and installations, copies of approved building plans, architect’s or general contractor’s statements, contracts for work performed, appropriate government approvals, and photo- graphs of conditions before, during, and after the work was performed.
• Proof of payment by the owner

If work completed before 11/2023: DHCR may be more lenient towards the landlord with documentation requirements.

Exemptions

• The landlord was convicted of arson to create the vacancy.
• OR if DHCR or Government Agency has a finding of harassment.
• Occupied apartments during rehabilitation work remain Rent Stabilized. But not the next tenant.
• Vacated apartments remain Rent Stabilized if the vacated tenants move back. But not the next tenant.

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What are the steps?

• Owner may have applied for a DHCR advisory to see if plans qualify for Substantial Rehabilitation.
• STEP 1: Landlord files “Application By Owner To Determine Whether Building/ Apartment Is Exempt From the ETPA or Rent Stabilization Law” Form RS-3.
• STEP 2: Tenants and landlord should receive “Notice Of Commencement Of Proceeding For An Order Of Exemption From Rent Regulation”
• Tenant can file a response to this notice within 20 days from the date appearing at the bottom of this notice.
• STEP 3: Tenants or landlord may receive one or several “Request For Answer/ Additional Information/ Evidence.” The response is due within 21 days. Can request extensions for responses to get more time to meaningfully respond to DHCR.

What are the steps? CONTINUED……

• STEP 4: Tenant/ Landlord receives “Order and Determination”
• DHCR could REJECT the Landlord filing for Substantial Rehabilitation.
• Owner can still qualify for IAI’s and/ Or MCI’s if they apply.
• DHCR could issue an order ALLOWING Substantial Rehabilitation
• If this is the 1st time receiving notice of Substantial Rehabilitation, may be because the landlord excluded unit from the application. Include this info in any responses to DHCR.
• STEP 5: Tenants can file “Petition To Administratively Review” (aka PAR) within 35 Days of the Order being issued.
• STEP 6: If After an Order for Substantial Rehabilitation, it is determined that there was fraud involved, tenants can ask DHCR to make a Redetermination.

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Challenging Substantial Rehabilitation

RESPOND (timely)!!! CHALLENGE!!! DON’T IGNORE NOTICES!!!

• Get More Time all the time. These cases can takes years, so time is on your side.
• Request 90 Days extension to respond after receiving notice of landlords filing.
• If an order is issued, file a Request for Records, Rec-1 Form for the Full Case File. Once received starts the 35 day clock for filing Petition to Administratively Review.
• Review if the owner applied for an Advisory Opinion from DHCR prior to filing for Substantial Rehabilitation.
• You can see the Status of the case here: HTTPS://APPS.HCR.NY.GOV/CASESTATUS/DEFAULT.ASPX
• Work with your neighbors and, if one doesn’t exist already, form a Tenants Association.

Challenging Substantial Rehabilitation Continued…

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• You don’t need all the facts in the initial response
• In the initial response
• Reserve the right to supplement filing.
• Request that DHCR inspect all systems in the building.
• Tenants can write their gentrification stories, or their experience with any construction/ rehabilitation work, or lack of any such work. How has this affected their building, neighbors and community?
• DHCR Harassment filing
• Vacated Tenants OR Tenants temporary relocated: File Rent Reduction Order with DHCR.

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Challenging Substantial Rehabilitation Continued…

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• Gather evidence to challenge
• Periodically request Full Case File Records (REC-1 Form)
• Look at spending. Does the $$$ add up to what is being claimed?
• Confirm that itemized lists are available, that dates of work match application and permits on Department of Building (aka DOB)
• Write about how many units were vacant if any during the rehabilitation work
• Look at all DOB and HPD Violation During and After Rehabilitation.
• Helpful Links:
• DOB: https://a810-bisweb.nyc.gov/bisweb/bispi00.jsp
• HPD: https://hpdonline.nyc.gov/hpdonline/
• Call 311 and Report ongoing Violations
• Text 311 @ 311-692
• Report Violation through 311 Website: https://portal.311.nyc.gov/report-problems/

