November 5, 2020

Understanding NYC Buyout Agreements | Featured in PropertyShark

Understanding NYC Buyout Agreements

It’s safe to say that, in New York, tenant’s rights and landlord’s rights have shifted and adjusted drastically recently with the rent regulation laws that passed last year, and now especially, with the moratoriums and rent exceptions made during the COVID-19 crisis.

Nevertheless, for rent-stabilized tenants, negotiating a sizable buyout with their landlord may prove to be mutually beneficial. But, in order for both parties to reap the benefits, it’s important to understand the lay of the land when it comes to negotiating these buyout agreements.

What Is a Buyout Agreement?

For renters, a buyout agreement is when the landlord offers to pay the tenant a considerable sum of money to move out of their rent-stabilized apartments. In this situation, the landlord’s primary goal is to either replace the existing tenant with a higher-paying tenant relative to the (typically) higher market rent rate, or implement updates to the property, such as combining multiple apartments.

The art of the buyout can turn into a tricky negotiation to balance the interests of the landlord and the tenant. However, tenants can often benefit from a high payout by their landlord — depending on how eager the landlord is to have the tenant vacate the apartment and, therefore, how attractive the landlord’s offer is to the tenant.

Why Would a Landlord Want to Buy Out a Tenant?

When a buyout agreement is executed well, the landlord can successfully empty the apartment of a rent-stabilized tenant and, as a result, increase the rent to market value. Likewise, the landlord could also reclaim the apartment and drastically increase the rent, allowing them to potentially invest the extra cash flow back into the building. Or, the landlord could also be planning to update the building, whether that be for commercial or residential use.

However, it’s important to note that if the buyout agreement is not executed properly, the landlord may cause tension with their tenant and could even find themselves in a legal predicament for harassment. As such, landlords should be cautious in their communications with tenants. Notably, if a tenant refuses the landlord’s initial offer, the landlord must wait at least 180 days before contacting the tenant again about an offer. 

How Would a Tenant Benefit From Being Bought Out?

When presented with a buyout offer, tenants should carefully consider the sum they are willing to accept. For instance, the money you receive from the landlord should give you a head start in purchasing your own place or, at the very least, be enough to cover six months to one year of rent.

While tenants are in no way obligated to accept the landlord’s offer, a large buyout could be beneficial to both parties. For tenants, it could provide the opportunity to pay off their debt or even live in a better location. Consequently, it’s vital for tenants to do their due diligence and seek out professional advice to ensure they’re making the right decision.

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