Challenging Substantial Rehabilitation Continued…

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• Gather evidence to challenge… continued
• Chart out the systems in the building
• FOIL any DOB Job Numbers and permit information that is not seen on their website
• HTTPS://WWW.NYC.GOV/SITE/BUILDINGS/DOB/FOIL-REQUESTS.PAGE
• Ask DOB questions directly by reaching out to the DOB Tenant Advocate @ TENANTADVOCATE@BUILDINGS.NYC.GOV
• OR Go To DOB “After Hours Information Session” on the 1st and 3rd Tuesday of the Month. Sessions are 4-7pm in every borough DOB office.
• https://www.nyc.gov/site/buildings/dob/office-locations.page
• Research companies that the Landlord hired to complete the work.
• Companies can be found on DOB website and in Records Received from DHCR via Records Request
• Check the companies license status and corporation status
• HTTPS://APPS.DOS.NY.GOV/PUBLICINQUIRY/
• HTTPS://A810-BISWEB.NYC.GOV/BISWEB/LICENSETYPESERVLET?VLFIRST=N

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Questions about Sub Rehab?

DEMOLITION – The Basics

• “Demolition means the removal of the entire building including the foundation.”
• Demolition is grounds for an owner to stop renewing Rent Stabilized leases and to relocate or evict tenants.
• Rent Control (less common today) has different standards and added protections.
• For further information: DHCR Fact Sheet # 11 and Operational Bulletin 2023-2 (rev. 4-10-2024)

DEMOLITION – Criteria Landlord Must Meet

• Generally, owner may demolish IF:
• Demolition plans have already been approved by the Department of Buildings (DOB)
• Owner has enough money to “complete the undertaking” meaning to both pay for relocation and for stipends to all remaining tenants and to pay for the demolition
• Strict timing rules around the end of leases and when termination notices must be sent.
• Approval does NOT mean immediate eviction. If DHCR grants owner’s application, Owner has choice to:
• Relocate existing tenants at owner’s expense to a cheaper or same cost Rent Stabilized apartment that is “closely proximate”, meaning nearby;
• Relocate existing tenants at owner’s expense to a more expensive Rent Stabilized apartment nearby and pay tenants the difference for 72 months (six years); or
• Pay existing tenants a lump sum stipend based on what is should cost them to rent a market rate apartment for 72 months (six years).

DEMOLITION – Procedure (1 of 3)

• Owner first files demolition plans with DOB (called a PW1: Plan/Work Application)
• Application includes sections (at bottom of PW1) about regulated apartments and whether they will be occupied during process.
• If DOB approves, Owner can file application with DHCR asking for permission to stop renewing leases and to evict tenants in order to demolish.
• Application is called a Form RA-54.
• Owner needs to include the approved DOB plans and proof of enough money.
• DHCR processes the paperwork and sends tenants notice.
• THIS is the point in the process where tenants often learn that the owner plans to demolish the building.
• DHCR sends all tenants a packet with a notice explaining that Owner has filed to demolish the building, that they have 20 days to respond, and instructions on how to send in the response.
• This packet has the application’s DOCKET NUMBER (one for each apt.). Save this number.

DEMOLITION – Procedure (2 of 3)

• Tenants have 20 days to respond to the DHCR notice. Tenants should RESPOND.
• If no response, Owner can be granted permission to evict BY DEFAULT.
• If tenants respond, then DHCR begins seeking more information from both owner and tenants, continuing until DHCR is ready to set a hearing or issues a decision on the papers.
• While application is pending, Owner does not have to issue renewal leases, but TENANCY CONTINUES without lease.
• While application is pending, Owner also must serve termination notices on each tenant during a “WINDOW PERIOD” of 90-150 days before expiration of the tenant’s current lease.
• If window period is missed, Owner must renew lease and wait until next window period comes about.

DEMOLITION – Procedure (3 of 3)

• DHCR eventually makes decision:
• If Owner’s application to demolish is denied, they must issue new leases to tenants.
• If Owner’s application to demolish is granted, then decision will say when Owner is allowed to relocate tenants and/or pay them the moving stipends.
• Decisions can be appealed: first within DHCR in a Petition for Administrative Review (PAR) and PAR can be appealed in court. Each level of appeal is harder for party appealing.
• Tenants who refuse a final DHCR order can be taken to eviction court and may not receive the full stipends they would be entitled to.

DEMOLITION – Challenging It (1 of 3)

• Read the application closely.
• The PW1/DOB plans have important sections (e.g. 26) that the Owner has sworn are accurate. Inaccuracies or lies on it can be enough for DHCR to deny the application.
• Check that this is a full demolition, including foundation: “dirt-to-sky.”
• Post HSTPA, there is no such thing as “partial demolition.”
• Investigate the application:
• Is the demolition on the DOB BIS/DOB Now website(s)?
• Are the engineering and construction firms that signed off on the plans legit?
• If you cannot find info on the DOB site or have questions about it, the DOB Office of the Tenant Advocate should be able to help.
• The previous Sub-Rehab section has links for corporation searches and communicating with the DOB.

DEMOLITION – Challenging It (2 of 3)

• After reviewing application, respond to it (some call this “answering”).
• If 20 days isn’t enough (and it probably isn’t), REQUEST MORE TIME to respond:
• Ask for 90 days to start.
• Make sure to include the DOCKET NUMBER from the original notice in all communications.
• In the response, tenants should explain why Owner’s application should be denied.
• Highlight any inconsistencies within the application.
• Include the tenants’ narrative of their experience with their landlord including any harassment/efforts to depopulate the building.
• Repeated buyout offers or uncorrected HPD violations are forms of harassment.
• Reserve the right to supplement the response with more information.
• Reach out to community legal service providers who may be able to assist.
• Make sure the Tenants’ Association (TA) is working together on it. If there’s no TA, form one!

DEMOLITION – Challenging It (3 of 3)

• DHCR doesn’t always get all the papers to Tenants. Once Tenants’ initial responses are in, Tenants should request a copy of the entire file with a form called a REC-1.
• Be sure to include the DOCKET NUMBER from before.
• Once the application is under review, DHCR will request additional information from both Owner and Tenants. DHCR may hold a hearing before issuing its decision.
• Tenants should RESPOND TO EVERYTHING sent by DHCR. If Tenants cannot respond within the time on the notice, they can request more time.
• Always include language reserving the right to supplement the response with more info.
• Owner may stop renewing leases once the application is filed but has to comply with strict timing requirements.
• Tenants who receive a termination notice outside the window period of 90-150 days before the expiration of their lease should tell DHCR.
• Tenants who were not given renewal leases and/or have no current valid lease should tell DHCR.
• Can check status of the case using DHCR’s “Case Status Inquiry” website.

DEMOLITION – Wrapping Up

• Process can take years, even before appeals.
• Don’t self-evict before a final decision or risk losing rights to the unit and rights to relocation or stipend if demolition is approved.
• Out-of-court negotiation is possible, but should use a lawyer.
• Final decision can be appealed, but appeals are harder each level.
• Tenants cannot be evicted by a marshal unless Owner takes them to housing court AFTER a final decision from DHCR approving Owner’s application. BUT staying past a final DHCR order’s move date can reduce amount of money owed by Owner to Tenant.

Questions about Demolition?

FRANKENSTEINING

WHAT’S THAT MEAN?

WHAT IS FRANKENSTEINING ?

WHEN LANDLORDS CHANGE THE LAYOUT OF AN APARTMENT BY ADDING SPACE - USUALLY BY COMBINING APARTMENTS TOGETHER.

WHY WOULD THEY DO THAT?

LANDLORDS FRANKENSTEIN APARTMENTS TOGETHER SO THAT THEY CAN CHANGE THE RENT STABILIZED RENT AND MAKE MORE $$$

CAN THEY DO THAT?

NOT ANYMORE! THE LAW WAS CHANGED LAST YEAR TO PROTECT TENANTS FROM LANDLORDS WHO WANT TO RAISE THE RENT BY FRANKENSTEINING APARTMENTS TOGETHER.

WHAT HAPPENED?

LANDLORDS WOULD FRANKENSTEIN APARTMENTS TOGETHER AND RESET THE RENT STABILIZED RENT AT WHATEVER AMOUNT THEY WANT, OFTEN RAISING THE RENT BY THOUSANDS OF $$$.

THIS CREATED INCENTIVES FOR LANDLORDS TO GET LONG TERM RENT STABILIZED TENANTS OUT OF THEIR HOMES BY HOOK OR BY CROOK. IF THE LL COULD GET THE APARTMENT NEXT DOOR EMPTY, YOU COULD BE IN FOR A WORLD OF HARASSMENT TROUBLES. IT COULD PUT A MILLION DOLLAR TARGET ON YOUR BACK.

WHAT CHANGED?

SINCE THE FALL OF 2023 THE STATE DISINCENTIVIZED FRANKENSTEINING BY SETTING THE MAX RENT LIMIT OF FRANKENSTEINED APARTMENTS.

WHAT’S THE MOST THE LANDLORD CAN CHARGE FOR A FRANKENSTEINED APARTMENT NOW?

A LANDLORD CAN ONLY RAISE THE RENT BY THE AMOUNT OF SQUARE FOOTAGE ADDED TO THE RENT STABILIZED APARTMENT

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FOR INSTANCE:

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IF THE RENT REGULATED MAXIMUM IS $1,000 A MONTH FOR A 500 SQUARE FOOT APARTMENT, THAT WORKS OUT TO $2 PER SQUARE FOOT. IF THE LANDLORD ADDS 100 SQUARE FEET TO THE APARTMENT, THE LANDLORD CAN CHARGE $2 FOR EACH SQUARE FOOT, ALLOWING FOR A MAXIMUM INCREASE OF $200.

WHAT IF THE LANDLORD SHRINKS THE APARTMENT?

THE SAME BASIC PRINCIPLE APPLIES.

FOR INSTANCE:

SAY THE MAX RENT FOR A 500 SQUARE FOOT APARTMENT IS $1,000. THE LANDLORD REDUCES THE SIZE OF THE APARTMENT BY 100 SQUARE FEET. SINCE THE APARTMENT IS $2 PER SQUARE FOOT, THE RENT SHOULD BE REDUCED BY $200.

WHAT IF THE LANDLORD COMBINES THE APARTMENT WITH A NON-STABILIZED APARTMENT?

THE MOST THE LANDLORD CAN CHARGE IS THE SQUARE FOOTAGE ADDED BASED ON THE RENT STABILIZED RENT. SAME EXACT AS THE FIRST EXAMPLE.

WHAT ELSE CHANGED?

IF THE LANDLORD GOT AN APARTMENT VACANT THROUGH FRAUD, HARASSMENT, OR “EVASION” THE LANDLORD CANNOT RAISE THE RENT ON THE NEWLY FRANKENSTEINED APARTMENT. IT’S STUCK AT WHATEVER THE LAST RENT STABILIZED RENT WAS.

WHAT’S HARASSMENT?

THE CITY CODE DEFINES HARASSMENT AS A COURSE OF ACTS BY A LANDLORD, OR A LANDLORD’S FAILURE TO ACT, WITH THE INTENT TO CAUSE A TENANT TO LEAVE, OR TO GIVE UP RIGHTS.

…. WHAT?

SOME OF THE LANDLORDS ACTS AND FAILURES THAT ARE CONSIDERED HARASSMENT ARE:

• REPEATEDLY FAILING TO FIX SERIOUS VIOLATIONS IN A TIMELY MANNER
• LOCKING A TENANT OUT, REMOVING THEIR STUFF, THREATENING WORDS OR BEHAVIOR IF THE TENANT REFUSES TO LEAVE
• LYING ABOUT THE RENT STABILIZED STATUS OF AN APARTMENT
• MAKING BUYOUT OFFERS WITHOUT GIVING THE TENANT NOTICE OF THEIR RIGHTS
• PERFORMING WORK WITHOUT RECEIVING NECESSARY PERMITS FROM THE CITY …

HOW WOULD A LANDLORD REMOVE A TENANT BY FRAUD OR EVASION?

GOOD QUESTION. WE DON’T KNOW YET. HOWEVER, SOME SCENARIOS THAT MIGHT APPLY:

• FAILING TO RESTORE A TENANT TO THEIR APARTMENT AFTER A VACATE ORDER, AND INSTEAD RENTING IT TO SOMEONE ELSE
• CONVINCING A TENANT TO MOVE “TEMPORARILY” TO PERFORM WORK, AND THEN REFUSING TO PUT THE TENANT BACK IN AFTER COMPLETING THE WORK.

WHY IS THIS IMPORTANT INFORMATION TO HAVE?

TO KNOW YOUR RIGHTS IN THE FUTURE

• FRANKENSTEINING APARTMENTS TO INCREASE RENTS STOPS NOW! IF YOU MOVE INTO AN APARTMENT THAT HAS BEEN FRANKENSTEINED AFTER 2024, GET YOUR RENT REGISTRATION HISTORY FROM DHCR TO SEE IF THE LANDLORD HAS APPLIED THE CORRECT AMOUNT TO THE RENT

WHERE DO I GO IF I THINK THE LANDLORD HAS INCREASED THE RENT IMPROPERLY AFTER FRANKENSTEINING AN APARTMENT?

REACH OUT FOR ADVICE!

• HOUSING COURT ANSWERS
• ASK YOUR CITY COUNCIL MEMBER, ASSEMBLY MEMBER, OR STATE SENATOR FOR HELP
• CALL 311 TO ASK FOR FREE ADVICE FROM A LEGAL SERVICES ORGANIZATION
• CALL MET COUNCIL AND ASK ABOUT LEGAL SERVICES AND COMMUNITY BASED TENANT ADVOCATE ORGANIZATIONS IN YOUR NEIGHBORHOOD

Questions about Frankensteining?

J-51 and 421-A - What are these?

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• Both are tax credit programs to incentivize landlords to maintain or build “Affordable Housing”
• 421-A is a property tax exemption if value of a property changed because of construction.
• J51 is a property tax exemption and abatement for renovating a building.
• Once the Landlord Received J-51 or 421-A Tax breaks tenants become rent stabilized for at least the time period of the tax break.
• Co-op’s and Condo’s are exempt from Rent Stabilization status with these tax breaks.
• Landlord receives MCI rent increase, the rent can be temporarily reduced in the MCI case or at a later date in a Tax abatement Modification case. But rent is restored at the end of the tax break pursuant to a DHCR rent restoration order.

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Important Links

• See if you building currently has 421 exemption: https://www.nyc.gov/site/finance/property/benefits-421a.page
• See if you building currently has J51 exemption: https://www.nyc.gov/site/finance/property/benefits-j51.page
• Furman Center Core Data on Subsadized Housing Database: https://coredata.nyc/
• Or DAP Portal - https://portal.displacementalert.org/
• FOIL Records about 421a or J51 tax records from Department of Finance: https://a860-openrecords.nyc.gov/request/new
• Facts Sheet from HPD: https://www.nyc.gov/assets/hpd/downloads/pdfs/services/421-a-tenant-fact-sheet.pdf
• Fact Sheet from DHCR: https://hcr.ny.gov/system/files/documents/2025/03/fact-sheet-41-03-2025.pdf

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How Does 421A Work?

After 421A expires, Tenants may have a right to remain Rent Stabilized, depending on when the construction took place and if notice requirement were followed.

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How Does J51 Work?

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After J51 expires and tenant received appropriate notices with every lease renewal then the apartment comes out of Rent Stabilized status. If not, then tenants may be able to challenge deregulation.

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Challenging 421A/ J51 Tax Breaks

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• DO NOT SELF-EVICT!!!! ORGANIZE!!!

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• Share information you learned about the tax break with your neighbors.
• Keep records of any notices and dates of notices.
• Verify information in notices written by your landlord or their attorneys.
• Inform any family members living with you about their rights to succeeding the Rent Stabilized status of your unit.

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Questions about 421a/J51?

CO-OP & CONDO CONVERSION – The Basics

• Cooperatives (co-ops) are a “hybrid” ownership where owners have shares of a corporation which entitle them to “proprietary leases” on the units tied to those shares.
• Condominiums (condos) are where owners own the individual apartments (“owning the four walls”) and collectively own the common parts of the building, sharing the common costs. There is no corporation like co-ops.
• The conversion process and existing-tenant rights for co-ops and condos are similar.
• Conversion starts the deregulation process on a Rent Stabilized unit, but NOT NECESSARILY for existing tenants.

CO-OP & CONDO CONVERSION – Criteria

• The Owner is called a “Sponsor” in these processes.
• The Sponsor can convert their building into co-ops or condos if 51% of the existing tenants in occupancy agree that they want to buy their apartments (co-op shares or condos).
• HSTPA of 2019 made big changes to conversion process:
• No more “eviction plans”; older references to them are out of date
• Higher percentage of tenants (up from 15%) need to agree to buy
• NY Attorney General (AG) has the power to investigate conversion and enforce NY’s broad anti-fraud law against Sponsor
• Conversion is not effective until AG Office issues its letter and until purchase agreements are signed and delivered.

CO-OP & CONDO CONVERSION – Procedure

• The Sponsor submits their “offering plan” to the AG’s Office.
• Offering plan is proposal of how they expect to convert the building into co-ops or condos.
• The Sponsor also has to send copies of the offering plan to all current tenants, with a bright red lettered cover page: the “Red Herring” packet.
• The Martin Act requires a “full disclosure” of the investment to the prospective purchasers.
• Current tenants generally have the right of first refusal to purchase the units they are renting before units are sold on the open market.
• The AG’s Office decides whether the plan is accepted and has to do so before shares or condos may be sold.
• Current tenants can send comments to the AG’s Office asking them to investigate or look into part of the offering plan.
• Conversion is effective once 51% of tenants purchase and the AG’s Office has signed off.

CO-OP & CONDO CONVERSION – Consequences

• Non-purchasing tenants of Rent Stabilized units RETAIN THEIR RENT STABILIZED RIGHTS for the duration of their tenancies, including renewals, until they choose to move out.
• Family of non-purchasing tenants retain SUCCESSION RIGHTS of Rent Stabilization, subject to the usual family and cohabitation requirements
• Otherwise, once the Rent Stabilized tenants of a now-converted condo or co-op unit move out, the apartments may become market rate.

CO-OP & CONDO CONVERSION – Challenging It

• The AG’s Office can deny the plan, but tenants may need to point it in the right direction: if part of the plan is shady, tenants should let them know.
• Conversion also requires tenants to buy: if 51% of tenants refuse to buy, the conversion cannot be done. So collective action (with a TA) is key.
• Communal “no-buy” pledges made by tenants together can be enforceable.
• Tenants may collectively negotiate for better terms. Some examples include:
• more control over the bylaws/condo board or
• better terms for non-purchasing tenants.
• Reach out to community legal service providers to get advice about what more can be done.

CO-OP & CONDO CONVERSION – Wrapping Up

• Check the plan for unusual details and contact a legal service provider for more info (e.g. AHRA 15% instead of 51%)
• DHCR is not really a party during the conversion applications; the AG’s Office is the main governmental body to interact with.
• Even if the plan is approved, non-purchasing tenants retain their Rent Stabilized rights, including right to renewal lease.
• And as long as Rent Stabilized tenants are there, even after conversion DHCR can act for overcharge, harassment, RROs, etc.

Questions about Coop/Condo Conversion?

Final thoughts and questions.